If you have been curious about building a custom home or considered new construction building vs. buying a home, here are a few questions we are often
asked that may help give you some quick insight. Our hope is may help you be more prepared as you consider setting up a meeting with your custom homebuilder. Asking the right questions helps manage expectations and helps you enjoy the process!
1. How long will it take?
You have control of the speed of the process, if you want to move quickly there are a few things that can help. Have the land identified (this can take a while, months to years but the right property is worth the wait), home design process (2 to 3 months depending on your ability to make decisions and the complexity of the home and property) once the “design” happens those plans go to the structural engineering phase and preliminary budget (two months) permits (two weeks to three months depending on the jurisdiction).
The most important thing here is communicating and keeping expectations clear. This is paramount throughout the process. Building your home is an intimate process. There is no doubt that the budget is a very important factor but a strong relationship with open communication as expectations change is in my opinion the most important thing. Now we are on to building. This is a very loose guide as each home is unique but anything over 3,000 feet will be complete in about six to seven months, anything over 4,000 feet will usually be about nine to ten months. This will be outlined early on into the process for the client to be able to have a guideline to go off of. Again communication and clear expectations is key to being on the same page with timing of the build.
2. What is your budget?
We start this part of the conversation almost the same way every time. “You can be honest with me now or honest with me later.” What we mean by that is: There is not benefit for each of us not being clear on budget expectations. There is no benefit to a builder designing a home that is more than you want to spend; or you accepting a home that doesn’t cover all of the items you want in your home. There are a lot of things that go in to homebuilding to make your house the perfect reflection of your tastes and personality. Making sure you have a budget parameter prior to going in to the meeting is helpful to be able to talk specifics.
The most difficult question we get it is: “What will my home cost per square foot?” Home prices don’t work by cost/foot, there are a lot of variables involved when coming up with the exact budget. Some of those variables are in the choices you may make in the home, and some of them are based on the property itself. Coming to the builder with an honest framework that is a reasonable between x-y can be really helpful. Some of the things that are involved with coming up with a budget include: costs of permits, type of land, topography, length of driveway, what utilities are already on the property, and what jurisdiction we are building in. All of these things are a part of the equation that helps create the budget of your home.
3. Ask about payment schedule and how that works.
Builders do this a lot of different ways but they should be able to let you know their preferred method via BSA – Builder Service Agreement or Pre Construction Contract:. This is a contract that is generally paid for out of pocket and is used to pay for the plan design, any consultants that are needed on the project and some of the builders time to get the home “permit ready”. How builders come up with this amount can be subjective. If you choose to get a loan to build your home this is considered a “pre paid” and can potentially be reimbursed to the client.
One other important thing at this stage is how will the builder pay the costs. We choose to do this “open book” with our clients showing them all of the costs, paying the invoices out of the deposit amount identified in the BSA and supplying lien releases to the client. Everyone’s billing cycle is different but again it should not be difficult to identify. Our invoices that are received by the 25 th of the month will be paid by the 10 th of the month following.
After the pre-construction phase is the build contract and building phase. Most builders are coming up with the cost of the home one of a few ways.
- Lump Sum: You agree to an overall budget on the home and it is billed out by a percentage of completion.
- Fixed Price Contract: The home budget is broken out by line item for the lender but you are paying the lump sum of the contract.
- Cost Plus Contract: The home budget is broken down by line item and if there is a savings on a line item you will receive that savings, however if there is an overage on a line item you are responsible for that cost.
- The builder will be charging either a fixed fee or a percentage of cost to build your home. Some lenders are quite specific of how homes are to be contracted so you want to have this conversation early in the process.
4. Are there preferred lenders to use when building a custom home?
Yes, and the reason we have preferred lenders: Because they know the construction lending process as well as how we work. We have close relationships with John Satterberg at Community Financial, owned by Banner Bank as well as Vanessa Rez with Umpqua Bank. We are always growing our portfolio of lenders we are working with and right now have projects in process with Granite Financial, US Bank and FirstTech Credit Union.
When applying for a construction to permanent loan there are three qualifications that must happen:
- Borrower must qualify for the loan amount
- Builder needs to qualify. Each bank is unique in what these qualifications are
- The home has to qualify based on a pre-construction appraisal.
The reason the lender matters here is that not all lenders do this type of loan and there are some specificities to them that are unique.
5. Do we get to pick everything? How does that work?
From the very beginning the clients are involved and Anlon has created a “standard” of what you start from and can choose specifics and go from there. We come to you with recommendations, but each of our clients will work with our home designers, interior designers and exterior designers to make sure that the home is exactly what the client wants. One other thing we say almost every time is, “there are 5000 decisions that go into your home. We NEED you for 10 of them but you are welcome to be involved with as many of them as you want.” Our team will give you recommendations based on our experience, but we recognize we are building YOUR home.
Sometimes the perfect looking lot may have restrictions that could affect you building what you desire. There are things that one might not know to ask when
looking with the naked eye at the property. Getting in touch with builder beforehand will enable you to have an expert in your corner as you are looking for the perfect property.
We hope this gives you some insight on the many things that go on behind the scenes to make your dream home happen. We went over a lot of information here, and please know that we are here for you to answer any questions you have about home building, whether you choose us as your builder or not.