THE TIME has finally come.
You are ready to find your dream home.
You make a list of your general must-haves price, size, style, location and perhaps even some specific requirements, such as the types of rooms, yard or garage.
Then you start looking. Whether its with the help of a real estate agent or through your own Internet searches, you are quickly hit with the realities of todays resale home real estate market in the Denver metro area.
Reality number one: inventory is low.
According to S. Robert August, president of North Synergies, which specializes in marketing for the homebuilding industry, there is less than one months supply of existing home inventory on the market.
Resale homes are moving fast! Good homes are going within days, if not hours, August says.
Paul Brunger, a Realtor with Keller Williams in Centennial, recently listed a home near 7th Ave. and Gilpin St. in Denver for $650,000. The house hadnt been updated in 40 years.
Brunger had 34 customers visit the open house, plus 17 private tours of the home the same weekend. By the end of the weekend, Brunger had nine offers on the home, three of them cash offers, and it is scheduled to close next week for well over $700,000.
This is not atypical these days. Its good news for sellers, but not necessarily for buyers. Your dream home if an existing house may be elusive, and thats where having a home built comes in.
BUILDING A home whether its a production home built on land owned by the building firm, or a custom home constructed on land you choose and purchase separately can be a lengthy process, but the result is a home that is brand new and uniquely yours, hopefully enabling you to check off all those items on your dream home list.
If you choose to go the custom building route, there are many steps to take and many variables to consider.
Building from ground up takes time and patience.
According to Robert August, builders can take up to 16 months to deliver a new home, largely due to current material and labor shortages. Denver is in the midst of a building boom with a projected 9,000 new home starts this year. Add to that 5,000 new apartments, and you have an over-burdened home construction industry in the metro area.
Jason August, managing broker at Gourmet Real Estate, says that customers are reporting that production builders can take 18-24 months to complete a home and thats after all the design work is done.
The first step for buyers is to choose a real estate broker who is familiar with the homebuilding process, says Jason August, the broker helps the customer determine his needs and budget, including land acquisition, and advocates on the customers behalf with the builder.
August says the customer should get pre-approved by a lender who does a lot of custom home construction lending. Such a lender will be familiar with processes and products that take into consideration the time that it takes for a custom home to be conceived and constructed.
Some lenders offer a one-time close mortgage. With a traditional construction loan, you would have to go through two different closings during the process. When you initially start building the property, you would go through one closing with a lender. Then, when the property is completed, you go through a second closing to get the funds to pay off the initial construction loan. This second loan is a traditional mortgage you will pay for over the years.
By utilizing a one-time close loan, you lock in your interest rate at the beginning of the process and eliminate paying two sets of closing costs. You would know everything about the loan before you start building.
CHOOSING A site for your new home comes with its own set of variables. A good real estate broker will do due diligence in researching these considerations when identifying parcels of land to show you. As Jason August puts it, A broker has to understand the whole process, not just where the pretty pieces of land are.
Both Robert and Jason August recommend considering:
Soils conditions. Soil in Colorado can be expansive and must be tested for its ability to support a new structure. A soils report is mandatory. If additional foundation work is needed for the new home, the land price should be negotiated.
Radon. There is no way to know about this gas, which is hazardous at certain levels, until you build. Therefore, new structures need to be properly vented so potential radon gases can escape.
Water and sewer taps. If you want to build in an undeveloped area outside the urban core, water and sewer taps are not included in the land. You will need to pay for these. You also need to consider the access to water and waste. Is there a water tap or a well? Is a septic system needed?
Utilities. Gas, electric and cable hook-ups entail separate fees.
Comparable sales. Your real estate broker should study the sales prices for comparable parcels of land in the area to help you determine a fair price to pay.
Special improvement districts. These districts collect tax revenue for roads, utilities and other projects in the jurisdiction. They can represent added expense on a one-time or an annual basis.
Local amenities or detractions. What has been built in the area? Where are the schools? What is projected to be built? How close is the land to shopping and other businesses?
Type of house. Not all parcels of land can accommodate all building styles. Consider the grade of the land if you want a walk-out basement, or if you need a home built to accommodate physical disabilities.
Road impact fee. Construction can take a toll on the condition of local roads and there may be fees.
NOT ALL new home construction takes place in undeveloped or newly developing areas. Many people want to live in the city, and look to purchase an empty lot or a lot with an existing home which they will scrape in order to build the urban home of their dreams.
Scrape land purchases come with their own considerations:
Removal of landscaping. Robert August says Denver has specific ordinances regarding the removal of trees and other landscaping for construction.
Lead paint and asbestos. Many older homes were constructed using these toxic materials. If a home is purchased in order to be demolished, it must be tested for lead paint and asbestos and, if found, they need to be mitigated so that demolition can safely proceed. This is an additional cost.
Soil. Just as with an undeveloped site, soil needs to be tested to determine its ability to support a new structure.
Utilities. Unlike with an undeveloped site, water, sewer, electric and gas hook-ups have already been paid for.
Whether you want to build on a city lot, out in the country or in the mountains, Jason August recommends having a builder see the site before you close on it.
CHOOSING A homebuilder is another important step that should not be done impulsively.
Jason August suggests: Interview builders before you start the process to see if they fit your needs and personality. Youll be working together for a year, maybe more.
Obviously a builder needs to be able and willing to build the type of home you want. August says many builders could build any home but they specialize in certain price points and therefore have access to materials in those price points.
You should be comfortable with the homes a builder has been building recently, August says, taking into consideration quality, materials and workmanship. Define your needs and desires as much as you can when you first meet with a builder.
Homebuilders offer options for finishes such as doors, counters, lighting and plumbing fixtures on either a super custom cost-plus basis or through a standardized design center.
With a cost-plus custom home, you can have anything you want as long as youre willing to pay for it. Want a door from a farm house in the French countryside? Will only a custom-crafted crystal chandelier above the cast iron claw foot bathtub do?
You can also make changes to the design and finishes throughout the process.
When a builder has you choose your finishes from a standardized design center, you select products from the builders known contractors. They may or may not be quality, high-end finishes that you want, but you know the costs up front.
When discussing your home needs with a potential builder or architect, take into consideration universal design features. These are custom amenities that may allow the customer to stay in the home for decades as they age things like wider doorways, appliances with knobs on the front, zero-entry front doors and showers.
These amenities are not necessarily high-tech, but can involve new technologies that allow people to live in their houses for longer periods. These accommodations cannot always be achieved through production builders.
Buyers of custom homes also look for energy efficiency without the green features costing a great deal of money.
They also want durable, low maintenance exteriors.
Custom-buyers are looking for more privacy than in their previous homes. This means both external and internal privacy.
External privacy can be achieved through the way the home is oriented on the site, and the directions in which the windows face.
Internal privacy can involve insulating interior walls around the master suite and powder room.
While custom-built homes allow many more options for personalization than production homes, you may want to show some restraint and not make it too custom, says Jason August. Down the road, even if its many years from now, you will want to sell the home, so hold back on the purple countertops and the orange shag carpet. (Use these colors in your throw pillows.)
You still want the home to appeal to other people so you can get as much as possible out of it.
August suggests that building a custom home be done at a point in your life when you can make a time commitment to the design process, which can take many hours, spread out over many months. It will pay off very well if you put the necessary time into it.
Building a custom home involves many decisions and can be stressful at times, but the process and certainly the end result should be very rewarding, August says.
It will be a significant part of your whole life experience, affording you a great deal of personal value beyond the financial value.
Larry Hankin can be reached at firstname.lastname@example.org.
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