You’ve looked at homes in your price range and then decided to put in an offer on something, only to find that you were one of 12 other parties with the same budget and taste there at the same time. You watch your dream disappear for $65k more than you were planning to pay. Like the other 11 who were also beat out you might be left scratching your head about how to outsmart this rapid selling seller’s market with far too many buyers than inventory. It’s a conundrum in nearly every area of the US right now. After a year of work and school from home, the apartment or condo isn’t cutting it for space. Those who own are hanging on and those who sell are seeing unexpected dramatic gains in their property values. One listing I reviewed recently said that the sale of the home was contingent on the seller’s finding a home…it’s still sitting there on the market while it’s neighboring properties flew off the shelf in a few days time.
We are seeing some crazy kinds of offers too. Buyers are saying they will waive their inspection and accept the property with any surprise it may have and also waiving appraisals, agreeing to pay the price even if the property doesn’t appear to have reached the market value. In some cases this limits the financing, causing a borrower to bring in more cash than expected. Depressing if you’re a buyer with limited funds and scary as rates rise and housing opportunities seem scarce in the most popular areas.
How to open more opportunities for home ownership and replenish the lack of supply? New construction seems like one answer, but it’s a complex process with a lot of moving parts if you are not buying in a subdivision that a builder has built out. Buy a lot, get a plan, get a builder, get the financing set up…all time consuming and messy. Truth is that most of us are too busy and don’t like or have time for messy. We want the home to be turnkey. Isn’t that why the staged homes sell quickly over the ones that have masses of personal items in the shower, on the bathroom and kitchen counters and a mountain of clothes and stuff strung throughout the house when we walk through?
While I wish this post were able to tell you that there is a quick solution and that building a new home is a snap, that wouldn’t be true. Eyes wide open to the process and to expect the unexpected is what home building looks like. There are a couple of ways that these work financing wise. This will be a quick overview of some of the options that are most typical:
- Buy a lot. Financing: Bank or credit union, seller contract or some combination of those or offbeat financing or dig deep into your pockets and pay cash. Aside from financing, you should do your due diligence on whatever lot you obtain. IMPORTANT to check with all jurisdictions and get a survey to make sure lot is permitable, buildable and that you aren’t going to have some ugly surprise before you even get started like finding out the soil is unstable to handle the stilts or that there is a big boulder where you need to excavate.
- Home plan – some lots come with them, there are lots of stock plans on line or get fancy and hire an architect. Sometimes the builder comes with their collection of them.
- Find a builder. Interview them. Talk with their references. Look at the homes they have built. Pay attention to the details. Note the quality. Look them up on your local contractors board and see what their reputation is. Have them give you information and compare with others. Make sure the representative is someone you can communicate easily with as you will be doing a LOT of it over the course of the build.
- Financing to build. This can come through a joint loan with you and the builder through the builder’s lender or they can get their financing and you get approved for the final loan once home is completed. Or there is something called a One Time Close where you close a loan prior to construction and you sign off on the draws, the payments are rolled into the loan until the home is complete and after the final draw you move in and payments commence.
That is the quick and dirty overview. If you have questions or want more information on this or other types of home financing, please reach out as I would love to hear about your goal and see if there is a way to put things together to make the dream reality.
Have helped buyers of all types and financial levels and worked on 1000's of loans.
There is always something new!
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