The TOP 10 MISTAKES MADE IN NEW CONSTRUCTION
#1 Evaluating opportunities based solely on PRICE PER SQUARE FOOT
Price pr.sq.ft. is a commonly referenced statistic that many in the real estate industry use to quickly compare the relative value of a home. It is perhaps most valid when comparing homes that are highly similar....for instance this methodology is useful when comparing opportunities in communities where all of the homes have been built by the same builder.....and significantly less relavent as you move up in price and level of customization. For a correct apples to apples value comparison you need to understand costs. Perhaps the simpliest example I can give can best be illustrated within the following:
EXAMPLE #1: If you build a 2000 sq.ft. (200K) home on a 8000 sq.ft. (50K) lot the total price will be 250K and the price per sq.ft. = $125.00 If you were to build a 1800 sq.ft. (180K) home on the same lot,…the total price would be 230K and the price per sq.ft. = $127.00
EXAMPLE #2: Solid Granite Counter-Tops in a kitchen can in many cases cost upward of $5,000.00. If we are evaluating two different homes (one with granite, the other without) and both are 2000 sq.ft. then the difference in price per sq.ft. = $2.50 per ft.
EXAMPLE #3: 12” Title floors typically cost $14.00 per ft (labor & material) versus most of the common hardwoods @ $8.50 per ft. If a home requires 1000 sq.ft. of flooring to cover the kitchen, dining and high traffic areas then the difference in price per sq.ft on a 2000 sq.ft. home = $5,500.00 or $2.75 per sq.ft.
EXAMPLE #4: A 400 lot subdivision with a $2,000,000.00 club house and pool has lots that are priced $5,000.00 more than a similar sized community that does not....A 2000 sq.ft. home built in the more highly amenitized community will cost $2.50 more per ft.
NOTE: The old saying that “YOU GET WHAT YOU PAY FOR” is alive and well and as we like to say at NCC “REPUTABLE BUILDERS CANNOT CHEAT THE MATH”. If a builder A is delivering 400 sq.ft. more for the same price as Builder “B” on a similarly priced lot... then they must be cutting corners somewhere... and usually not to the advantage of the homeowner.
#2 Purchasing land based solely on the LOT COST
Lot/Land cost is the single largest ticket item in the cost of any home. Most reputable builders that NCC works with will tell you that it should not exceed 17% to 22% of the total value of your completed home. Every home owner must prioritize the factors that are most important to them... but there are some UNIVERSAL TRUTHS that will elevate or deflate the value of any parcel of land:
FACTOR #1: LOCATION, LOCATION, LOCATION....parcels closer to centers of commerce, good schools, entertainment with ease of access to transportation arterials are ALWAYS worth more!
FACTOR #2: Consideration of the environment around which you are building/buying. Are you over-building/buying in a community? Who are the other builders and what is their reputation? How successful is the developer and do they have a track record of keeping promises? How active is the ARCHITECTUAL CONTROL COMMITTEE and do they have a history of enforcing THEIR RULES.
FACTOR #3: What amenities are “ARPURTENT” (go with) the land? Are their PARKS/OPEN SPACES, CLUB HOUSE, POOLS available to the residents?
EXAMPLE: A 400 lot subdivision with a $2,000,000 club house & pool would have lots on average that are $5,000.00 more than a similarly sized community that doesn’t.
EXAMPLE: A lot that includes (3) sides of Cedar Fencing @ $18.00 a linear ft. for a total of 250 linear feet is worth $4,500.00 more than one that doesn’t
#3 Working with a builder who WILL NOT guarantee the price of the home UP FRONT (otherwise known as a escalation clause)
Most people have heard horror stories from friends, family or acquaintenaces of situations where a home buyer gets to closing, only to be notified by their builder that the project has experienced unforceen cost overruns to the tune of many thousands of dollars. The unscrupulous builder will then pressure their buyer to cover the cost increases or risk losing their earnest money.....and to add insult to injury refusing to let the family move in until the situation is resolved. At NCC, we understand how to protect our buyers and build in insurance to protect you and your finances from the unethical practices of others.
#4 SWEAT EQUITY will save you thousands!
It is true that if you are a “tradesman by profession”, that many builders will allow you to “replace” one of their existing subcontractors as long as you provide proof of insurance and agree to abide by “THEIR CONSTRUCTION SCHEDULE”. This is especially useful in areas where the cost of labor is high and material relatively low... after all, the cost of material is similar for most professionals and the only real equity you can hope to make is born of your labor.
For the “NON-PROFESSIONAL” hoping to save a buck, most builders will only allow you participate in areas like painting or landscaping at best... and you must commit to abiding to the buiders “CONSTRUCTION SCHEDULE” or risk the same financial penalty that any professional would pay should they cause the schedule to slip and thus delay closing. REMEMBER, that building a home is like a layered cake... should your installation take longer than scheduled, it will delay the tradesman scheduled behind you. Many people do not understand the fact that these tradesman have blocked out time for their portion of the construction process months in advance and cannot simply adjust to the delay on the fly.
Misconception #1: That painting a home is easy!! Painting is the easy part, it is the putty work, fine sanding and masking that distinguish the professional. In the experience of NCC, most of our clients proclaim with vigor that it was “NOT WORTH IT”. Any money saved was often at the expense of additional stress caused by the effort required to conform to the builders construction schedule while balancing family and work obligations.
Misconception #2: That landscaping a home is a piece of cake! Most people find that the single hardest part of this endeavor is installing the sprinkler lines and most who have done so say that the $375.00 to $400.00 sprinkler zone is a pretty good bargain. Consider the time and cost of laying out the zones, purchasing the infinite number of parts and multiple trips to Home Depot and we think you will agree that this is better left to the professionals. When considering the installation of SOD think of this... that most sod farms sell their turf for 20 to 22 cents per foot and that the cost of installation is around 7 to 9 cents.........if your yard is 10,000 sq.ft. and you have 7,000 sq.ft. of sod, the labor to install the sod amounts to between $490.00 and $560.00.
Misconception #3: That leaving a certain percentage of the square footage in the home “UNFINISHED” will save me thousands. We have all heard of unfinished basements and unfished bonus rooms......but what was once defined as unfinished by the code inspectors of yesteryear is “NO LONGER” allowable today. TODAY, ada county building inspectors will require that the HVAC, Plumbing and Electrical be installed before they will issue a “CERTIFICATE OF OCCUPANCY”. This leaves only insulation, drywall, carpet & paint.....which can add up to several thousand dollars but not the TENS OF THOUSANDS many people anticipate.
#5 MAKING CHANGES to the design of the home AFTER CONSTRUCTION HAS ALREADY BEGUN!
Changing the architecture, floorplan and/or amenity content of any home can result in both forceen and unforceen “COST INCREASES”.
Example #1: Changes that require architectual revisions because of their impact on load bearing walls and/or roofing trusses are extremely expensive and often impossible depending upon timing of the change.
Example #2: Changes that expand the floorplan will require a NEW BUILDING PERMIT resulting in a construction delay = cost penalty. Expanding the floorplan can result in significant modifications to the HVAC, electrical and plumbing requirements
Example #3: Agreed to changes will result in a modification to the construction schedule which requires the significant involvement of your builder whose TIME THEY WILL CHARGE YOU FOR.
Example #4: Changing the amenities (i.e. type of granite) is often not possible in a timely manner because of availability. Often items are back ordered only then to find out that they have been discontinued. Often a homeowner will choose a specialty item provided outside of the builders subcontractor base thus eliminating the builders ability to establish control over a timely delivery NOT TO MENTION that it WILL NOT be covered by the builders warranty.
#6 COMMUNICATING YOUR CHANGES with the subcontractors instead of DIRECTLY TO THE BUILDER
Situation #1: Stopping buy after work to check on the progress of their home, a buyer communicates to an employee of the framing company that they would like three different ART NICHES placed in different locations throughout the entry. The employee promptly responds “NO PROBLEM” efficiently making the changes without consultation to either their boss or the builder. At the framing walk-through, the builder notices the changes and advises the buyers that each ART NICHE is a $300.00 upgrade because it required additional time & material on the part of the framer, finish carpenter and electrician. The buyer then disputes this $900.00 upgrade charge as excessive and we now have BAD BLOOD between the parties, all because the changes were not communicated through the proper channels and made prior to having an agreed to price.
#7 NOT RECORDING AGREED TO CHANGES OR UPGRADES IN WRITING
Memories are imperfect, peoples perceptions of what was said and/or agreed to can be different, and oral agreements are hard to enforce. The only way to guarantee that you will receive what you are expecting at a price that is acceptable to you the buyer, is to clarify IN WRITING all ambiguities, upgrades, changes, timelines, quality expectations & amenity content.
It is important that conversations had over the phone and your interpretation as to what was agreed to are re-interated via email correspondence so that their is a written record of the discussion. Decisions finalized must be recorded via an addendum to the purchase & sales agreement including modification of any price.
#8 ASSUMING THAT ACREAGE is more affordable than buying a lot in SUBDIVISION
The appeal of owning acreage and having enough space for outbuildings and/or livestock is for many one of lifes greatest ambitions. On the surface the cost correlation between a lot in a subdivision and a acreage lot in the country often doesn’t make sense... why should I buy ¼ acre lot in a subdivision for 70K when I can buy 1 Acre in the country for 70K? Make sure that you have asked all the right questions before you understand whether or not you are truly comparing apples to apples
Question #1: Does the acreage have a valid survey that is insurable via an “EXTENDED POLICY” of title insurance through a reputable Title Company? Surveys can cost many thousands of dollars....an expense that you will not have to incur when you buy in a plated subdivision with a LOT & BLOCK legal description
Question #2: Is the acreage SEPTIC APPROVED? and if so....for WHAT SIZED HOME?...maybe it is already septic approved but the septic system approval is based only on a 3 bedroom, 2 bath home and not the 4 bedroom 3 bath home you had been dreaming of and already spent thousands designing. maybe the land CAN NOT get septic approval because of its high ground water, proximity to riparian areas or gradient. Maybe the septic system required is SO EXPENSIVE as to negate the relative affordability of the land by itself. Making sure that you understand the value of CITY WATER & SEWER service is important and a large reason that subdivision lots are smaller and more expensive than acreage.
Question #3: Does the property have a well? If so, is the water quality acceptable for humans (nitrates)? IF NOT, how deep will I have to drill to find it? Many well drilling companies can charge upwards of $30.00 a foot... a 1000 ft well = $30,000.00
Question #4: Does the property have power? Do you need single phase or three phase? Power can be expensive and is typicaly billed by the foot and can often require additional infastructure depending upon the homeowners requirements.
Question #5: Does the property have an “EASEMENT” allowing you access or conversely allowing others access on or through your property? Does it have a utility easement that restricts your building envelope?
#9 BUILDING/BUYING from a PART-TIME BUILDER
Professional builders enjoy an ECONOMY OF SCALE that smaller builders DO NOT... resulting in increased purchasing power that they pass on to their clients.
Professional builders have enough work in the pipe line to create STABILITY IN THEIR SUB-CONSTRACTOR BASE resulting in higher & more consistent quality and perhaps more importantly ACCOUNTABILITY when it comes to warranty items.
Professional builders have access to the BEST COMMUNITIES and can often negotiate a better price on behalf of their buyer because of relationship with the developer.
Professional builders have established SYSTEMS & PROCESSES that IMPROVES ORGANIZATION making your buying experience easier
NOTE: Shade Tree Builders are like Shade Tree Realtors - everyone knows someone who dabbles in these professions. WHO SHOULD YOU TRUST with your families fortune....the answer seems self evident WORK WITH AN ACCREDITED PROFESSIONAL......seek out those who are members of the Builder Contractor Association and those that who aspire to GREEN & ENERGY STAR CONSTRUCTION.
#10 NOT HIRING A PROFESSIONAL TO REPRESENT YOU THROUGHOUT THE NEW HOME BUYING PROCESS
The proceeding 9 Mistakes are just a few of the areas that New Construction Consultants (NCC) can help you SUCCESSFULLY navigate around. NCC consultants ADD VALUE to your purchase by:
A) Negotiating on your behalf the absolute BEST PRICE. We achieve this by leveraging our knowledge of costs against a understanding of the comps.
B) We leverage our years of New Construction Experience by proactively ASKING THE RIGHT QUESTIONS & LISTENING CAREFULLY so that we can understand your CORE MOTIVATIONS quickly arriving at the appropriate solutions SAVING YOU TIME.
C) Predicting points of stress throughout the design process, selection process, paperwork, meetings, finances, inspectors, title and closing.
D) Providing a team of consultants available literally 24/7 to answer questions & to make things happen (not just an empty voice on the other end of the line).
NCC makes things happen by leveraging our years of performance, reputation and relationships with many of the valleys top builders.