Building a house in Idaho

[Lacerta]

Originally Posted by oldafretired

This sounds pretty interesting involving a title company. If I already own the land free and clear and no loan would be involved in building the house, where would a title company come in to the picture? Is that to make sure all the bills for supplies have been paid and for setting up an escrow account for the builder to get paid? I'm not very familiar with this process at all.

In this case, it is to make sure that all the bills for construction get paid. I've seen several people in my area get screwed by a builder who closed on about 20 houses and then filed bankruptcy before paying all the bills. Those new homeowners then owned a home, with a mortgage, and nearly an equivalent $$ amount of liens against the house. Meaning they paid the builder for the house, but if they ever want to sell the house, they have to basically pay AGAIN for materials/labor. This title insurance protects against that.

As my mom (the builder) always says, you can have the best, most honest builder in the world, but if they die in a car crash the day after closing on your house, there will be 30 days worth of bills that haven't been paid yet, and probably another 30 days worth of bills that haven't even been BILLED yet. So if you don't have insurance, you will have to pay again for all work done in the last 60 days on your house.

The only way I wouldn't have that insurance is if I was paying all the subcontractors (materials and labor) myself. But then again, if you already own the land, the builder may prefer that arrangement anyway, that you pay all the bills and just pay him his fee. In that case, there wouldn't be a "closing" per se, and you wouldn't need a title company, although I'd definitely involve an attorney to write things up in that unusual case. That isn't the way homes are usually built here. Usually the builder owns the lot and fronts the money for the construction, so your situation is non-typical in that.

Sorry, my mind went to the typical building arrangements for my part of the state. I didn't even consider that you might be fronting all the money yourself and paying the subcontractors directly, and therefore not needing to even have a closing. If that is the case, most of the rest of my advice in my prior post is no good, and you should ignore it.

[oldafretired]

Originally Posted by banjomike

The main thing a title company does is make sure the land is free and clear.

There can be all sorts of encumbrances on a property that may have escaped attention in an earlier time (and sale of the property) that are still valid. The seller may have liens or something that he isn't disclosing, but once a sale is done, the lien may still hold. (this is an example)
Other times, there can be property deputes of long standing that can be passed on in a sale of inherited land.

The title company's job is to search through county records for this stuff. Knowing which records to search, how far back to search and other things is what they are paid to do.

This would apply to land owned by a contractor or realtor as well. Take nothing for granted when it comes to buying land; God quit making it a long time ago, and disputes of all kinds are common.

One thing is for sure about building a home: no matter how tightly the plans are estimated and budgeted, I have yet to see a new one that didn't cost about 15-25% more than estimated.

Thanks Banjomike. Escrow just recently closed on the land and the title company didn't find any problems so hopefully there won't be any surprises later.

[oldafretired]

Originally Posted by Clark Fork Fantast

Another thing you should think about: getting construction insurance. I don't really know whose responsibility it is to secure insurance for your construction site and all materials, you or your contractor, because we went ahead and took care of it ourselves, since we're going the co-project-managing route. But I consider it absolutely essential to have the building materials, the building-in-progress, and the site itself insured against weather damage, theft, fire, etc. Make sure you ask your contractor about it--it may be included in his bid/estimate. An insurance company, if they choose to offer such an insurance, will typically insure the construction site for a year.

Thanks for the tip. I contacted the insurance company and they said to give them a call when construction is about to start and they will start coverage. After I pay the premium of course. LOL

[oldafretired]

Originally Posted by Lacerta

In this case, it is to make sure that all the bills for construction get paid. I've seen several people in my area get screwed by a builder who closed on about 20 houses and then filed bankruptcy before paying all the bills. Those new homeowners then owned a home, with a mortgage, and nearly an equivalent $$ amount of liens against the house. Meaning they paid the builder for the house, but if they ever want to sell the house, they have to basically pay AGAIN for materials/labor. This title insurance protects against that.

As my mom (the builder) always says, you can have the best, most honest builder in the world, but if they die in a car crash the day after closing on your house, there will be 30 days worth of bills that haven't been paid yet, and probably another 30 days worth of bills that haven't even been BILLED yet. So if you don't have insurance, you will have to pay again for all work done in the last 60 days on your house.

The only way I wouldn't have that insurance is if I was paying all the subcontractors (materials and labor) myself. But then again, if you already own the land, the builder may prefer that arrangement anyway, that you pay all the bills and just pay him his fee. In that case, there wouldn't be a "closing" per se, and you wouldn't need a title company, although I'd definitely involve an attorney to write things up in that unusual case. That isn't the way homes are usually built here. Usually the builder owns the lot and fronts the money for the construction, so your situation is non-typical in that.

Sorry, my mind went to the typical building arrangements for my part of the state. I didn't even consider that you might be fronting all the money yourself and paying the subcontractors directly, and therefore not needing to even have a closing. If that is the case, most of the rest of my advice in my prior post is no good, and you should ignore it.

Thank you for the very detailed answers. I have a local real estate agent helping me. He's a good friend of one of my brother's best friends so hopefully he can guide me though this. Seems like it's a lot easier to buy an existing house but it's nicer to be able to build one to fit my requirements.