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.

 

The Financing Contingency is NOT a contingency to get financing

The Financing Contingency is not what it says it is. From the date of acceptance of the Offer, until the moment the lender approves disbursement of funds (at the end of the hour of closing when all papers are signed) the buyer and seller are proceeding with a leap of faith.  The buyer does not have a protection of their obligation to close being contingent on obtaining the funds to close from a lender. And, satisfaction of the Financing Contingency is  no assurance that the seller will receive any money on the date of closing.   The Wisconsin Offer to Purchase Financing Contingency, unless modified, is only a contingency for the buyer to be able to obtain a Commitment Letter….nothing is said about the offer being contingent on getting the money.

Financing Unavailable. It happens that the loan approval process uncovers a reason that the otherwise ready and able lender is not willing to issue a mortgage commitment letter for the buyer on the terms of the Offer, or on any terms. According to the contingency stated in the contract, the buyer agreed to send written notice to the seller stating the financing is unavailable and provide a copy of the lender’s rejection letter. The next step is for the seller to take up to 10 days to finance the transaction on the same terms…unless the buyer’s agent filled out the Offer as suggested with a name of loan source.  Because it is common practice to write in “Conventional Loan” even though the offer prompts in capital, bold letters (INSERT LOAN PROGRAM OR SOURCE), buyers are sometimes in an unattractive spot waiting up to ten days for sellers to release them from the contract.

 

 

 

 

 

Will It Work?

Nahum Waxman, author of Cooking Dumb, Eating Dumb gets asked, “Will the recipe work?” His answer is deeper and clearer than a yes or no. Nathan says in essence,  It is they who must work, and think. They must apply intelligence to ideas.

The moment you sit down with a blank real estate contract and a client with hopes, you apply your intelligence, your insight, your creativity to crafting a plan. Whether the plan works depends on whether you think, work, apply your insight.

You can do it.

Choose To Fight or To Understand

Memorable outcomes of my fights to be right serve a purpose when I look at them and ask, “What did you learn?” It’s so easy to rush to battle, and so admirable to watch people who first seek to understand and then to be understood (Melanie Trump said that…no she didn’t, Steven Covey did in 7 Habits of Highly Effective People).

The art of understanding is in listening. When I’ve been most respectful I am shown the the feelings rooted in fear which may be a contributor to an attitude of battle. Respect is served with space and patience. In my rushing to results days, impatience bowls through the space and rumbles over respect. I know what patience looks like and accomplishes.  I’ve seen admirable patience in my sons, young people who let go, seniors who know what life is about, and other well adjusted people who probably have faith in the power of Karma.

I was just told that a person believes I’m not trying hard enough. She may be right. Trying hard is not a path I will walk.  I’m being patient. I’m being gentle. I’m listening and understanding. It’s freedom to be at peace with the world. I choose to not fight today. Let’s see if the universe accepts patience. I believe it does.

Why do we do that? Cuz, we always do.

Because that’s the way I was taught. Yup. That’s a common answer to a question that may get thought more than it get’s asked out loud. And that’s too bad. Change begins with asking, “Why?” Growth is stunted when we accept, “Cuz we always do”. Why do include the Appraisal Contingency in Offers?  Don’t tell me to protect the buyer. That’s not a reason we use the contingency. We use the contingency because it’s there.   And it’s been there since 2011. Carved in ink stone, that relic will protect  a person from an imaginary threat to the point of keeping them from ever getting a chance to appraise the property…cuz they came in second.

What’s wrong with that Appraisal Contingency? It’s old and  stuck in its way. It’s inflexible. It’s a seller unfriendly curmudgeon. It’s not a contingency, it’s an ESCAPE CLAUSE. Read it from the perspective of a seller… a seller who lives in a seller’s market. You can see the problem instantly…should the appraisal, which is a subjective process, show a value of even a dollar less than the purchase price the buyer CAN terminate the Offer. Will they? Probably not, but 30 days from acceptance the seller is in no good place to negotiate and without an agreement to modify the contract to something fair, the buyer is in a position to negotiate price, closing date, concessions of any kind.  Smart sellers and will pass your offer over if they have a smart buyer who knows they don’t need an overkill contingency to be safe.

Savvy Realtors are proactively thinking up better conditions to create a win-win for the buyer and seller who have an offer with an appraisal contingency. This is a version you’re welcome to copy:  Appraisal Contingency:  In the event that said appraisal shows a value less than the purchase price, buyer shall deliver to seller a copy of the appraisal and a signed amendment to the Offer to change the purchase price to appraised value amount. Said amendment shall include no other conditions and shall allow Seller one (1) day to accept. Buyer shall not deliver the Notice to terminate provided for in this contingency prior to seller’s deadline for acceptance of the price change amendment.

If you grew up thinking your’s is not to question why, your’s is to either do or die, there’s good news—you’re not gonna die…ASK WHY and find a better way.  Next contingency that has outlived it’s use is the “Buyer direct Broker to reject the listing broker’s offer of compensation. Seller to pay buyer broker  ____% at closing for buyer agency fees…” This monument to old times has no good reason linger longer…you know why, right?

 

No, Stupid. That’s Not What Business People Do

I sort of hope that happens (housing market collapses) because then people like me would go in and buy.”  Donald Trump 2006.

Trump in 2016, On being called out for rooting for a housing market collapse: “I mean, I’m a businessman, I like it when it-when it goes down it goes down.” “What am I going to do. I’m in business. Never thought I was going to run for office.” 

The Onion didn’t write the satire. This was no fictitious businessman, smirking with selfish irresponsibility. This was the epitome of the money grubbing, selfish thugs who thinks death and misery of others is a game of opportunity for them. If we were in business participating in perpetuation of the no-bubble lie, we have some responsibility for the humanity crisis of the start of this century. If our only contribution to change is taking what is not ours at a steep discount then we are not business people at all.

Oh, I understand, there were opportunities in acquiring properties lost by “business people” who leveraged what they did not have, but that’s not the target of people like Trump. Their target were moms and dads. Young people. Retired people. People with young children who lost their homes because they lost their jobs and their banks refused to modify their aggressive interest rate loans. A business person takes what talent, ability, assets they have and puts them to use to relieve the misery of others.

Another opportunity to be a business person in a crisis will come along again. If I have to think if my action is right or wrong based on my intention to run for office, or If I have to ask rhetorically, “What am I going to do?” then I’m stupid.