Home Buying in 23435>Question Details

Sylvia Park, Home Owner in Glen Allen, VA

what are the pros and cons of building a custom home?

Asked by Sylvia Park, Glen Allen, VA Fri Aug 15, 2008

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The cons would be that you have all up the upgrades and landscaping to do. It adds up quick. With a resale its all in. You may not like everything but it is in.
1 vote Thank Flag Link Fri Aug 15, 2008
Bo,

Please read my blog that I linked to where I give reasons why a new home might be the best value- facts are our new homes are giving more quality. it's not always about price. It's also about the "right home" too and that goes with floor plan and quality. Sure you can get a deal on some resales, not all. You can't just say a resale home is better priced and ignore the quality features or the premium lot, etc. We're seeing people look at resales, even offer on them, and then come back and buy a new home even if it's a higher price.
Mark
0 votes Thank Flag Link Mon Jan 30, 2012
Mark

I'm happy that you are seeing new construction home sales selling briskly. Actually material prices are higher than they were just a few years ago. Commodity prices on building materials generally trend higher with nominal inflation. It's a misconception among consumers that building material prices are lower because we are in a recession. Now on the labor side, you certainly can achieve some savings.

Still at the end of the day, the empirical evidence is that existing home sales continue to outpace new housing starts for the reasons I stated. Again, we are construction & development company as well as a brokerage so we are on both sides of the equation with no agenda. I'd love to see new custom home construction ramp up again and catch up with existing home sales but when that's hard to do when people sell their existing homes at prices lower than current replacement cost.

I am happy for you but the facts remain the same and we have a bunch of existing homes to sell in VA before new construction gets back to some state of normalcy. Good luck Mark.
0 votes Thank Flag Link Mon Jan 30, 2012
Bo,

That's not the case in our area. New homes results are up for a reason. We've had 24 new homesales transactions in our Harbour View community at The Riverfront since last May ($360,000 to over $2 million) and 30 new home sales transactions at our Founders Pointe community in the last 18 months. It's not always about price, as the new homes we're building offers more QUALITY and value than many of the resale homes. Our builders are including more in a new home than they were five years ago.

Homebuyers have been paying more attention in recent months in finding not only the "right price", but what's equally important is finding the "right home" and the right neighborhood. Buying a new home is a way to make sure you achieve your dream home and it's never been a better time to purchase a new home. Pricing of materials and labor are very attractive today than a few years ago and we're seeing it reflected in many pre-sold homes. People also want to take advantage of the lower interest rates.

People should compare their options with a new home before they purchase as they'll be pleasantly surprised in what they can accomplish.
0 votes Thank Flag Link Sun Jan 29, 2012
The pros and cons are various usually the upfront cost maybe lower on the “used” home but it really depends on your market; you need an expert Realtor® to guide you and honestly answer your questions. The one thing I can add that is very underrated is when designing and laying out your new home ask questions about energy star guidelines and energy star homes. If you want to take it a step further ask about a LEEDS certified home. Energy cost will continue to outpace inflation so do all you can to reduce this cost while still maintaining good ROI.
Picking a custom home builder is a lot like picking a realtor®; you should interview several builders before making a decision. Do not solely rely on a referral from an agent! Do the work yourself and interview several. Here’s a short check list of questions to ask:
1) Ask for current client referrals, 3 should be no problem & follow up with each regarding quality of the home and how well the builder did in regard to warranty work after the sale.
2) Ask if the builder is willing to do a cost plus contract this will save you money if the builder is ethical and doesn’t try to steal.
3) If you are obtaining financing ask about construction perm loans, these are one time closing loans and usually save the customer about 2,000 and may also have a tax benefit for you. It also allows you to see all the bills and control all the money.
4) Talk with the builders bank make sure the builder has the resources to complete the project
5) Run a background check on the builder check for current & pending lawsuits
6) Ask for a copy of the builders credit report (personal or company) also ask for a copy of your realtors® credit report before you hire them. This may sound bold but you would be surprised how many are below 600, and then ask yourself do you really want to accept consul on one of the biggest decisions of your life from someone who can’t manage their own financial future?
7) Check with the local home builders association for a list of builders in the area
8) Energy cost are going up and the trend will continue pick an Energy Star home builder and have the home certified as an energy star home this will save you money over the long term, add quality to your home and help the resale down the road. For an energy star home expect to add 2-3% to the price of the home.
9) Ask to see a written copy of the home builders warranty program.
10) CONTRACTS- usually not a big deal and all 3 types work well the question is getting the best deal for you. The 3 types are: Realtor® provided (these protect the interest of the agents & brokers), builder provided (these protect the interest of the builder and usually provide more detail in regard to dispute resolution) home owner provided (these are drawn up by your attorney and favor you in the event a dispute arises) many times a builder will want to use their contracts, it’s usually fine just make sure your real estate attorney reviews the document before you sign.

That’s your top ten list! Good Luck!
Web Reference: http://www.randshomes.com
0 votes Thank Flag Link Sun Jan 29, 2012
The biggest pro now on the Chesapeake Bay is that it costs less to buy than build and I am an agent and Class A builder. The general construction market needs for the waterfront inventory of homes to sell off before new custom waterfront construction will ramp back up.
0 votes Thank Flag Link Sun Jan 29, 2012
Again, with a new home purchase in either Eagle Harbor, Founders Pointe, or The Riverfront, the landscaping is ALREADY included as is sod and irrigation. With a brand new home, you will get a Builder's Warranty and warranties on many of the mechanical items/appliances, etc. With a resale purchase, you may have to replace roofs, HVAC, replace carpet, paint, etc. I'd recommend that you take the time to compare the "real" cost of purchasing a new vs resale, so you can have a better idea of what your cash outlay may be over a period of time.

It's never been a better time to purchase a new home also because the price adjustment has been made. Builders are also offering $10,000 in Closing Costs on five of the Eagle Harbor new homes (starting in the mid $300's). http://www.eagleharborva.com/our-homes/homes-for-sale/

Thanks,
Mark Edwards, East West Realty
0 votes Thank Flag Link Sun Jan 29, 2012
In our new home communities in the Hampton Roads area of Virginia, the landscaping is enhanced by our architectural guidelines (includes sod & irrigation) and the "upgrades" are already included in the included standards by our 8 custom builders. People are actually finding out that MORE quality is included in a brand new home today versus many of the resales on the market. With a "custom home" you are also able to get the floor plan and special features that are most important to you.

A resale home may not have the quality appointments that you can get in a new design build situation. It all depends on your area and the builder that you select of course. (Our communities are Founders Pointe, The Riverfront at Harbour View, Graystone at Eagle Harbor, and Liberty Ridge in Williamsburg.)
0 votes Thank Flag Link Thu Jan 12, 2012
Just a suggestion to avoid surprises. Use an architect. An architect will not only do the design you choose, but she will put the specific product types from window frames to doorknobs into the plan, exactly as you specify. Then you get a builder or contractor to bid on the project using the products on the plan. Sometimes we make a mistake of taking a low bid on a job...say it comes to $200.00 a square foot...then you decide you don't like the builder's choice of windows or doors or whatever and you want to upgrade. Then you start making changes and you turn your $250.00/sq ft job into a $350.00 sq/ft. It happens all the time. It happened to me. Know the products you want, specify every detail and put them in the plan for the bid.
0 votes Thank Flag Link Sat Aug 16, 2008
I think what the "interest built in" means is that because they will be putting up 90% of the money for construction upfront, they will be charging interest on that money. If you pay them upfront with the mortgage, then they shouldn't need to charge interest because they aren't fronting the money, the bank is.

With any business budget, plan for 10-15% contingency just in case things come up. So if your home costs $500k, make sure that you are able to afford an additional $50-75k just in case.
0 votes Thank Flag Link Sat Aug 16, 2008
the area that we are looking to build only uses 8 builders that have been around for many years. i trust that all of them are good and would be around to take care of issues that might arise.

one more question that i have is on the financing of the home. the agent from the companies have told me that the construction company will take on the loan and that they will require a 10% down payment and that we will pay for the house at the end with a traditional mortgage. But what does it mean to have the interest of the loan "built into the price of the home"?
0 votes Thank Flag Link Fri Aug 15, 2008
My dad is a builder. The worst PROCESS he ever had building a home was when he did his own! He had to make a gazillion decisions (you will know how many that is once you get started) and he knew this was his "forever" house, so each one was very stressful. For a year, every time I saw him he had samples of something in his truck and he'd beg everyone he knew for input - which siding should I use? He'd ask - and we'd look at the 20 samples he had in the truck, and I'd say "They're all beige, anyone of them is nice." That made him angry. This went on for a year. And, he KNOWS about construction, materials, and had a great builder. You'd have even more decisions to make. As an agent, if I work with builders and a custom buyer, we try to make everything multiple choice - and limit the number of choices. Generally, if we've read them well and they trust us (seems to be the case most times) they go with someone we picked for them. In a few cases, they will say - well, we wanted something different, and they go hunting for those things. But overall, us doing this makes life much easier for them (and us). So, find someone you trust and who you think understands your tastes, lifestyle and budget.
0 votes Thank Flag Link Fri Aug 15, 2008
thanks so much for the response. i do appreciate them. i do wonder, how much "padding" should I include? I have set aside a budget and i have been upfront with the two builders that i am considering about the amount. both builders said that it can be done with the lot and the type of home that i want. but i wonder if there are going to large costs that i am not foreseeing that might hit us in the end.
0 votes Thank Flag Link Fri Aug 15, 2008
Agree with the previous three folks. Make sure if you do buy a custom home in an established subdivision that it is a builder that has a great reputation so you know they will be around to take care of any issues. If you decide to start from scratch yourself there are so many things to do...be prepared, it can be a daunting project and one that can be a test on a relationship if you are in one. Building a custom home myself, I know what it takes.
1. You have to first select the appropriate LOT to build the home. Make sure you seek someone that specializes in custom home lots. You want to always buy the lot and design the home with selling in mind at all times. From the size of the lot, location, view and available utilities. It can help to buy a lot in a good location that is already in a recorded subdivision, hence less of a worry about available utilities.
2. The DESIGN of the home should try to capture all the features you want, but also capture the benefits of the surrounding elements, view etc. As to Ellen's point, you don't want the interior design to be too individualized or it could hurt your sale down the road.

As far as pros and cons...I think it is a very individual thing for anyone that takes it on. It can be extremely rewarding in the sense you can do everything you want and choose each and every feature you want. Make sure you have a budget and pad the budget! You can, if done right and you know the right people, save a lot of money doing a custom home. It can also be time consuming when it comes to picking out fixtures to door knobs to door casing and moulding, when there are hundreds to choose from. (Go look at other custom homes on the market or open houses with an Agent friend) There is so much more that can be said, I hope this helps.
0 votes Thank Flag Link Fri Aug 15, 2008
A lot of newer construction is done quite poorly if you're buying a custom home in a subdivision. You have to be on top of the consruction teams, as they tend to skimp and do sloppy jobs. If you're doing a custom build with an architect, then you may of course find a better crew.
0 votes Thank Flag Link Fri Aug 15, 2008
The Pros are that you are getting the home that you helped design and a home that includes all of the custom features that you require. The word "custom" implies that the home is built to your specifications. The only down side may be the cost. Also, on a resale, buyers do not have the same tastes, and if the custom features are too unique, it could be a turn off to a buyer down the road.
0 votes Thank Flag Link Fri Aug 15, 2008
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