A brand-new home. A home that is yours and has never been occupied by another person. That has the exact kind of floors and number of baths and eco-friendly appliances you want. You can get the home you’ve always wanted — by building it yourself.
There’s a big difference between purchasing an existing home and building a new one from scratch, though. If you’re considering building a home of your own someday, here’s a list of questions you need answered at the very beginning of your project.
How Much Does It Cost?
Ah, the No. 1 question: How much does it cost to build a new home? Prices vary widely depending on your size, design, location, material and labor costs at the time, and many other factors. That said, in 2019, an average 2,600 sq. ft. newly built house sold for about $485,127. Where does that money go? Let’s break it down.
New Single-Family Home Cost Breakdown
Source: National Association of Home Builders (NAHB), “Cost of Constructing a Home,” January 2, 2020.
Includes all labor and material costs.
Don’t forget about the land, or lot, you’re going to build on! That has to be bought separately. The average lot size, according to NAHB, is about a half-acre. A real estate agent familiar with land purchasing can help you search for the perfect location. Ask us about special loans to help you purchase the land for your build.
Is It a Good Investment?
Real estate is one of the safest investments you can make with your money. Over time, it has a steady appreciation that’s been historically tracked. Your brand-new custom-built home will likely do the same — as long as you keep resale value in mind during the design phase. Be careful not to price yourself out of the market or make it so customized that another family could never imagine themselves living in the home.
What Steps Are Involved?
Here are the basic steps you’ll take when constructing your new home.
Start planning. Here’s where you take a look at your finances to get an overall idea of your budget and make your list of needs and wants for your new home. If you can sketch, start drawing out your floor plans and the exterior. You can also try an online drafting or blueprint program. You can work with a pro to explore other designs or make adjustments later, but if you already know what you want, it’s a good idea to come prepared.
Find the land. A real estate agent can help you hunt for vacant lots in the locations you’ve narrowed down. If a vacant property is hard to find, you could buy a home in disrepair and have it pulled down. Note that tearing down a building and site clean-up will add to your new-home costs.
Hire your team. You’ll need a builder who can supervise the entire construction process, from handling subcontractors to keeping an eye on the budget. An architect will turn your ideas and sketches into blueprints your contractors can work from, and you may also want an interior designer to help plan the flow of traffic and bring your palette together. Be sure to interview each and ask for references. (Need some referrals? Just let us know!)
Get your budget and financing in order. Work with your builder to put together your budget. The builder will break down the costs and start scouting for contractors. Be sure to build in some cushioning for unforeseen emergencies; 10% of the overall costs should suffice. For your home mortgage, you might start with a lot loan or go straight to a construction loan. We can go over your choices together so that you fully understand how this type of financing works.
Know your mind, but be prepared for compromise. Stick to your original plan as much as possible. Making changes to your build can be stressful and expensive! But also be willing to compromise when your builder tells you something could push you over budget or isn’t going to work.
How Long Does It Take?
That depends on the scope of your project. An average new home takes three to six months to build, according to the National Association of Realtors®, but that’s not a custom build. So many factors can add to build time: how smoothly your permitting and site prep goes, availability of materials and labor, what season you start, weather delays, and even you! If you’re requesting change orders left and right and wavering on decision making for your finishes, you’re stretching out the construction time — and likely incurring more costs.
How Does It Compare to Buying an Existing Home?
When you buy an existing home, you usually deal with 3-4 people. Closing can happen in approximately 45 days. You’ll probably only view the house a couple of times before purchasing it, and you won’t need to supervise the inspections. You’ll also need to mentally and financially prepare for making some minor (and possibly major) repairs, upgrades, and replacements when you first move in.
If you want a fully custom home, new is the way to go. However, your newly built home is going to require a longer process, as there are several phases to construction, lots of inspections to go through, and you may need to change the type of mortgage you have partway through. Of course, with your newly built home, you shouldn’t have to make repairs or replacements for at least the first year, saving you some money and making your home truly move-in ready.
Still set on a brand-new home, but feeling a little overwhelmed by the information above? Remember that you can always buy into a new-home community. Builders often purchase land and build homes that can be customized but generally follow a standard design. You may get to tweak the floorplan, depending on the builder, and you may be shown a catalog of flooring, paint, fixtures, and other features to choose from. You’ll still have a brand-new home, but it will likely take less time to build and cost less than your custom design.