Home Buying in Falmouth>Question Details

Sara P, Home Buyer in Massachusetts

What should we know before buying a lot and building a home?

Asked by Sara P, Massachusetts Sun Sep 30, 2007

We saw a new house on a golf course that we'd like to buy...BUT...it was just sold to someone else yesterday! The realtor says he can sell us the lot next door, which is equally nice but a bit more $, and either have us get a builder or he'd have his builder build us the same house as the one we like.
My husband has always wanted a new house, but we don't know much about the right things to look for (in both a lot and a builder) and would appreciate some advice about questions to ask, pitfalls to avoid, etc. There are only a couple lots left in this little neighborhood that backs up to the golf course, and they seem to be selling quickly now that the one house was built. Are we better off getting our own builder or telling the realtor to have his builder build the same house? If we build, I'd want to change a few things about it, but I'm afraid any changes will run the price up. I'm afraid by building we'd lose negotiating power, but we can't find what we want in town we want.

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Hi Sara. If you like the lot and things are moving quickly in the area, I would make an offer on the lot and get in contract especially since you say that you can't find what you like elsewhere. You don't have to decide now if you want to go with the agent's builder or find your own. You can make that decision during the inspection period. I would set up an appointment with the agent's builder and talk about what you want changed and make sure that it can be done within your budget.

One of the biggest pitfalls of new construction is making change orders which can be costly. I would ask the builder for references and look at few other houses that he has built. If you have a friend or relative who knows about construction, ask him to come along.

Unless there is a compelling reason not to go with the agent's contractor I think you'd be better off going with someone who has already built a similar house before as he already has the plans and does not have to start from scratch. If you hire a new contractor, you'll have to pay for a new design as the new contractor cannot just copy the plans of the other contractor (that could be a copyright violation).

If you find during the inspection period, that you don't want to build after all, you can cancel the contract as long as you have not removed your contingencies. I would discuss your options with your agent.

Make sure you qualify to buy the more expensive house. Get your loan agent involved in the discussions. Getting a construction loan is different from getting a loan for the purchase of a house that already exists. There are usually two phases. The construction phase and the post construction phase and many times you can lock in the rate for the final loan when you get the construction loan, but I don't know if that's a good idea as interest rates may go down between now and when the house will be finished. You may want to find out ahead of time what your options are if the rates go down after you have locked in a rate.

You also want to discuss with the builder what happens if the completion of the construction is delayed. Construction delays can cost you money and unless there is a penalty clause in the construction contract, you have not automatic recourse against the builder. Good luck.

As you can see, there quite a few things to consider. You may also consult with a friend or relative who has gone through building a house.
Web Reference: http://www.go2kw.com
1 vote Thank Flag Link Sun Sep 30, 2007
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
MVP'08
Contact
Take a look at my website...although aimed towards New Orleans rebuilding, it will give you an understanding of the building process that some other folks have successfully used.

Take a look at what the Realtor has to offer. The way to make changes and not get crazy contractor pricing is to get breakdowns of what each item will cost, such as, how much material and labor to install an electrical outlet, or how much to install a sheet of drywall that is 4' x 8'. What will really help you alot is to go to a major hardware such as Lowes or Home Depot, and get an idea of what material costs are. This way when you talk to a contractor you are speaking the lingo and have a sense of at least the material costs, and can then make sense of the labor cost.

The website noted has advice on avoiding pitffalls. If you email me I can send you a spreasheet to get you rolling so you can go make an offer on the land and have a fun and reqarding building experience.
Web Reference: http://www.iansellsnola.com
0 votes Thank Flag Link Sun Sep 30, 2007
Thank you, Ute and Ian, for your replies. You've given us much to think about!

Uta, (or anyone, for that matter!) can you explain what is meant by your comment ...."If you find during the inspection period, that you don't want to build after all, you can cancel the contract as long as you have not removed your contingencies."

I don't understand what it means "if you have not removed your contingencies..."

Also, when is a lot inspected and how is that done? I know I sound ignorant, and I know about home inspections, of course, but what is inspected on a lot and by whom? The builder and realtor will be walking the lot with us, but do we need to get someone else to inspect it for us? Also, what contingencies would we have if we are not going to get a mortgage?

Thanks again for your advice!
1 vote Thank Flag Link Sun Sep 30, 2007
Hi Sara. I sent you an e-mail earlier this evening. I hope you received it.
Web Reference: http://www.go2kw.com
0 votes Thank Flag Link Sun Sep 30, 2007
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
MVP'08
Contact
Yes, I sure did. Thank you, Ute, for clarifying things for me!
0 votes Thank Flag Link Mon Oct 1, 2007
Talk to the Realtor's Builder and at least two others. Get references, as others suggested. Also, go to the town Code Enforcement Office. They cannot make recomendations but you can ask if the builder has any outstanding code violation issues. A good builder will generally build above code. Also, check the builder out with the Chamber of Commerce and ask if there have been any customer complaints.
If the Realtor sells you just the lot, they earn commission on the land only. If you use the Realtor's builder, they will earn a commission on the building package, too. The builder will have to include this commission in pricing your house. This may be money well spent, as they will offer you services during the construction process.
0 votes Thank Flag Link Sun Nov 4, 2007
All the previous posts were very informative. I'd also consult the city/town engineering department and find out if the lot is indeed buildable and the condition if any of the catch basins, water tables, special zoning restrictions, history of flooding. You'll need environmental testing most likely as well. Ask neighbors about the neighborhood and find out about any problems (ie. high water table, steep topography, presence of ledge,etc.). Research the history of the lot it's self and the neighborhood (prior uses, prior neighbors uses of their properties (ie. was there a tannery, is the golf course built on reclaimed land etc.). Find out about any easements. Then consult with a real estate attorney that's very experienced with land purchases and also with contracts to build homes to protect your interests. Consult the proper architects, engineers, general contractors. Research them all and ask for and investigate as many refrences as possible. Check out all with Better Business Bureau, city/town departments, Mass licence boards. Hope that helps a bit.
Web Reference: http://www.Medfordhouse.com
1 vote Thank Flag Link Sat Nov 17, 2007
Build on it with the realtor's builder if you are satisfied with his reputation.l Get a lawyer now, you're gonna need one eventually. Check out my website to view ALL homes and lots in the area for FREE. That way you will be comfortable with the price. www. JeanSOLDMyhouse.com
0 votes Thank Flag Link Thu Nov 29, 2007
You have recieved lots of good advice here. The best answer you so far that I see listed here is from Ute Ferdig -…Real Estate Pro in Auburn. Essentially she is telling you to go for it. if you can afford it. I myself have purchased on a golf course comminity and got just what I wanted but I held out for the right lot. When the opportunity came up for me to be right on the 6th fareway I jumped and I was glad I did. For some reason when it comes to Real Estate people almost always try to out fox themselves and think about it too much. You have already said that things are selling quickly and that implies that the supply will soon be gone. I agree you should go for it and take the Realtors's advice with respect to the builder and recognize the more changes you make in the basic plan the higher the price. It probably makes more sense to build what you want now rather than trying to make changes later. This falls under the axiom "you can pay me know or you can pay me later, if you pay me later, I may have to charge you more." Bank on it they will charge you more later.
0 votes Thank Flag Link Tue Dec 11, 2007
Thank you, ALL, for your advise! As it turned out, we were seriously considering buying the lot, when the new house next door (also with beautiful views of the fairway) went back on the market. Something happened (to this day we don't really know what!) and the original deal fell through, making it available again. We decided that, although we didn't get to choose things like granite, cabinets, etc. (because it was almost finished) we should grab it because it we really liked the house and location, and it would be more turnkey and less stressful than building. We paid almost the full price, knowing that others were interested....and learned that there were 3 other back-up offers on the house, had our deal fallen through! So much for the "slow" real estate market. Long story short...we didn't build, but have a brand new house we love! Hopefully, it will also turn out to be a good investment in the long run ; )
0 votes Thank Flag Link Wed Dec 12, 2007
We are seeing the same situation here. Buyers think no one else is looking - and then are surprised to find that there are multiple offers!

Just a clarification on the plans from a builder's perspective - many builders purchase ready-made plans from an architect, rather than commissioning an entirely custom plan. They often do not purchase exclusive rights to that plan, just the rights to build the home either once or as many times as they wish. Because of this, another builder may be able to purchase that same plan from the same architect and build it as well.

But there are many things that a builder does and can do to make their homes unique: they might do extra decorative work that's not in the plans, increase or decrease room sizes, add a walk-up third floor, use rounded corners instead of traditional (and less expensive) square corners, and include many more changes from the original floor plan to make thier product unique. Thus using another builder to build the same set of plans does not necessarily guarantee that you'll get the same house.

I'm glad you were able to get the home you wanted!
Web Reference: http://www.StantonHomes.com
0 votes Thank Flag Link Fri Dec 14, 2007
I would think it must be hard to find land to build on. We considered it but we bought a great home instead.
0 votes Thank Flag Link Tue Aug 28, 2012
Obviously before your buy a lot you should consult a realtor who knows the neighborhood, its location and what surrounds the neighborhood. Any lot would have to be big enough to build a particular size house whther it be 2 or 3 bedrooms or more and have room to build your septic system as well. Any lot should pass a Perc test which will tell you if the soil will drain water and waste. Where are you looking to buy and if I can help you further or give you options for more builders just let me know.
0 votes Thank Flag Link Mon Feb 4, 2013
you can also check out my website for Land For Sale at http://www.sdwrealtyofcapecod.com/HomesAuthenticated.aspx?tabid=2203122
Flag Mon Feb 4, 2013
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