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LAND
I can’t find a house should I purchase land and build?
If you have some time before you must be in your new dream home that perhaps building is a good option for you. You will also need to be flexible with your living quarters during the build as completion times may need to be adjusted due to weather, shipments, crew, etc. Roughly from beginning to end and depending on the size of the home and how busy the contractors are in the area; it may take 7-10 months. However, you need to consider the steps of finding the land and making sure the land is suitable for the home you want to build. You will need to research and consider the zoning, setbacks, utilities, soil evaluation, etc. regarding the property you chose. In Arizona, we have a Vacant Land Purchase Contract. In the boiler plate of the contract the buyer has 30 days in which to research, inspect and test to be sure that this property is the best location and the right fit for your dream home. You will need to hire experts to do most of these inspections. If the property has utilities already installed there will be less work but if you are looking at properties outside of the “city limits” you may be dealing with tests to install septic systems (standard or alternative) or hiring a well expert to tell you if you can possibly drill and find water, this is a bit of a gamble because you can’t drill on someone else’s property. Most well drillers can give you a sense of where a good place to drill and approximately how far down before you hit water.
We have a great resource in Arizona for consumers, provided by the Arizona Association of Realtors and the Arizona Department of Real Estate, called a Buyers Advisory. This document that provides links to the experts and articles needed to research what you may need to be concerned with or need to consider for your property. It will give you ideas on what to investigate and verify.
The other important step is to communicate with your real estate agent. They should be able to guide you through the process of purchasing your land but if you don’t communicate you may be purchasing property that is not suitable for your dreams. For example, they can assist you with what companies to call for inspections such as surveyors or who to contact if the property is located in a home owners association. They can also advise you of the time frame you may need for all of these inspections and test. The boiler plate of the contract states 30 days but if you are dealing with some property that you will need surveyed, perked for septic systems and soil test and more, your real estate agent may be able to tell you how far out some of these inspectors are in order to schedule them for the test. If many of the companies that survey property are busy it could take 3 weeks or more before they can get to your property using up a lot of the 30-day deadline and you don’t even have the report yet. Talk to your agent!
It helps if you already have a design in mind but if not a builder or architect should be involved in this process. If soil tests come back with a good amount of Arizona clay this will add to your construction costs and may take you off budget. Or after the survey is complete and the report shows the setbacks and any easements on the property the builder may see that the house and/or other buildings that you have designed and want, won’t fit on the property.
All of these inspections and tests will be out of pocket costs for you however, should you find out during your “Due Diligence Period” that the property is not what you wanted after all, you will have saved money in the purchase cost! You do receive your earnest money back should you need to cancel during this time.
Please remember that not many banks or financial institutions will loan money on vacant land. You will be using your cash for this leg of your journey.
Once you own the land you may begin your build. Again, if you involved a builder in the process of purchasing the land you already have some cost sheets worked up and a budget for your new dream home. You are set to begin. However, there is a step you should have already completed prior to finding the land and that is to visit with your lender. Your lender will be the one putting together your construction loan. I am not going into the details of construction loans but to say that there are a few different programs you can choose and construction loans typically are more expensive.
Here are the steps:
- Ask your real estate professional for some good lenders that have construction loan programs. Interview these lenders for a good fit for you.
- Ask your real estate professional for a list of builders in the area. Research and review the Buyer Advisory document that was provided by your real estate agent and go to different links such as the Registrar of Contractors to verify that your contractor is licensed. Consult with the builder/architect on the costs of the project.
- Consult with your real estate professional on what properties would be more suitable to your wants and needs for this project.
- Begin looking at land and make an offer.
- Once you are under contract get everyone involved so that you can determine if this is the property for your project. Schedule and complete all of your inspections. Review reports with your experts to verify the information and confirm that this property will work.
- If acceptable move forward to purchase the land.
- After closing begin the process of building using your construction loan.
- Communicate with your contractor often. Your real estate agent will have completed their responsibilities of the land purchase but you may want to continue with communications.
- Communicate with your lender often. There will be monies released during different phases of the project. Towards the end of the project your lender will convert the construction loan into a final mortgage loan.
- The builder must go through several phases of inspections by the city or town or county that the property is located in and once all is approved will issue an Occupancy Certificate.
- Prior to moving into your dream home, you will want to walk through the property with your builder or the Supervisor of the project.A list will be created of small items that still need to be completed or repaired. These are typically “small items” and should be completed by the contractor within the first few months of living in the property.
- Moving Day!!
The process is similar if you have decided to purchase a manufactured home. The difference is you may select one of the manufactured builders, choose a model and construction time may not be as lengthy as the home is “manufactured” elsewhere and brought to the property.
There is one more method and that is to look for the “big” builders who may be building in subdivisions and have “model homes” to walk through and choices to make as to which model, what lot and make selections as to cabinetry, carpeting, tile, wood, colors and even appliances. The lots in this type of scenario are typically owned by the builder and the agents that greet you and walk you through are working for the builder who is the seller. It is important to bring the real estate professional you trust to at least the first consultation and run through the contract. Many builders require a hefty first down that will not be returned if you change your mind. At this writing many of these big builders are taking 12 months plus to complete a home.
In deciding whether to purchase an existing home or purchase land and build or purchase in a subdivision with a big builder, it is important to communicate to your real estate professional. The right agent can instruct and educate you on what the current real estate market holds and guide you through the processes. They should be able to introduce or recommend lenders, builders, and other experts to help you make a great decision for You!
About the author: The information above was provided by Cynthia Yannitelli, of the Yannitelli Group at Better Homes & Gardens Real Estate, BloomTree Realty. Cynthia has managed real estate brokerages and trained real estate agents for over 20 years and started her real estate career over 30 years ago. The Yannitelli Group consists of Cynthia and her two sons, Neil and Nicholas, in a family owned real estate group enjoying what they do and working with each other. Cynthia and the Yannitelli Group can be reached via email at yannitelligroup@gmail.com or by phone at 928-251-0025.
