Note: Mark Tepper, senior vice president of sales & marketing, HomeFinder.com, is currently in the process of building a custom built home for his family of four.
Building a new home is an exciting and at times overwhelming experience. I know, I’ve just embarked on my first home building adventure! The end result will be incredibly rewarding, however we are working hard to avoid minor missteps along the way that will cost an unexpected amount of time and money. Below are five tips that will help ease the stress of the home building process.
1.) Determine the estimated cost, but budget to exceed: Work closely with your builder to determine a realistic estimate (to include all construction costs and home features), but budget 10% more in additional expenses to cover unforeseen changes and additions you may incur during the building process.
2.) Take your time and be hands on during the planning/architectural phase: Your instincts will be to move quickly to the demolition or construction phase, but take your time reviewing and studying your drawings. Continue to visualize your new home: imagine where you want lighting, think about how will you access cabinets, determine which rooms should be soothing colors, where do you plan on entertaining, where you will need the most storage, etc. Every change during the building process will cost you money so take your time in the planning stage.
3.) Understand the bank approval process: Securing a loan to build a home is different than buying a home. Unless you are paying cash, you may have to secure financing for both a construction loan (used to pay the builder, subcontractors and suppliers) and a mortgage loan (used to finance the home after construction is finished, and to pay off the construction loan). When applying for a construction loan, you will need several important items in order for the loan to be approved:
- The plans must be completed and the builders’ fees must determined in order for the loan to be completed.
- Once the builders’ fees are notarized and submitted to the bank it cannot change.
- If you spend more than originally budgeted, these fees will come out of your pocket (further reason to budget in that additional 10%).
4.) Profit from the demolition: If you are demolishing the previous house on your new lot, search for nearby demolition sale companies. You may be able to extract some value out of the home you’re tearing down (i.e. cabinets, flooring, appliances, metal, etc.). Then, contact the local fire department to allow them to practice on your home. Many fire departments are looking to practice opening walls, scaling roofs or ventilating homes, but don’t have the opportunity. Check with your accountant for a possible tax deduction.
5.) Choose your finishes wisely: Hire an interior designer, or work closely with someone who understands interiors and finishes. You will live with these decisions for a long time. Also consider the home’s potential resale value. The house may not be yours forever, so refrain adding so many upgrades that you price it out of the neighborhood.
Bonus tip: Buy your new neighbors a nice bottle of wine and introduce yourself before the demolition begins. They will have to endure lots of mess and noise while your house is being built, and this type of gesture can go a long way