Building a Home From Scratch: Our 4 Top Considerations
If you have a specific vision for your dream house, building a home from scratch gives you exactly what you want — but it comes at a price.
My wife and I have bought two homes so far. Both have been typical resale transactions in which we buy a “used” house. Now we’re about to get our third place, and this time we’re building a home from scratch. But there are several considerations that we have to take into account, some of them more expected than others:
- You can get what you want (almost).
- There are tons of pros and cons to weigh before building a home from scratch.
- You should negotiate whenever you can.
- A new-home warranty is a must.
1. What You Want
We picked the lot, the floor plan, and all of the particular finishes in the house from the flooring to the paint color. However, it won’t be 100-percent custom built.
Our home is part of a new development. As such, we’re limited to a list of floor plans and other customizations that fit within the neighborhood guidelines. Luckily, this new neighborhood fits our housing desires almost exactly. That said, building a home your way comes with a price tag.
2. Pros and Cons of Building a Home From Scratch
We looked online to see what was for sale in our area and investigated every listing that met at least part of our criteria. None of them matched our picture of a dream home.
Besides, after doing extensive renovations on our last two homes, we didn’t want to be burdened with a long to-do list for our next house. The resale homes we looked at were a bit cheaper than new construction, but the price difference wasn’t much once we factored in the renovation expenses we would do in the resale homes.
For instance, one home we considered was listed for $40,000 less than building a home from scratch. Plus, we probably would have negotiated another $10,000 off the purchase price had we made an offer.
But we would have had to remodel the kitchen completely to get what we wanted. Based on Zillow estimates, this would have cost about $28,000. We also would have changed some of the floors for about $10,000 and painted many of the rooms at the cost of about $2,000. And that’s not even counting the stress and time it would take from our lives.
We would have saved perhaps $10,000, but we wanted our home to be near perfect.
Of course, the decision to buy a resale home or build a brand new one will be specific to your local real estate market.
We were able to negotiate a bit, but builders normally have their prices pretty firmly set in advance, especially in new neighborhoods. Some builders may offer money toward upgraded finishes or a premium lot. However, you shouldn’t expect builders to negotiate too much on the sale price of the home.
In the end, we managed to negotiate an additional $5,000 of upgrade incentive money beyond what we were initially told they offered. We got the builder to pay for our owner’s title insurance — a cost of about $1,600 that we didn’t have to pay.
Building homes is their business, as our real estate agent says. So they know exactly what they need to sell each home for before you even walk in the door.
Another common question for those interested in building a home from scratch: “Can you drop the real estate agent and save on commission by dealing with the builder directly?”
Based on everything I’ve read, it depends on the builder. I learned that our builder wouldn’t negotiate a lower price with or without an agent. I’m glad I ended up using my agent because she alerted us to many factors we wouldn’t have considered otherwise.
4. A Warranty
The builder will warranty their work for periods ranging from one to 10 years. The one-year warranty is the most comprehensive, but the 10-year warranty will cover us on some of the more expensive structural items.
Is Building a Home From Scratch Right for You?
In the end, deciding whether to buy a “used” house or a brand-new one depends on your particular situation. For us, building a home from scratch instead of buying resale made more sense. The amount of time and money we would have spent changing an existing home — headache included — just wasn’t worth it for us.
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