You Have an Accepted Offer on a Plot? Great! Now Due Diligence Begins
Finding the plot for a reasonable price in this market is a challenge, and getting the offer accepted is an even bigger challenge. But once you've made it through those hurdles, the journey really begins.
The first thing you need to be aware of is that doing a new-construction is a long-term project. It will absolutely try and test your patience. It is overwhelming because there are a lot of moving parts and a lot of different chefs in the kitchen. You have to envision what the end product will be like before it is even there. For some people this is an exciting prospect, for others it very difficult to do. Be self-aware. If you don't enjoy envisioning something before it exists, you are way better off to find a house that already exists and renovate it to make it more your own. Short of walking through model homes that have already been built - if the builder can even provide that - you are taking a leap of faith that your vision will come to life.
The other thing you need to be aware of is there is no surefire way to price a new-construction from the beginning. You can say you have a max budget of whatever number, but that doesn't actually mean it will come in at that price. Even if you are a wizard with a budget and a spreadsheet, there are certain costs that are constantly fluctuating. A recent example would be how the current price of lumber has soared. Surely you have seen the memes regarding this... and if not, here are some for you now:
Who knows what the actual cost of a specific material will be by the time you actually need to order it and are physically ready to build? But also other costs are in flux too. Town permit fees change, taxes go up as you improve your land, labor costs can increase based on shortages or shifts in labor laws.
Plus, sometimes you can even be your own worse enemy too in the new-build process. By "adding on" things along the way, it's more than just the cost of materials that change. Sometimes architects have to go back and rework floor plans or plumbers have to come back and repipe differently. If you do this throughout the build, it adds up quickly. I would recommend setting your actual budget 30% below what you think you can afford and try to stick to that as much as possible because you will inevitably still run over.
The next thing to be aware of is how long it takes to do due diligence on a raw piece of land and to actually prep the land for construction. This is entirely dependent upon the actual piece of land you choose and the tradesmen you hire to do the work. If you are building on the side of a mountain, excavation and stabilization work will be needed. If you are building on a flat land you may have less prep work depending upon the soil. However, if there is bedrock where you plan to locate your house, you will have other financial costs related to that.
So here's what will need to be completed during due diligence. Make sure you do it all. Don't leave anything to chance because if you do there is always the possibility you may not be able to build the exact structure you want, or one at all even. So make sure you do the following:
Get a Perc Test.
This test measures how water percolates (or drains) through the soil. Why does this matter? Well, it determines whether a septic tank (a tank that holds the sewage you and your family produce) can be placed in the actual ground, partially in the ground or whether it needs to be built entirely above the ground. If the soil is too damp, you may have to go with an above ground septic tank. They are easier to access but can be an eye sore and often are much more expensive than in-ground systems.
Also, make sure you keep in mind that it is very difficult, if not impossible, to do an accurate perc test in winter when land is either frozen or when snow is thawing. You will get a different read than you would in the fall. This of course throws off the timeline for your build because many people want to buy in the winter so they can be ready to build by the next summer. Oftentimes that timeline can be unrealistic. If you can, anticipate purchasing a year in advance before you plan to break ground, just to be safe.
Another thing you should know is that the septic field determines size and number of bedrooms you can build in a home. The larger the field, the more bedrooms you can have. Some people try to get around these local ordinances by creating a “den” that doesn't legally count as a bedroom, but could serve as one. So there are ways to get creative but the rule of thumb is that it's better to build a larger septic system initially if possible so that you can always add on to the square footage of your home later if need be.
Get a survey and lay out of where the structures, septic and well will go.
You need a plan in place. Don't just close assuming you will be able to do exactly what you want on the land without verifying it. That legwork should really be done before you close if you want to make sure there are no surprises. There would be nothing worse than closing on a piece of land only to then find out that the house size you want is not possible or that you can not place it in the location you want on the parcel.
Generally the more complex or bigger the piece of land, the more expensive a survey is. Don't just rely on the seller to provide you with your survey, especially if it was done a long time ago. Verify, verify, verify. Get your own survey done. They can essentially say anything and it might not be correct. Or changes could have been made to the property boundaries since the last one was drawn up, either formally or informally. Make sure you check it out for yourself.
Photo Credit @Scott Blake
Research additional rules or restrictions.
I was just looking a plot of land for my clients the other day and one of the restrictions in that community had in place was that you couldn't put a trailer on the land. While this didn't affect them specifically, or impede with what they wanted to do with the property, it may be a concern to someone else. What if someone decided to get an ol' Airstream, fix-it-up and Airbnb it out? That might not be possible in this case. So do you research. Whether it's a township or a home owner's association, find out the following:
Do they only allow one structure on the land?
Is part of the land protected as a nature reserve?
Are there any setbacks that you should be aware of?
Are their any access rights that the neighbors or the community have to your property?
All of these things are essential to knowing in advance. So take your time and research this well.
Get approval from health board for your plans.
This is the most challenging part. If you close on land before you have this approval, you are running the risk that you may never be able to get approved and therefore you may own a plot of land that you won't be able to build on. Seldom does that happen, but it has before happened so you need to be aware. Ask around and find out how easy or difficult it is to work with the local health board. Are the quick or are they slow? What is the likelihood you will get approved if you go this route and what is the estimated time frame? The more questions you ask now, the better idea you have of what to expect in the future.
Choose a builder.
This sounds easier than it is. Right now, most builders are booking 2-3 years out, as it is in the area I specialize in. Additionally, a lot of builders have a few models of homes they build and customize meaning they aren't building a wide array of houses designed from scratch. If you like their styles, great! But if you want specific customizations, depending up on what those customizations are, they may cost you more or they may simply refuse to do it.
Builder reputation is everything and sometimes, people who do really good work can be a little difficult to work with because they are perfectionists. So it's not just a matter of finding someone who can build it, but finding someone who you will enjoy working with over the scope of the project. A new-build will take at least a year generally on the shortest end of it, but oftentimes it can take much longer than that. Compatibility can not be overlooked. You want to choose a builder you trust but that you also enjoy interacting with.
You also want to find a builder who has experience in the area your land is located in and has worked with the local jurisdiction to pull permits and what not. Many small towns run on relationships, and if your builder is connected that will benefit you in expediting your build. You want a builder who has great relationships with people in the community and is highly regarded.
Photo Credit @Jessica Delp
Prepping land plan for "improvements"
Lastly, you need to have a plan before you close of how you are going to prep the land for the build. Some general contractors will include this service, others will not and you will have to project manage this part. For example, will you need tree clearing? If you want something super private and back off the road, the further you go back, the more expensive it will be to cut that road out (not to mention plowing it in the winter, too). And it's not just as simple as cutting down the trees, you also have to have the tree roots removed entirely to ensure ground stability. Other things to consider are: Are there rocks that may be an issue? If so, how much will it cost to remove them? Are they even removable? Do you need to excavate in order to begin the build? If so, who will handle that? Is there an obvious spot for the well and septic or will you need to prepare land for that too?
Figure all this out before you close so that you don't end up in a situation where you can't get what you want or the costs soar because you didn't realize how expensive it would be beforehand.
Photo Credit @ Rural Explorer
So long story short, new-builds are very exciting but they definitely require a major commitment. Just to warn you, doing a new-build will be like having a part time job when you manage the project. And this entire process will last at least a year, but more likely several. There will be a lot of moving parts. There is no clear path or checklist to getting it done. Surprises will pop up all the time. But eventually you will have that dream home you always wanted. Doing a new-build isn't for the faint-of-heart or the penny pincher, but it is an amazing project that will bring you a level of satisfaction and pride in your home that you never thought possible.
And one final thing for newbies, it is standard procedure that your realtor only helps you through purchasing the land, which is usually paid for in cash. The rest is on you to figure out. Now, I'm not necessarily that way. I'm working with one of my client's start to finish because, well, she and her family are amazing and I just enjoy spending time with them, but understand that is not the norm. Most real estate agents only get paid commission for the land and therefore they do not help you locate builders or help in managing the build process. You will have to be your own sherpa throughout that trek. So if you are looking for someone to really take you through it step by step, make sure you look for and end up with a general contractor who enjoys educating their client as much as they enjoy doing the building of the home. If you find that perfect person, it will be a wonderful and life-changing process.
Feel free to reach out to me if you have any questions. One day, I too will do my own new-build! It's definitely on my bucket list! Good luck!