Having a custom home built is a dream for many people. We have covered many different aspects of the process, from hiring a residential construction project manager to contracts to dispute resolution. We have also started to offer some design tips. What we have not covered, however, is the most basic thing that is needed before you ever get started… the plot of land to build on.
For some, this is a seamless purchase that is taken care of when they sign on with a contractor. By this we are talking about people who are buying homes in developments. That is not the purchase we are talking about here. We want to look at homebuyers who are picking a specific plot to build their home outside of a community setting.
Cash is King
In some cases, you may be required to purchase the land with cash. Depending upon where the land is, the mortgage company may not want to back the purchase of raw land that is completely underdeveloped. These companies look at conditions such as electric and plumbing being available in the area.
If you are able to pay for the land in cash, chances are getting the financing for the build will be much easier. You may even be able to move the entire purchase over to a traditional mortgage after the home is built.
Use an Agent
You are obviously free to look for land, but when you are ready to make a purchase, you are going to want to hire a real estate agent to navigate the waters for you. A real estate agent will also be able to give you a far better idea of the value of the land in the area to let you know if the price is fair or not, not to mention some of the problems that could arise, such as regular flooding.
Research Value of Homes
It is great to build your dream home, but are you building it in the wrong area? For instance, your home construction costs are estimated at $750,000, but the value of the homes in the area is under $500,000. That would be a fairly significant risk unless you were assured that you had no plans to ever leave the home and were not worried about resale value. The opposite of that is also true, meaning if you can build a home for $250,000 that looks comparable to the homes in the area that are selling for $400,000, your home should be an easy sell when you are ready to unload it.