Building a Home with a Production Builder

CAN you do it? SHOULD you do it?

 

In order to be happy with the process and the result, whether you are considering purchasing a resale home, building in an established neighborhood, OR building from scratch, the starting point is the same. Are you financially (and emotionally) prepared to do this.

Just because you can afford to build doesn't mean you should do it. In my almost two decades in the real estate business, I've worked with a lot of Buyers, and one thing I've learned is that some Buyers are not good candidates for building. And that means building a custom home OR working with a "production builder"  The thing one person thinks is fun and exciting, another Buyer will find stressful and overwhelming.

Do you need a realtor when building a home? 

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Can you make changes?

The term "production builder" isn't quite as clear as it might seem. Depending on the builder, location and price-point, some builders will allow you make a lot of changes, others will allow no changes...nada...zippo. They maintain the way they can keep their prices down and delivery schedule on time is because everyone, all the trades, know the floorplan and can do the work that much quicker.

Even those that allow changes have a limited window that changes can be made. Even those that allow changes are clear up-front on what changes they will allow, and when they will allow them. It's always in the beginning. Changes made later might be allowed with some builders but with a minimum of $250 on top of the change for an administration fee. But again others will just say 'no'.  I'll admit this can be frustrating for some buyers. They might want a different stove, or they don't want the closet in the bedroom, or they want ...whatever...and the builder holds firm, absolutely no changes...and they mean it. 

The majority of builders you'll find in Kyle, Buda and San Marcos involve, production type of builder. (In Driftwood there is more open land, larger estate size lots so you either use your own builder or work with a builder that is 'semi-custom'. They still own the lots, have base plans to choose from, but are much more flexible with changes, as long as they are made upfront. These are at a higher price point as well.). 

The Joys and Challenges of New Construction;

The Joys 

Let's start with the Joys. Building your home, from lot selection to getting the keys, is a journey. No matter what type of building situation it is, it's a bit like having a child. There might be some discomfort, morning sickness, birthing pains, and it takes time, BUT when all is said and done, the results are well worth the wait. Walking through a home you designed and had built, knowing this is where you are going to raise your family, or perhaps spend the later years of your life, or build your empire, can give you a sense of accomplishment that is hard to describe. YOU created this. You'll be able to look back at once was an empty patch of ground and see something that was your vision. 

The Challenges

Some people have the dream of buying some land, designing their home and building it exactly the way they envision it. And if you are one of those who don't really have to worry about a set budget or the time issue, it can be fun and very rewarding seeing it all come together. But more often than not buyers have constraints. Here are a few of the challenges to at least think about before you begin the journey.

  • The Unknowns  --  Probably the toughest thing about the building process is you aren't sure exactly how it's going to look when it all comes together. The more decisions that are left to you, the buyer, the more unknowns you'll have. I had one client who was considering building ask me if she didn't like it when it was done could she change her mind. Obviously, my answer was 'no'. After much discussion, I helped her understand that she wasn't a good candidate for building. She was the type who needed to walk through a home and get a physical feel of it in order to know if she liked it or not. Hopefully you have been able to walk through a completed home with the same plan. This helps you know what you are getting. We often have to drive to places like San Antonio to look at a floor plan that is there, but not available here to walk through. Do whatever you can to get a good idea of what the house will look like when it's done. Because at the end of the day, it's going to be your house. 
  • The Financing  --  Usually, when you are starting with raw land and selecting a builder etc, you need to carry the loan. You either need to have the cash up front, or you need to work with a lender who does construction loans, and the builder will be given 'draws' on that loan over the various phases of the project. In either scenario, you are footing the bill and if a loan is involved, you are making payments during the process. If you currently have a mortgage on the home you live in, or you are paying rent, you need to think through the financing during the build process before you are living in the home. 
  • Thie Budget --  When working with a production builder, you begin with a base price for a floor plan, a lot premium (or not), and then you go to the design center (or into the garage of the model in some cases) and select your options. They'll point out what "comes standard" and what is an upgrade. Those are terms that become very familiar to you as you make the selection. Then when it all comes together you have the price of the home. The advantage of a production builder is once that is agreed upon and signed, that is your price. Even if the costs of materials go up, your price is set. You also might not be able to get all of the upgrades you wanted because of your price point. I've had Buyers who added almost nothing at the design center, preferring to stay with the standard. I've had others who went up to the 30k on the same house. Things like wood floors, granite counters, extra light fixtures, etc add up quickly. So it's not until you've been to the design center and made your selections that you really know the price of the home you're building.
  • The Time Factor  -- This varies based on builder, location, and how many contracts were submitted before yours. The time can range from 4 months to as much as 10 months or more. And, unfortunately, it can drag on longer. The contracts are written such that the builders (ALL BUILDINGS) are committed to a particular time frame. They give you a rough estimate on how long it typically takes but toss in a hurricane somewhere in the states where tradesmen leave the area for a few months, or a lot of rain, or a problem with the city planners, delays can and often happen. So don't count on moving in on such and such a date. Even at the last minute getting city occupancy certificates can be out of the builders' control. They really do their best, they want to close quickly almost as much as you do, but sometimes they just can't.  

 BUYING A SPEC HOME-Best of both worlds???

A spec home is a home the builder built on speculation/before having a buyer lined up. Sometimes there was a buyer but for reasons such as a job change or not able to get financing as planned, they are unable to move forward with the deal. So now the home is available to sell. In these cases the building of the home is already underway. You might save only a few weeks of getting permits, but other times the home is done or almost done and you can actually walk through it. You can see the selections, the paint, carpet, counters and cabinets to see if you like the combination. The downside is you don't often get to make the selections so if the spec home has white cabinets, either installed, or on order, and you prefer espresso, you're out of luck. The upside however, is you don't have to make all the selections and you don't have to wait 4-9 months for the home to be built. Spec homes that are completed also often have additional incentives tied to them. The builder wants to sell them and get them off the books so they begin to bring down the price. So you can get the exact home that you would build and save thousands of dollars.

Undoubtedly buying a spec home can save you money in the end but you need to be flexible as to what floor plan, colors etc you will accept.