Pros and Cons of buying a lot and building a house (real estate, condos)

[Basic2020]

Hello,

I am interested in buying a plot and building a house from scratch. I am worried about the pros and cons of hiring general contractors as I have heard from the media that they are often corrupt and take advantage of an ill-informed client such as myself.

I am currently looking in the Middlesex County (price range not exceeding 1.25 million for a single-family house). Any aspect of building and designing a house that I should be concerned about would be greatly appreciated.

Thank you

[r_p]

If you have the time, energy, and patience to find contractors, deal/haggle with them, buy materials, etc. then go for it. Should be a great learning experience and perhaps in the future you can even capitalize on it and build/sell houses on the side.

It is true that most folks are trying to rip you off but it is possible to find good people and then use their help. E.g., the contractor who lays your foundation can potentially refer a good framing crew and so on. For a lot of things, you can get good leads from commercial stores. E.g., when I was redoing my bath/shower I got some very good references from stores like Tiles Plus More/The Tile shop, etc.

Not only will you save a lot but more importantly, you will have full control over the design, quality of materials, and the work done. The real question is that is it worth it, i.e., are you better off spending your time elsewhere.

I would also recommend that you hire a good architect.

Another alternative is a modular house. I have heard that they have gotten better these days but I am not sure.

[OutdoorLover]

Building a house can be more risky and is certainly more complex than buying an existing house, and that goes double for a custom design and build. The builder may not be well organized, there can be long delays or he/she may even have serious financial trouble. He may not be on top of his contractors and whether it's due to laziness or incompetence, they may do poor quality work. The site may offer special challenges that aren't apparent at the outset for e.g. well water quality, septic waste treatment difficulty, radon, excavation difficulties due to granite ledge at the homesite, etc.

As mentioned - custom design and builds are more complicated and present more risks. You can actually hire a construction project manager to provide some independent project oversight while looking after your interests specifically, not the builder's. But this will add some project overhead cost, and you of course have to negotiate this with the builder, you can't force it on them... but you can find another builder if you feel it's important and they won't accept it.

Housing developments lower construction costs for a number of reasons that basically amount to economies of scale, I won't detail them. It may not all be passed on to the consumer, but still, you'll normally get a significantly better deal that way than with a custom design and build. Furthermore, if you're buying well into the neighborhood project, you can see the finished product and talk with existing owners - it helps with due diligence. Things tend to be more cut and dried and while I am no real estate attorney, I think more responsibility for the project success is on the builder. So if you can find a development you like, I think that will greatly simplify buying a new home.

Mind you, existing homes *also* have lots of risks, even if they're already done and are 100 years old - they too may have been poorly built, and they also may contain all sorts of problems that existed at the outset or that have developed over time.

Either way, I really think it's a matter of doing your research, trying to be well-informed in general on home construction and common issues for new and existing homes, as well as trying to be thorough in doing your due diligence on the property (and builder if applicable) in question. You cannot take anything for granted whether buying a new or an existing home, or at least, you do so at your peril. You have to be realistic and realize that you can never completely eliminate the unknowns and their attendant risks, but with thorough due diligence, you can certainly reduce them significantly.

[GeoffD]

I’ve known the builder I’d use for 25 years. I’ve known the architect I’d use since I was a kid. With infinite money and nowhere else to live, I still don’t think I’d take on a custom new construction project now since building materials and subcontractors are so unpredictable.

[r_p]

Originally Posted by OutdoorLover

Building a house can be more risky and is certainly more complex than buying an existing house, and that goes double for a custom design and build. The builder may not be well organized, there can be long delays or he/she may even have serious financial trouble. He may not be on top of his contractors and whether it's due to laziness or incompetence, they may do poor quality work. The site may offer special challenges that aren't apparent at the outset for e.g. well water quality, septic waste treatment difficulty, radon, excavation difficulties due to granite ledge at the homesite, etc.

As mentioned - custom design and builds are more complicated and present more risks. You can actually hire a construction project manager to provide some independent project oversight while looking after your interests specifically, not the builder's. But this will add some project overhead cost, and you of course have to negotiate this with the builder, you can't force it on them... but you can find another builder if you feel it's important and they won't accept it.

Housing developments lower construction costs for a number of reasons that basically amount to economies of scale, I won't detail them. It may not all be passed on to the consumer, but still, you'll normally get a significantly better deal that way than with a custom design and build. Furthermore, if you're buying well into the neighborhood project, you can see the finished product and talk with existing owners - it helps with due diligence. Things tend to be more cut and dried and while I am no real estate attorney, I think more responsibility for the project success is on the builder. So if you can find a development you like, I think that will greatly simplify buying a new home.

Mind you, existing homes *also* have lots of risks, even if they're already done and are 100 years old - they too may have been poorly built, and they also may contain all sorts of problems that existed at the outset or that have developed over time.

Either way, I really think it's a matter of doing your research, trying to be well-informed in general on home construction and common issues for new and existing homes, as well as trying to be thorough in doing your due diligence on the property (and builder if applicable) in question. You cannot take anything for granted whether buying a new or an existing home, or at least, you do so at your peril. You have to be realistic and realize that you can never completely eliminate the unknowns and their attendant risks, but with thorough due diligence, you can certainly reduce them significantly.

Words like builder, construction manager etc., will add upwards of $150-200k to the project.

BTW housing developments are almost always more expensive than building your own home. Moreover, houses which I have seen in the area in recent years (e.g., Pulte Homes) were not only expensive but had no character whatsoever. You simply cannot compare a cookie-cutter house to something custom-built, with quality materials, to the owner's specifications.

[sawyer2]

Originally Posted by Basic2020

Hello,

I am interested in buying a plot and building a house from scratch. I am worried about the pros and cons of hiring general contractors as I have heard from the media that they are often corrupt and take advantage of an ill-informed client such as myself.

I am currently looking in the Middlesex County (price range not exceeding 1.25 million for a single-family house). Any aspect of building and designing a house that I should be concerned about would be greatly appreciated.

Thank you

There are good and bad GCs and builders, like there are in any profession. Good local realtors and architects can steer you in the right direction.

Sounds like you are talking about a full custom house vs a spec. build with some choice options?
Assuming the former, I would hire a good architect that will work with you all the way through management and completion of the project. Will cost more but you will get what you want and you will have an expert on your side from the outset.

I would advise against using design/build firms to have separation of church and state - just my preference.

I have acted as GC in several renovations - condos and not a full SF build, but pretty extensive and each required all of the trades. And each time I said 'never again' - will outsource if there is a next time.

Also, be aware that this is a very difficult and expensive time to be doing any construction, but that may not be a factor for you.

Good luck.

[Lampert]

Originally Posted by GeoffD

building materials and subcontractors are so unpredictable.

1 month project turn to 3 months because the plumber (subcontractor) added 1 month of delay + 1 month from electrician and multiple inspectors.
The builder himself basically didn't add any delay since the day he started working on it. Can't really imagine doing 1 house while working full time.

[MikePRU]

Originally Posted by r_p

Words like builder, construction manager etc., will add upwards of $150-200k to the project.

BTW housing developments are almost always more expensive than building your own home. Moreover, houses which I have seen in the area in recent years (e.g., Pulte Homes) were not only expensive but had no character whatsoever. You simply cannot compare a cookie-cutter house to something custom-built, with quality materials, to the owner's specifications.

While I agree that companies like Pulte/Toll Brothers/etc. build houses that lack character, a homeowner would have know good from bad in order to make better decisions about materials than these companies. The fact that these companies are able to sell their homes fairly easily is an indicator to me that most people don't know or don't care about the difference.

Personally, I would buy a townhome from one of these big, national builders but I don't know that I would buy a single family.

[BosYuppie]

Plan for it to take two years for your house to be built and inspected in this environment.

[OutdoorLover]

Originally Posted by r_p

Words like builder, construction manager etc., will add upwards of $150-200k to the project.

BTW housing developments are almost always more expensive than building your own home. Moreover, houses which I have seen in the area in recent years (e.g., Pulte Homes) were not only expensive but had no character whatsoever. You simply cannot compare a cookie-cutter house to something custom-built, with quality materials, to the owner's specifications.

What are you saying? Are you saying people should build houses without a builder? How does that work? I have heard of a few people being their own general contractor, but that is supposed to be the most difficult/riskiest path, and certainly wouldn't be for the OP.

Adding a project manager to an existing project being run by a builder/general contractor won't cost anywhere near that price. They really don't need to do that much. Even the builder themselves shouldn't cost anywhere near that, unless it's one *really* expensive house. The builder I spoke with who will likely build my place when the time comes will do it on a "cost plus" basis for 7% of his costs. Using even your lower bound of $150K would translate to a home that cost over $2M to build - that's quite a place.

And you're saying that custom building a house is cheaper than buying one in a development?