Should I build

shouldibuildNovember 14, 2012

Well the subject says it all. I am a long term lurker. I have wanted to build for several years now and have enjoyed reading this forum. My wife and I have sold our home and have spent the last 2 months reviewing and modifying a Frank Betz plan that we purchased. We had a preliminary cost to construct figure from our builder based on prior Betz plans that the builder had built. Imagine my surprise when the building cost went from an estimate of approximately $500,000 to well over $600,000 after the bids came in. Even worse is the fact that this is with the builders estimates for cabinets, floors, fixtures, etc and before we start picking anything specific.

I have certainly learned about roof lines and wasted space and footprint and all of the other factors that can add to the cost. As I am sure you all know like I do now, you cannot multiply the square footage shown for the plan by an estimate square footage cost. It just does not work.

So back to my question. We can afford to build the house as currently estimated and would have an allowance for overages. That is not the issue. The issue is that I can buy a 5 year old house, with pool (which the above does not cover), with more square footage, similar finishes for at least 100K less all in with the pool, which is something that we want. In fact, we found the same floor plan that was built without our modifications, and in an area that is not convenient for us, for about $120,000 cheaper than it will cost to build the plan (I do not believe the mods added to the cost - mostly moving interior walls). Again, finishes are not what we want, but that is certainly eye opening.

In our market the resale market is so much less than the new construction market. There are things about the floor plan of the resale home we do not like. There are some finishes choices we would not have made if we built this house. Many of these can be fixed with money and still be less than building and if you built you still would not have the pool. I am having a hard time justifying the additional cost and the headache of building.

What made you build? Is the chance to get exactly what you want worth the 20-25% premium?

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Shouldbuild, you have identified a key question in real estate in many U.S. locations, i.e., the cost of new construction is greater than the cost of existing houses. It just seems to be the reality in many areas.

What to do?

Everyone and every situation is different, so it's impossible to generalize. Some thoughts:

--Location, location, location: the old mantra's importance is as relevant as ever;
--Age, operation and maintenance: new houses (well built and equipped) have, perhaps, a 10-15 year initial period where repairs and replacement may be largely unnecessary. Conversely, houses of 10-15 years age and older will begin a period of continual repair, replacement and a wider range of annual maintenance. Well designed new houses should be more energy efficient (if that was a priority) and cheaper to operate annually as well.
--Finances: One may get more for less money, as well as have the opportunity to remodel to one's preferences, with a lower-priced existing home. Remodel construction, however, may be just another type of construction, with many of the same challenges and decision-making of new construction, while living in the middle of the remodeling!
--Unknowable surprises: Existing construction is generally full of unknowable surprises, whether or not one decides to remodel. For example, does the site drain properly; do all of the utilities function properly; are there tree roots in the sanitary sewer line; is there missing insulation in the attic; is the furnace servicable, yada, yada, yada. Buying an existing house is buying unknowable surprises, and full due diligence is essential, but seldom certain and complete.
--Personal goals/aspirations: Here's the imponderable--just how strong is the personal desire to design and complete one's own custom home? And, as you say, what's that worth?

What made me build? I am a retired architect (among other things) and so designing and building is just part of my DNA. I've lived in various pleasant non-architect designed homes throughout the U.S. and often just been miserable at the lack of thought, design and execution. Even though now retired, I continue to plan and design my next custom home, even thought I go through your same situation.

For me, at the end of the day, a home is less about "shelter" (simply keeping the elements out) and more about "a way of living" (enjoying views, light and the way I most enjoy living and acting day to day). Said differently, I prefer my home to respond and support me, rather than me adapting to the style of life imposed by an an anynomous structure.

To me, "build" or "buy", where everything else is equal (and it seldom is) is "personal lifestyle" vs "shelter and convenience". Hope this makes some sense.

Good luck on your project!

    Bookmark   November 14, 2012 at 11:53AM
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We built because we couldn't find a house we wanted to buy at any price. Even the ones we looked at in our area that were at the top of the market needed major redos to make it something we would be happy with.

We wouldn't be able to sell this house for anywhere close to what it cost to build, now or likely 10 years unless we happened upon someone who just loved the house. That being said, it is a custom home so it isn't like we could find the same or similar plan built in another area.

We love our neighborhood - heavily wooded, multi acre lots, on the shoals of a river, loads of wildlife but literally 5 minutes from Target, Publix, Trader Joe's, Fresh Market, CVS, etc. Also 5 minutes from the golf course and 5 minutes from work.

This is a "live here til we go to assisted living" place for us . . . and we don't look at it as an investment. We built the house to enjoy it and as long as we can sell it in 30 years for less than we owe on it, we will be happy :)

I guess we subscribe to the philosophy of virgilcarter above - this is not just shelter for us but a lifestyle choice.

    Bookmark   November 14, 2012 at 4:38PM
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A custom house alone is not worth 20%. There are markets where the premium is less or zero and that is where building makes sense.

Older houses have their headaches but so can newer homes.

    Bookmark   November 14, 2012 at 6:14PM
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This is so personal that I doubt it can be answered on this forum....that being said, the reason I am building at my age (recently widowed at 70) is one that I pondered, but I am semi-handicapped and looked long and hard for a house that would fit my needs and found none...therefore, I am building. I am keeping my build very modest and am building on a pretty little lake, so I am hoping there will be no problem selling it in the not too distant future.

So take your personal circumstances into account..weigh the pros and cons...age, children, income, job security, location, needs, etc. And good luck on your decision.

    Bookmark   November 14, 2012 at 6:46PM
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I had the same experience. But ask yourself who is this builder? How many houses do he builds per year? Receptionist, wife on the payroll, kids in college - you are paying for it.

It would be nice for us to have to build just one house per year and pay for it all. Figure your costs out. Betz depends on plan. In my experience windows could cost as little as 5k and as much as 50k for the same number of windows. Interior doors could cost as little as $57 (mastercraft) as as much as $400/per door solids.

Guy I talked to asked for as much as $79/sq ft unfinished space + $6k bathroom + $85/sq ft garage + $50sq ft unfinished basement. Other GC said $50/sq ft finished space.
(not including kitchen cabinets, flooring) per plan.

Go figure.

    Bookmark   November 14, 2012 at 6:59PM
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Annie Deighnaugh

We built because we had the land to put a house on and the existing house was a total wreck.

We also built as we had very specific requirements for green and for making best use of the site.

I would only build if I had a specific lot or a specific home design that didn't exist already on the market....otherwise, I'd always opt for a built home, even if it needs a reno over building from scratch. Building from scratch is a lot of work, a lot of money, a lot of time, a lot of everything. So you have to really want and need the outcome to make it worthwhile.

    Bookmark   November 14, 2012 at 7:11PM
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We are building because there's a hole in the market where we're headed. All the homes are either poorly built and poorly designed and older, or new and out of our price range. Our house will be worth what we've paid to build it when we're done.

I'm curious how you can get financing to build in your situation-- why would the bank loan you money if your house won't be worth what you owe?

    Bookmark   November 14, 2012 at 8:30PM
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To an extent, we built for similar reasons as zone4newby. We needed to live in a particular area for work requirements, and there were close to no homes on the market for a two year period. What few did come up were either old w/ issues or they were very overpriced. There was one house we liked, but we were able to build for the same price with everything current and customized to our liking. (The difference being the yard was all done on the for sale house, but ours wasn't.)

With all that said, ff I was buying in an area with more than ten MLS listings, I would likely not have built.

    Bookmark   November 14, 2012 at 9:45PM
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"I'm curious how you can get financing to build in your situation-- why would the bank loan you money if your house won't be worth what you owe?"

You can pay for the difference between appraised value and cost to build in cash.

    Bookmark   November 14, 2012 at 9:48PM
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I want to build a house because I want things that aren't typical. I don't mean I want a house that's outrageously big or expensive, just that I want some things that don't fit the typical mold.

Also, I don't want a house in a neighborhood.

    Bookmark   November 14, 2012 at 10:38PM
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