Building A New Home vs. Buying An Existing One

Why Building A new Home May Be A Better Financial Choice For You Than Buying An Existing Older Home   For this example, I’ll assume that you are able to put 20% down in both situations for simplification of math and to give an apples to apples comparison. Scenario 1:Buying a 25 year old home for $250,000Borrowed $200,000 @ 3.25% for 30 years$875/mo principal & interest Scenario 2:Building a new home for $350,000Borrowed $280,000 @ 3.25% for 30 years$1,219/mo principal & interest In Scenario 1, after living in the home for a few months the owners realize that the home needs a fair amount of updating and maintenance. New furnace New hot water heater New washer and dryer New refrigerator New stove New dishwasher New windows New roof New paint Refinish Driveway Clean up overgrown landscaping New kitchen cabinets and countertops New flooring New paint Update hardware So you decide to take out a loan for renovations and updates to bring the home more current. Let’s be conservative and say that all the above is going to cost you $120,000 and won’t get you everything you want, but will at least get the home looking more updated and all your mechanicals taken care of. If you took out a rehab loan on the property assuming 80% LTV after work is done and got a 3.5% APR for 30 years your new payment would be: $1,437/mo. In scenario 2, where you build a new home, you’ve got a lower payment than this and everything is set for many years to come. Everything is brand new, most...

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Do I have to Like My Builder?

So now you’ve selected a competent builder. But you may ask, “Do I have to like the guy? If he has a good reputation as a builder, does it really matter if I like him?” Yes, it matters. Don’t sign a contract with a builder you don’t like, trust, or respect. If you do, you could be headed for trouble. Why? Because this is a long-term relationship and a long-term relationship with someone you don’t like, trust, or respect can be challenging, frustrating, and more than disappointing. The planning stages of custom building a new home can take anywhere from months to years. Actual construction may range from six months to 24 months or longer, depending on the size and scope of your home. Add to that a one- or two-year limited warranty time period, as well as the fact that you may need additional information from your builder for many years to come regarding warranty information, vendor and subcontractor contacts, and other nuances In this business, it’s not uncommon to lose some contracts to other builders, and it usually boils down to perceived costs. A prospective homeowner may initially think our pricing is higher than our competitor, but most often that’s because we didn’t have the opportunity to thoroughly compare the two proposals. We like to ask our homeowners why they chose us to build their home. Often the answer is trust. When challenges arise in your project and you call to ask questions, it’s important to know that you’ll get a straight and honest answer. Do you...

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Forcing a Round Peg into a Square Hole: Finding a Competent Builder

Jim and Linda were the kind of people who refuse to give up. Sometimes persistence is a good thing, but there are times when pushing too hard is unwise. This couple, for instance, were unwilling to listen to sound, professional advice. They forced their opinions and ideas on a builder— and it was like forcing a round peg into a square hole. It just didn’t work. Even when they realized they had received inaccurate advice from their designer about their homebuilding costs, they wouldn’t give up their dream. So they began to shop in earnest for a builder who would build their home for the price they were told. Would Jim and Linda find a satisfactory and skilled homebuilder? Maybe. But the builder they seemed to want—one who would be the answer to all their problems—would have been either a builder who was desperate for work or one who didn’t know how to price a home. Finding a competent builder can be challenging, but when you know what to look for, you’ll get an accurate estimate and good advice. Many builders won’t (or don’t know how to) price a home while it’s still in the concept stage. If most builders can’t do this, it certainly makes sense that most designers can’t either. After all, designers are trained and skilled in designing and creating what they are asked to create. Homeowners who don’t have a good handle on pricing will tell the designer what they want and the designer will only do what he was retained to do. I’m not blaming designers for not knowing about...

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Which Comes First: The Builder or The Designer?

Just like the proverbial “chicken and egg” question, “Which comes first?” is a question that confuses some people, but must be answered before you start the custom, homebuilding process. While the answer may seem obvious, it’s important to know the right answer in order to avoid problems from the beginning. The designer comes before the builder, right? Wrong! Read on… Sometimes people get the cart before the horse and in all the excitement, they get ahead of themselves. Mike and Janine thought they had done it all right. They had a roll of plans tucked under their arms, a sparkle in their eyes, and a skip in their steps because they knew they had something very special—they had the plans to their dream home. During the last several months, Mike and Janine had spent countless hours dreaming about their new home and holding meetings with their designer. They went through revision after revision pouring over the plans until late in the evenings. The couple worked tirelessly to make every room just right—put the baby’s room here, move the daughter’s room there, make that closet just a bit wider, add two feet to the kitchen—giving instruction upon instruction to their designer about each room. Their dream home included the newest ideas from This Old House, the latest trends in low voltage lighting, and cutting-edge insulation that could lower energy bills by up to 90 percent. It had a cabana like the one they saw while vacationing in Acapulco, layers upon layers of moldings,...

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