Building a House: Own The Lot, Control The Price.

Outcomes are determined by control. The residential home building process is  all about control.  Your satisfaction of the process will depend on your ability to maintain control and your wisdom to relinquish control to responsible people.

When you control the building site, you have the upper hand in everything from design (to the extent building restrictions permit) to completion date. If the outcome matters, this might be a strategy to employ.

  1. Locate a building site that fits your lifestyle, and is not connected to a builder. Unless the builder will let you build with a builder of your choice on the lot she or he is selling to you, keep looking.
  2. Get an accepted offer with necessary contingencies to do your due diligence on the lot, and include a contingency like this:  This Offer is contingent upon buyer executing a residential building contract with a builder of buyer’s choice within ________days of acceptance of this Offer. (Allow sufficient time for design, pricing, and selecting a builder.)
  3. Before you  close and take ownership of the lot, you want to know the lot is sufficient for your purpose and you have a plan that can be built by a responsible builder at a price, with the amenities you can afford.
  4. Work with an architect to design a plan.  Architects will save you time and money even if the plan is relatively simple. They should know the current building codes and have smart ideas on wise use of the space. An architect will specify materials and construction methods.
    1. While the architect is working on your plan, study up on Building Science.  Be prepared to know best practices in construction.
  5. Take your plans and specifications to builders of your choice. Ask them questions about their construction practices. Knowing a little bit about Building Science will help you ask prudent questions.
  6. The time you spend getting your specifications nailed down will come back to you in dollars and cents. Every decision made with builder’s bidding against each other is one less place for the builder you choose to have you accepting her/his price later.
  7. You’re going to get a bid from a builder. Make sure that bid includes a copy of the builder’s warranty, construction schedule, and a copy of their contract. At the end of the day, it’s a leap of faith you take with the builder you choose, but the contract is your rule book…your attorney may have some ideas to keep the rules favorable.
  8. Take out your own construction financing. If the builder tells you they can save you money by acquiring the lot from you and you buy the house as a “turn-key” finished product, ask for proof. Remember, he who has the control of the lot has the control of time and money.
  9. Include the architect in the process of reviewing the construction. The building plan is called a plan for a reason. Contractors may choose to deviate from the blue print for their benefit, but the cost to the next subcontractor on the job is your problem. Someone, and don’t expect it to be the builder, has to make sure the house is built to plan. Builders charge for change orders. You can charge for deviations and the corrections to get back to the plan.
  10. The builder gets the final payment at the time you take occupancy. If you work with an attorney on your side, you will not make the final payment without 100% of the work finished. If you do take occupancy with loose ends, an escrow of more than sufficient funds is a good idea.

As you navigate this building process, keep control in mind. Either you have it or someone else does. Control is divisible by nothing.

 

Author: Tom Meyer Real Estate Broker, Madison, WI

I believe every every Offer to Purchase can present the unique ability of the person the contract is written for. The person who is most compelled to be cooperative, most qualified, most sincere, most committed, least risk adverse, can have an Offer drafted to show their true ability and commitment. Home sellers are likely to look favorably upon those offers which give them the most comfort. Licensees who know how to craft Offers as unique as the individual buyer are worth their weight in gold.

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