Buying land and building your own home is the quintessential American Dream! Since our country was first settled, building your own home has been one of the most coveted goals of many Americans. However, this dream, as basic as it sounds is much more difficult than most people realize. So here in this post I’ve outlined several things to consider when pursuing the dream of building your own home.
Plan, Plan, Plan
In my career I seen many people go down this path and come up empty handed or worse losing money in the process. So my goal here is not to discourage you but to help you understand the process. We will look at what’s involved with finding the right property and how to develop a plan for success. From talking with builders to understanding the dynamics of land, I want you to have a great foundation to start. Knowledge and planning will give you the highest chance of fulfilling your dream of building your own home.
Finding A Lot or Land To Build On!
When you’re ready to begin your search for land, we’ve made it a little easier for you. Check out these pre-built links to every land listing on the market categorized by area.
Step 1 – Building Your Own Home
Do You Have To Sell Your Current Home To Qualify?
The first question you have to ask yourself is, do I have to sell my home to qualify? Big question! This will tell you if you’ll be able to move straight into your new home when it’s ready? Or… if you have to sell your existing home and move into a temporary rental until your home is built.
Know What Your Current Home Is Worth!
Also, knowing what you will eventually net from the sale of your existing home is extremely important. How much cash/equity can you realistically pull from your current home to put into your new home will be the basis for establishing your down payment and budget. Knowing what your home is worth is an important first step but knowing what your approximate net gain from the sale will be is even more critical.
Tip: Don’t make assumptions on what you might be left with after the sale of your current home!
Contact Us For A FREE, NO OBLIGATION Market Analysis and Net Sheet for your home! 843-790-7000
Step 2 – Building Your Own Home
Secure Financing
Just like buying a resale home, you’ll need to get pre-approved for a lot or construction loan purchase. This is critical to establish your budget. The last thing you want to do is to find a great property and get your family excited about it and not be able to close. Or, you buy a great property and discover you can’t build the home you want within your budget! The last thing you want is to be stuck owning a lot you can’t build your home on! Ouch!
Step 3 – Building Your Own Home
Know The Costs Of What You Want To Build
It is very important to begin the process of discovering the costs of what you want in a home. You probably have a good idea of most of the basics but now is the time to do your research. Having a great real estate agent that knows the building process like our team does, will go a long way towards guiding you to the best decisions. Some resources to check out.
- Go Online and visit Home Plan websites
- Visit Model Homes in the New Communities in your area
- Go to Home Shows
- Visit Home / Building Supply Stores
- Meet and talk with different builders
Know Your Numbers
You’ll want to get a good idea of how much your home will end up costing before you hunt for land. For instance, if your total budget for a house and land is $450,000., and your house is going to cost $350,000 to build, you’ll need to find a lot of land under $100,000.!
I’ve seen to many people do this backwards. They will put a lot under contract and then discover what they want to build puts them way over budget and they have to back out of their purchase of the lot. Or worse default on the contract and lose there earnest money deposit. Additionally, some folks get so far into the process that they will have spent money on home plans, survey’s, soil reports and more! It’s a shame to watch this happen. Especially when we know, we could have helped them plan and avoid these losses.
Planning to build a house can be time consuming and expensive. But in the beginning, if you put in the work, your efforts will payoff!
Step 4 – Building Your Own Home
Make A Checklist
Determine the basic requirements for what you will need in your home. You can take this a far as you want. But at least make sure the big items are covered.
- How Big Do You Want Your Home? Square Footage Required?
- How Many Bedrooms and Baths
- Do You Want An Attached / Detached / Side Or Front Loaded Garage
- Do You Want A Swimming Pool
- How Big Of A Yard Do You Want
- What Type Of Siding Do You Want
- What Type Of Foundation Do You Want
- Etc.
Step 5 – When Building Your Own Home, Should You Have A Home Designed or Hire A Builder?
Have A Home Designed
You might want to take this as far as having a home designed in advance by either a builder or a home designer/architect. However, this can be relatively expensive. So my best advice would be to discover a basic range of the cost per square foot for homes like you want in your area. Once you have this number, you can use that as a reliable gauge.
Tip: There are a few things to keep in mind if you visit new home sites where “production” home builders are building. Builders like Pulte Homes or Lenar that build in high volume can build homes for less money than you will be able to. Since they build so many homes, they benefit from the economy of scale. They receive bulk discounts from their suppliers and contractors that you won’t be able to get. With the biggest advantage being the cost of the land they build on. These large builders either buy land in bulk from developers or develop the land themselves. This gives them a huge pricing advantage in the market! A homeowner building a single home just can’t compete.
Meet With A Builder
A less expensive alternative than having your home designed in advance, is to meet with a couple builders. They should be able to give you an idea of what the home you envision will cost. They may not be able to give you and exact cost but should be able to share with you a cost per square foot range. Typically, this figure will not include costs for site preparation, tap fees, well and septic, clearing, fill dirt, permits and many other variables that may be required for the eventual site you choose for your home.
Tip: You may have to pay for an estimate or hire the builder before they will put long hours into your plan or estimate!
Building Your Own Home – Conclusion
Keep in mind as your wish list grows so will the price. And you may end up very surprised at the cost of a home with all of your “have to have” items. Understand that it is very common for people to make compromises due to cost considerations. And, if you discover you can’t build what you want, it’s better to find out early in the process rather than after you have closed on and own a lot.
So once you’ve completed your initial research and discussions with prospective builders, now you’ll have a better idea of how much you can spend on your lot.
So now you can go shopping for land with confidence. You know roughly how much your dream home will cost and know how much you can reasonably spend on a lot!
What’s Next?
Check out this post on Buying Land To Build On!
The Author….Bill Byrd has been helping clients buy land and build homes since 1986. Having personally built several homes in his career, Bill’s clients gain valuable insight when buying land to build on and selecting the right builder. Working with a true expert will save you time and money, while being confident in your decisions! To reach Bill direct call: 843-972-7670 or feel free to send him a question below!
