I had the same situation. The builder wants the tie in and the contract. I recomend close on the lot first. I also recommend that you put the house build out to competative bidding. Get at least 5 bids to build your house. I had variations in the 50% range on the cost to build.

Competative bidding is what keeps the builder honest. Having said that do not go, nessarily for the lowest bid. Some builders bid low, then ramp your costs in "Change requests" etc. Some bid low, realize they are losing money, then quit halfway though the job. The best way is get the bids and also talk to each builder and ask for references and also ask to see houses they have built. Ideally meet with previous clients to see what their experience was. You also want a guy who bult recently in your area, so he knows the town and also the local construction codes and rules. Remember you are interviewing the builder, you need to work closely together for the next year. Check the builders finances, you do not want to post a deposit only for him to dissapear. In the end I went for a builder in the middle of the pack pricing wise and it turned out quite nicely.

If the builder you are talking to is on the up and up, he / she should welcome competative bidding. The reason is he should if he cares about his client relationship, to make sure that the client knows he/she is not being ripped off. The client will know this if the contruction was put out to competative bidding.

Best, Mike.

In my particular situation my builder owned the land. The price was conditional on us chooseing him as a builder. In the end we structured a deal in that we could not choose him as the builder but would pay an additional penalty. hence the "Tie-in". In the end we went to competative bidding and saved significantly more than the penalty. So we went with another builder. (There are more twists and turns to the story ... which is a long one. They always are :) )

Builders and real estate agents often have a relationship in that the agent tells the builder you are looking to build, or introduces you to the builder. This works for both parties in that (A) the agent can sell you the land because she has a builder to say sure he can do it. (B) This is good for the builder in that he gets lots of work.

Note the agent is anxious to get the deal done, she / he has commission. The builder is anxious to sign you up. So both have agendas right now possibly not aligned to yours.

I would:

1) make sure you can build the house you want on that bit of land. To do this get an unbiased read for free by taking your plans and a map to the local town building inspector and ask him. If he starts complaining alot then that is a red flag. Note the town building inspector will give you your "Certificate of Occupancy" when you are finished. The town inspector has a legal requirement to make sure your house is "safe". He / she will not sign off if you are not in complaince to codes, EPA, set backs etc. Hence he would love to flag all the issues with you now, rather than have you complain at him later. Some towns also have architecture review boards. In general if your house is similar to what is already there, then you should be in good shape.

Remember the town inspector is your friend. It is good to stay on the right side of him / her. Note that sometimes during a build he can be a real PIA, you cannot do this, you cannot do that ... But remember ultimately he is on your side. Note you pay his salary in that you have to pay a fee to pull the building permit. He works for you!

2) Note when buying the land, the title deed insurance only covers tha land. So triple make sure you know that the land you saw, stood on, is the land you are buying. Check ref land lot numbers etc. And make sure that there are no liens etc. You do not want to find an error after you have sunk $US 500,000 into the house.

Good luck with your build.

All the best, Mike.

"You guys will lose leverage in negotiating a good price with the builder after you've closed on the lot." I would ask the RE agent why he thinks this is so. If he says there's a discount involved with signing the building contract before land purchase, make sure that's all in writing (but you have nothing to compare it with anyway.) I can't see why a builder would have incentive to be competitive in pricing if he has no competition, so I'd make the RE agent try to explain it to me. (And I'd be skeptical.)

In order to competitively bid the project you will need a complete set of design drawings (unless you are only bidding the fee of a Cost of the Work contract). Who will provide that service and what documents would a contract with the original builder be based on?

Only a lawyer working for you should "represent" you at a closing.

I think this may be a rough guideline to follow.

1) You like the land. This is somewhere where you want to live. You know you can build something on it that you would like. Exact house details aside. I would therefore close on the land. No need to sign the builder contract. I think the land purchase and builders contract are independent steps.

2) After you have the land. You can then shop the house and the build. You can either hire an arcitect, or another designer builder, or the home builder you already know and the plan that you like. I.e. you have options as to pricing and builders and designers.

I think breaking down the process into smaller step by step chunks makes things easier. Although it is always useful to keep a mind's eye on the big picture goal of your house on your lot.

Maybe this in a nutshell one-two step guideline is something that would make things more clear cut.

All the best, Mike.

All the very best, and good luck with your journey. I am sure you will end up with something very special.