What to do first? Buy a piece of land or find a builder?

Home buyers who haven’t built a custom home often have a very incorrect understanding of the process. They imagine that they will start by finding the perfect lot, proceed to hire an architect, use the architect’s blueprints to solicit offers from custom home builders, and then choose the best deal. While it can be done this way, the best results are obtained when starting with a builder. Better yet, a construction company that offers design and construction services will eliminate the need to hire a separate architect, streamlining the entire process. By starting with a builder, a buyer can save time, money, and a lot of hassle.

Why is it better to start with a builder?

Builders are always buying lots

When you buy a lot to build, you’re not just competing against other homebuyers. It is also competing against builders and developers who are constantly seeking out and acquiring large lots before they are available to the general public. According to Steve and Hans Wydler of Wydler Brothers Real Estate, “Builders and developers invest enormous amounts of energy and resources to try to identify the best lots to build. When they find a potential lot, they are prepared to quickly attack and prepare a clean, written cash offer with limited contingencies and closing terms customized to the seller’s needs.” In other cases, they are better positioned to secure the lot you are interested in.

Builders have experience

As noted in our article on what to consider before buying a lot, it takes a lot of diligence to find a large lot. Builders have a team of experts ready to evaluate a property in terms of history, paperwork, preparation to build, and other characteristics of the terrain. While a builder spends about a week on due diligence and preparing an offer, an individual buyer usually spends about a month. A buyer has to do all the legwork himself, plus he simply doesn’t have the years of experience needed to quickly evaluate a lot. Steve Pallrand, owner of design, build and renovation firm Home Front Build, notes, “I see people here in Los Angeles [saying] ‘I love this hillside, this is so lovely.’ They buy it and then a few years later it comes back to the market because they realize they can’t build on it.” An experienced builder would know this from the beginning and avoid the hassle and expense of this type of sale.

Builders have a vision

While a buyer may look a lot and think they can visualize their future home, that vision needs to be toned down or even amplified by knowledge. Expert builders can see a lot and see its full potential because they know the best conditions to build and what modifications are possible. “For example, most buyers are looking for a lot that is perfectly flat. Some of the best lots, in our opinion, have a gentle slope toward the front of the house and then a gentle slope toward the back line of the lot and from one side to the other,” the Wydler brothers state. “Some lots that seem to have topographic problems [e.g., too steep] may in fact be excellent lots. Builders can also do wonders with remodeling and retaining walls.”

Builders have better access to finance

As an individual buyer, you would need to get a new construction loan from a lender. There are some advantages to this. For example, you can develop a relationship with a local bank, the bank must also approve the builder (which helps you with the research process), and banks offer a wide variety of loan types. However, new construction loans usually require more upfront. Expect to repay 30 percent of this type of loan. If you buy through a builder, builder financing may offer lower rates than bank rates. And because the builder already has an established relationship with a lender, the approval process is faster and the inspection process is streamlined (allowing you to get funding more quickly to keep the project going).

An additional issue worth mentioning is that if you buy a lot, you are liable if someone gets hurt on the lot while the house is being built. If the builder owns the lot, that liability belongs to him and is usually covered by his insurance. It’s another detail you wouldn’t have to worry about if you start with a builder before buying a lot.

With so many compelling reasons to start with a builder, your next step is to find a great custom home builder. And if you already have a lot, no problem! Visit the custom builders section of NewHomes here to find a custom builder or to build on your lot today.

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By Catharine Bwana