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Another problem if you buy the lot yourself is that you then have liability if someone hurts themselves on your lot building the house. If the builder owns the lot, that liability is theirs.
From what I understand, though, there are different norms around the country. In my area, almost everyone just buys the finished house and land from the builder, and very few have a builder build a house on a lot they already own.
You seem to be mixing a number of 'issues' together.
If I understand your question, you budget is tight, and so you might not have any option but to buy from a builder who sells you the land and the house in one package. I have never heard of a situation where the builder bought the individual lot and then packaged it with a house and sold you the finished deal, but I may be ignorant. Builders certainly buy individual lots all of the time and build spec houses, so why not?
So, your options are to do the above if you can find a builder willing to do such, or....
YOU buy the lot, pay for it somehow, and then hire a builder to construct a house. Trust me, you do NOT want to be your own General Contractor unless you have a LOT of experience. There are pitfalls everywhere.
Now, within that framework there are a number of ways to structure the contract. You can show the builder your plans (from your architect) , and have him give you a fixed price for the job. Or you can have him review the plans, and do a cost plus contract where he gets paid "x" percent over his documented costs. Or you can do, as I did recently, have a cost plus a fixed fee contract. I Paid the builder a fixed amount of money to "build the house which I wanted". Basically, the builder became my agent and did the very best to get what I wanted--high quality, at a reasonable price. I paid his invoice cost for materials and labor. On top of that he got a fixed fee for 'managing' the project. Your desires may be different.
Alternatively, you can find a development where the builder/develop still owns the lots and will build you a house. Usually he has a series of plans and will modify those plans to your desires. Generally he gets "X" dollars to build model Y, and for that you get the land and the completed house. Asking this kind of builder to build a custom house on his lot might not be the best bet as these sorts of builders generally (but not always) do not do the highest quality work, and are used to chiseling in quality wherever they can in order to keep costs down, and their profits high. The advantage to this scenario is that you get a price for the project, get your financing in place, and it goes directly to the builder. No out of pocket cost for the lot.
Others will likely be able to provide you with different scenarios. I am sure there are many, but if you are wanting to buy a lot and then build, I think you are going to find that YOU have to buy the lot, and then hire (after a LOT of vetting) an architect and a builder to build your house. Keep in mind that if you are buying a lot in the country, putting in water/sewer and other infrastructure is your cost. In a development setting these items are probably already installed, and will be reflected in the cost of the lot/house.
Good information. Thanks for the responses. I'm starting to think it would be easier and safer to let the builder buy the lot and build on it and then buy the "turnkey" package from them as the real estate agent I spoke with suggested. I probably need to talk to a few local construction lenders too. The lots I'm considering are cleared but I'm sure there are several other things that need to happen to the lot I choose before anything can be built on it. I've heard of others doing a cost plus fixed fee contract and I'm sure in new developments it would be a fixed price contract which I'm sure is risky for the builder. I'd like to be involved in helping make some of the purchases and plan to do my best to avoid change orders. Hopefully my realtor can help me decide which contract type to choose.
I have no intention to act as my own contractor. The advice given about that in this thread is spot on based on what I've heard and researched. And I don't have time for that.
The subdivision is established and the builder who built most of the existing homes is out of business.
In my area, builders usually purchase the developed lots in a subdivision, build the houses and then sell them. Sometimes one builder builds all of the houses in a subdivision; sometimes there are many.
Since the main builder went out of business, do you know if any builders own some of remaining lots? If so, it might be worth taking a look at whether a preferable builder already owns a suitable lot.
I'm starting to think it would be easier and safer to let the builder buy the lot and build on it
and then buy the "turnkey" package from them as the real estate agent I spoke with suggested.
Didn't this thread start with that as the well known basic truth?
It's just as true even for those who can actually afford to custom build.
Better yet? Buy an existing finished house.
Didn't this thread start with that as the well known basic truth?
It's just as true even for those who can actually afford to custom build.
I wanted to get different perspectives especially from those with experience in the field (even if it just means they've been through the process themselves). Several of the folks who have given advice said to buy the land myself and then have the builder build on it, others say it is less risky and easier for me to have the builder buy the lot and build on it and then I buy the entire package from him once finished, and others say it depends on our situation (if we can afford the down payment on the land, get the land loan, etc.)
Quote:
Originally Posted by MrRational
Better yet? Buy an existing finished house.
That would certainly be much easier, but I don't know if I want to wait another year for a house we like with a decent sized yard in the location we want to be in that's within our budget (and reasonably priced) to finally hit the market. I realize we'll spend more per sq ft to build but at least it will be exactly where we want it and have the basic design and features we want in a house we plan to stay in for decades to come hopefully. This will be our 3rd house and I don't want us to buy something we're not completely satisfied with and want to move again in 5 years.
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