Home Buying in Middleton>Question Details

Andy Zich, Real Estate Pro in 53717

Would I get a better deal/save more in buying a discounted lot and working w a hungry builder ($500K range total package) or buying a comparable home?

Asked by Andy Zich, 53717 Mon Jan 18, 2010

We are relocating to Middleton from Texas and look to either buy or build within 12-15 mos, so we have some time and flexibility as we will rent there during this time. I understand the Middleton area has not been as effected by the real estate slowdown but I can tell from looking at the lot listings that a number of area lots have been discounted, but also that there are homes that are being discounted some as well. Also, ARE the builders giving deals in the Middleton area? Please advise.

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I do fully agree that there are several existing homes in the Middleton area currently that are fantastic deals. Although the Madison area as a whole has not been as drastically affected as other states and areas there still is some depression in the market. This is most obvious by the current price or price reductions of land. Land typically maintaining its value as it is at a premium. But when land becomes difficult to sell and you see it reduce or sit on the market, that tells me it certainly is a great time to build. Which I certainly see as the case in Middleton. Currently working with a buyer in your exact range and in Middleton, ironically. I am blown away by the house they are building for the price. Of course we know the answer to that is simple. It is extremely difficult to get a construction loan currently and the amount down required is a bit more steep than it has been in the past. Therefore fewer are building and materials as a whole are a lot less expensive. Further equaling builders are in deed hungry! Lastly, if it is a spec home you seek. There really isn’t a lot to choose from in my opinion. Existing yes, new construction no. Many builders went out of business in these pass few years. Those whom are still in business probably were not crazy enough to build spec homes. I feel that this is the best time to build for someone who qualifies to do so.
1 vote Thank Flag Link Mon Jan 18, 2010
Hello Andy-
Welcome to Middleton!! It is a fantastic city to live in. To answer your question, you are much better off purchasing a home that has already been built. Generally it is more expensive to build a home than to buy one that is already existing. Spec homes in particular seem to be a nice buy and present good value in most cases. Please let me know if I can help you in any way.

Sincerely,
Nick Simon
Realtor
Sam Simon Real Estate LLC
608-213-1818
0 votes Thank Flag Link Tue Feb 16, 2010
Hi Andy,
I am an Agent with Keller Williams and do work the Middleton market. There are foreclosures here in the greater Madison area. Middleton is an upscale city, but there are foreclosures. Prices have come down approx. 15 - 25 % for the last 3 years. My husband is a builder, but he cannot beat the prices of some of
these foreclosures. I would recommend looking at some foreclosed properties, first. I can do a search to show you what is out there, if you like.
In construction, lumber prices have come down, but other materials have gone up considerably in the past 2 - 3 years. For example, shingles have gone up because of oil, and concrete is another. My husband and I are in the process of deciding if we should build a mutli-family property this year, the cost is not showing much of a discount from three years ago.

I hope this helps. Of course, I would love to help you either way.
Judy 608-235-0431, email: judybraund@kw.com
Keller Williams Realty, Madison, WI
0 votes Thank Flag Link Mon Jan 18, 2010
Hi Andy,

Welcome to the area. At present, you will find a better "value" on a sq ft basis by buying a resale home. With new construction, while many builders have reduced their margin, the cost of materials, labor and to some extent lots have not gone down a great deal. If you find a resale home you love, you will have negotiating leverage if you are not contingent upon a home sale.

If you are not finding your dream home you may be better off building to get what you truly want and are not paying for unecessary sq ft, amenities, etc. You could also incorporate cost effective green building practices that give you more energy savings in the long run. One builder I work with has done some amazing things in his spec houses after working with a green building consultant. We focused on building a healthier, more energy efficient home.

Many "hungry" builders are unable to get financing to do a turnkey project at this time. You will need to obtain construction loan financing.

I would start by understanding your buying power with resale homes based on your criteria and take it from there.

Best of luck and don't hesitate to ask further questions.
Web Reference: http://www.pamwiden.com
0 votes Thank Flag Link Mon Jan 18, 2010
Andy,

The better deals right now are on existing homes. But if you are looking for a new home, an existing spec home that a builder wants to unload would be a possiblity for you as well. If you decide to build a custom home, you may be able to get a good deal on a vacant lot since lots in Middleton, Madison & Dane County as a whole are not selling like they were a few years ago. A builder may sharpen their pencil a bit because they need the work, but keep in mind builders are not going to build a custom home to not make a profit. So the lot pricing could be the difference maker for you. If you can get a deal and get a home built in time to still qualify for the tax credit, you may get the best of both worlds. It is tough to say where are market will be if 12-15 months is your target, but my info is based on todays market. I do work with a builder, so if you have further questions regarding construction cost, lot prices or anything else...feel free to contact me.

Thanks, Todd
0 votes Thank Flag Link Mon Jan 18, 2010
Andy, I agree also with Charlie. I think it's still better to find an existing home since there are enough on the market to choose from. Middleton is a great area, I've lived here since 7th grade. In 12-15 months things might change a little bit but you could still watch for a great deal to come on the market. Just to give you an idea, there are currently 43 homes for sale in the Middleton school area between $400k and $600k. I have a feeling this will be going up as we come into summer.

Good Luck!

Kevin Campos
Web Reference: http://www.KevinCampos.com
0 votes Thank Flag Link Mon Jan 18, 2010
Andy,

If you want a home that is very specific than building may be the right thing to do. If you want a value, then existing homes are what you want to look at. Most home sellers have discounted their properties well below what they paid for them a few years back. People and companies who need to sell are doing what it takes to get an offer. Take a look at what is currently out there and try to build the same home and I think you will find that the prices of existing homes are very appealing! Of course... No house is worth a deal if it doesn't meet your specific needs.

Good luck and HAPPY HOUSE HUNTING!

Paul Spoerl
0 votes Thank Flag Link Mon Jan 18, 2010
Dear Andy,
You would have better luck talking to a builder about a spec home that has been sitting for sale then trying to build a new home with a contract. I am sure I won't be the only one giving this advice, but builders are still building but on contract only for the most part in the Middleton and Madison areas.

There is a great inventory of existing homes on the market and you will probably be able to negotiate on those prices better as well. Good luck in your search and if there is anything I can do to help, don't hesitate to ask.

Also, remember the existing home owner tax credit. If you have owned in the last 5 of 8 years, then you are eligible to buy a home and qualify for the tax credit as long as the price is under $800K and you need to have an accepted offer by April 30, 2010 and close no later than June 30,2010.

I hope this information is useful!

Charlie Wills
0 votes Thank Flag Link Mon Jan 18, 2010
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