New Construction Resource Guide
Choosing to build a new home has its perks, including fewer maintenance issues, better personalization, and overall peace of mind with the right contractor.
The caveat is in finding the right builder. And with building permits for new home construction topping records, finding the ideal builder can be a challenge.
Below is an overview of what to consider when building new, including the compromise between customization, convenience, and cost (budget).
Recent Stats
Last year, Delaware’s 27% increase in new home-building permits ranked first in the nation. Moreover, hundreds of different builders are working to meet this demand. With so many options to choose from, how do you decide?
The 3Cs of Building a New Home
There is a tradeoff between customization, convenience, and cost when building a home.
Customization refers to how personalized you want your home to be. Convenience relates to how much effort you put into the project and the time it takes. Cost… describes how much (or little) money you plan to spend, i.e., budget.
If convenience is important to you, that typically comes at a cost as you hire the most experienced designers and builders to take care of everything in a reasonable time frame.
In the 3Cs framework, selecting the right builder comes down to the right mix of personalization, quality, ease of the process, and budget.
One way to approach the selection process is to consult Realtors, mortgage lenders, and other community stakeholders who’ve done work with various builders and are familiar with their results.
Contact us directly for a full review of local builders and the latest new construction communities to consider.
Reputable builders typically require an upfront deposit. But you should be wary if they want an unreasonably large amount. Circumstances will differ, but deposits generally range from five to ten percent.
A builder without a portfolio of existing clients is also concerning. Having no references isn’t inherently wrong — we all start somewhere — but dig deeper if they cannot supply a list of previous projects and clients.
Avoid these red flags with a builder:
• Uses high-pressure sales tactics.
• Provides unreasonably low quotes.
• Doesn’t provide a comprehensive contract.
Fully understanding these items with a builder is vital:
• Exposure to increases in construction costs and negotiate price increase caps if needed.
• Fees associated with handling changes or upgrades during the building process.
• Warranty program.
• Project management and supervision support.
• Level of finishes included in base pricing.
A knowledgeable representative can assist with negotiating competitive pricing, extended builder warranty coverage, pre-drywall home inspections, guidance in resolving issues, reviewing builder track records, exploring creative new construction financing options and providing design guidance to help you make selections that will lead to a more advantageous resale.
Having representation during the new construction process offers several benefits in protecting your interests, versus working with the builder’s sales team to finalize terms.
It’s a significant financial commitment and an experienced new construction Realtor can advocate and stand up for you throughout the entire transaction.
As a team with abundant experience in the new home building and construction process, we’re here to help.
Call Henry any time to review your options.
With high inflation (though it's cooled a bit) and rising interest rates, the cost to buy or build a home is an issue of concern. Let's explore the comparative cost and advantages of building a custom home vs. buying a pre-built, conventional or modular build.
A study by NAHB (National Association of Home Builders) found the cost to build a home in the median-value range is $34K greater than buying a pre-built home (Houzeo).
However, a recent StorageCafe (Yardi) study reported that the cost to build a new single-family, median-value home in Delaware is on average, $96K less than to buy, making it the 6th most cost-effective state for homebuilding.
Generally, developers have a cost efficiency due to the scale of their operations. This isn't always the case, as the research above suggests. Developers have the leverage to buy everything involved in large quantities or at wholesale value. Whereas, if you're building a house, you may have to pay more for many aspects of the project, including:
• Architectural and engineering fees.
• Land acquisition.
• Permitting and surveying.
• Construction labor and management.
• Materials.
Luxury home construction typically ranges between $400 to $600 per square foot. Of the total development costs, you can generally expect to pay about 30-60% for labor, 40-50% for materials, and ~10% for design, permitting, and other soft costs. On top of that, it's a good idea to reserve a 20% cushion to cover unexpected expenses.
Another thing to consider is time. If you're looking for a first-time or replacement primary residence or moving from out of state, time may be of the essence. Depending on the size of the home and labor availability, it could take 6-12 months or more to complete the build. If you need to move quickly, buying a pre-built home is likely the best option, costs aside.
For time- and cost-efficiency, modular homes are a viable option to look at. As the components of the structure are already pre-designed and factory-built, the manufacturer can pass on the savings afforded by the scale/volume of their operations. Once the foundation is laid, the home can be assembled within a short time frame.
Another alternative is buying an existing home that needs improvements and renovating it. While your design options might be a little more limited than spec (custom) building, renovating can take less time, consume fewer materials (supporting sustainability), and cost less to finish.
Some loan programs allow you to roll these costs into the purchase with favorable terms and interest rates compared to construction financing. Another additional benefit is that local and federal tax incentives could be available for green renovations and historic reuse.
There are advantages to buying pre-built or customized homes from a new home builder. If the house isn't already in existing inventory, new home builders can typically put together your house with your preferred options in less time than it takes to spec-build a home. Builders often offer price breaks, financing incentives, and free upgrades depending on demand factors. With interest rates on the rise, there may be an opportunity to negotiate favorable terms and pricing.
All these strategies are feasible, and the best approach is unique to the home buyer's needs, preferences, and goals. My team and I have experience with each option and will guide you toward the right fit. We would also give you an idea of relative cost and time requirements. Reach out to me for an informal consultation.
Henry is always available if you have any questions or wish to schedule a meeting to review.
