NEW CONSTRUCTION – Building Your Home (Part 1)
If you look around the Ann Arbor area, there are billboards and signs advertising new home communities. Beautifully decorated models greet prospective homebuyers, but is this the BEST solution for you?
There are pros and cons with new construction, but first you have to determine if you have the time and money to invest in this lengthy process. You also have to determine how long you plan on staying in the house after it is completed.
Although the idea of building a home allows you to make it exactly the way you want, it does come at a higher cost. If you have never built a home before, this may not be the best time to consider this as an option unless you fully understand the entire process and the potential for runaway costs.
PROS: You will be making all of the designer selections prior to breaking ground (interior and exterior).
CONS: $$$ This process can be fun at first, but it can quickly become overwhelming mentally, emotionally and financially. Builders provide a base price; which in many cases doesn’t include upgrades or the extras found in model homes. During this process, any upgrades that you choose will require an additional upfront payment. After the design process is complete, any changes to the design plan will result in very expensive change orders; which can quickly blow up your budget.
PROS: You will be able to monitor the building process from start to finish.
CONS: Unless you have unlimited patience, this can be the most frustrating part of building a home. Plan on visiting your home site every day to make sure you are satisfied with the quality of construction. The GC (General Contractor/Supervisor) may not appreciate your daily visits, but many mistakes can be made during this process. You should be able to identify good framing materials vs piecing together short cuts, to identifying good plywood vs warped plywood. You need to understand the difference between nailed subfloors vs glued and screwed subfloors. PLUS many other construction basics. When you do find mistakes, you will need to continually follow up with the GC to ensure the corrections have been made. Keep in mind, many builders will mandate a “NO TRESPASSING” rule in your contract due to liability concerns. You will need to coordinate your visits during business hours and in many cases, only when the GC in on-site.
PROS: You will be able to select your Home Site
CONS: $$$ Premium home sites have a higher price tag, and in many cases, this is a pass through cost that may not provide an equal resale value. A water view, conservation or corner lot may be of value to you, but it doesn’t provide the same value to an appraisal or in re-sales.
Due to the demands and shortages of Trades, the building process can take up to one year to complete. There are many factors to consider during this process.
1) Make sure you have a flexible short term rental agreement in place that provides a 30 day intent of vacating notice without penalty.
2) Understand that weather will play a role during the construction time period; which can cause multiple delays.
3) Interest rates can change throughout the course of the year. Make sure you leave room in your budget for unforeseen rate increases.
4) Understand that your buying habits will be monitored by the Credit Bureaus, so NO MAJOR purchases during the year as this may negatively affect your credit score and ultimately impact your ability to qualify for a mortgage.
As a rule, buyers who plan on owning their home for less than 3 years, should not consider building. The chances of recouping all your expenses are very low. The ideal candidate for building a home is a long-term homeowner (5+ years).