Building on Your Lot
If you already own a lot or you are thinking about buying a lot where you would like to build a home, you may be ready to take the next step in building your home. There are a few different ways to accomplish this goal which you may want to consider. Below you will find information about a few of these options.
There are quite a few different arrangements that can be made between a builder and a home buyer concerning a custom home, so please contact us to discuss what your needs are and how we can help you accomplish your goal. No matter what arrangements are made, a custom home builder and a custom home buyer need to come to an extremely clear understanding of what is expected of each. Therefore, the custom built home contract requires extensive and detailed communication before the project begins to make sure that the contract is properly individualized to express the responsibilities of each party and to eliminate as many uncertainties as possible. With all custom homes, a buyer must decide on a house plan. A builder can be extremely helpful with providing plans that meet some of the criteria that a buyer may want in the house plan.
If a buyer does not already have a specific plan drafted to be built, Hometown can approach the plan decision process in one of two typical ways:
1) We can start with a budget target and obtain plan samples that are within the budget. Under this approach, a buyer provides the upper dollar amount (or a range) for the budget of the house and we work backwards to figure out what maximum square footage would be allowed (or a range for square footage) taking into consideration any amenities or upgrades that a buyer intends to include in the house, the location specific costs for the job-site (utility service connections, permitting, driveways, building pad elevation, any special engineering/certifications required, and flood insurance if applicable), and the buyer must also consider the lot cost if it has not already been otherwise financed. This approach requires the buyer to carefully consider the amenities and upgrades for the house in advance since any additional costs for these items will result in a decrease in the maximum square footage that may be built.
2) We can start with a square footage target. Under this approach, a buyer provides a target square footage or range and gives details about the number of bedrooms and/or bathrooms and any other special areas which the buyer would prefer to be included in the plan, plus any other plan description which might be relevant to such buyer. Sample plans can then be obtained for the buyer to review. Upgrades and amenities under this approach can be determined before or after plan selection since a specified budget is not limiting the plan size at this point.
After a starting plan is identified under either approach, the buyer will identify the modifications that should be made to the plan to suit the buyer's tastes. A description and/or a drawing of the modifications will be provided to the architect for an estimate of the drafting fees for making the plan changes. These drafting fees are the responsibility of the buyer and must be paid in advance. The architect will provide a draft of the revised plan for review. This process may take multiple revisions or the first revision draft may end up being the final. Once a final revision draft is confirmed, an estimate can be prepared.
To properly estimate a custom plan, prices will need to be obtained from multiple suppliers, so this process may take some time. A buyer will need to decide on the amenities and upgrades by the time that these estimates are requested from the suppliers, so the estimate can be as accurate and detailed as possible.
Some custom home buyers want to be involved in every stage of the construction process which requires a product quality or aesthetic decision to be made while others just want to decide a few key aspects of the homes such as interior and exterior colors, tile or wood floor selections, and counter-top selections. Obviously, many decisions must be made regarding the products that will be used in the construction process. During these pre-contract discussions between the builder and the buyer, the builder should be able to describe the products that the builder uses or provide specifications from the builder's supplier along with the alternative options available along with the benefits and drawbacks of each so that the buyer is able to make an informed decision regarding those products. Once a plan is chosen by a custom home buyer, Hometown prepares an estimate using Hometown's standard building products and subcontractors (unless the buyer specifies prior to the estimate that certain products shall be included in the project). Once the estimate is provided to the buyer, the buyer can identify any amenities or upgrades that the buyer would like to modify. A buyer may wish to upgrade the quality of certain items and/or simplify certain aspects of the estimate to control costs. The most efficient way that we can accommodate such modifications is to set "allowances" for particular items or categories of construction costs. For example, if a buyer indicates that he or she would like to personally select all knobs and handles for the cabinets and the door knobs, along with the towel rings, the towel bars, the tissue paper holders, and the robe hooks in the bathrooms, then we will look to the estimate to see the total costs for all hardware items for the house, and we set an allowance for the hardware based on that item of the estimate. A buyer may then choose all of the hardware items and if the total is higher than the allowance, then the buyer will pay the difference either to Hometown or directly to the supplier of the item.
Once the plans get to the final revision stage and the estimate is prepared, reviewed, and modified, we would then be ready to draft the custom build contract.
As described above, custom home building involves a great deal of communication, so please contact us to discuss your custom home and provide as much information as possible to describe what you would like in your new home.
Building Your Own House
You can build your own house on your lot except in areas that have restrictions which require a Licensed Builder to be responsible for construction. Knowledge of residential construction is the first factor to consider in building your own home. You should note that the construction trades are becoming increasingly specialized and are scrutinized more and more for compliance with building codes and safety regulations, so there may be a significant learning curve for you if you have not been heavily involved with the residential construction industry in recent years. You will be ultimately responsible to make sure the subcontractors and suppliers you hire are insured and capable of performing the job correctly and safely. The penalties for workplace safety violations and the costs for repairing construction which is not code compliant can quickly erase any savings you were trying to realize by building your own house. A couple of resources which will be indispensable if you are taking on this challenge will be the most recent version of the International Residential Code (IRC) and the Occupational Health and Safety Administration's (OSHA) regulations pertaining to residential construction. Most of the IRC has been adopted by statute in Louisiana pursuant to Louisiana Revised Statute 40:1730:28 et. seq. The OSHA regulations are federal laws for workplace safety and are applicable in all states which have not written their own laws to encompass workplace safety and Louisiana has not done this, so the federal laws apply. The other major factors to consider other than knowledge of the IRC requirements and the OSHA requirements are time and money.
Time is important for a few reasons. A couple of the time considerations also impact the money considerations discussed below. Most houses with a living area less than 2500 square feet can be built in 4-6 months unless changes are being made during construction, weather is really bad, an unusual amount of specialized work is requested by a buyer or major repairs are required during construction for a number of other reasons. Banks charge interest on the amount that has been funded during construction, so every day has an interest cost. Utilities, portable restrooms, and dumpsters all have monthly charges that will need to be paid regardless of whether work is done each day or not. Most people will also have a time frame in mind for moving into the new house from another location whether they are ending a lease or selling another home or moving out of a house where they are living with someone else. Missing deadlines for moving from one location to another will cause stress and cost you money. Builders will typically have better control of construction deadlines than an owner would have due to a builder's familiarity with the construction process, a builder's influence over the builder's regular subcontractors, a builder's relationships with permitting officials and utility suppliers, and a builder's ability to identify and/or troubleshoot problems in construction. You should expect the time you use to build your home to take away from the time you have available for work, family, and relaxation. The amount of work that you may miss will impact different people differently so the time and money consideration here is on an individual basis.
Money is the next big factor to consider. Most people who are not heavily involved with the construction industry (or connected with someone who is involved in the industry) will not be familiar with the standard rates to pay different subcontractors. Subcontractor rates can vary to a great extent and a couple of subcontractors who charge more than another would have charged can cost you as much or more than a builder would have profited on the job if a builder had been hired. Builders very rarely pay as much as an owner will pay for the same exact work even if the same subcontractor is used since a builder is better positioned to receive discount pricing from a subcontractor the builder uses on a regular basis. Even if an owner gets multiple bids for a specific job, a builder will usually be able to get a better price than any of the bids. As referenced above, the construction schedule has an impact on how much is ultimately paid for other costs such as interest, utilities, restrooms, and dumpsters, but trip charges must also be considered. Suppliers usually have delivery fees and subcontractors have fees for returning to a job which was not ready for them for some reason when they were originally scheduled. If you do not know what needs to be done or what needs to be on-site when a specific subcontractor shows up to the job site, you will very likely end up paying special delivery fees and/or trip charges. Waste is yet another money factor. A builder who has extra material on a job-site will usually be able to identify the material as extra to safeguard it for pick-up, get a credit for the material or use the material on another job so it is not wasted, whereas an owner may not be able to identify the extra material, may not be able to get it picked up for a credit, or does not have any other use for the extra material. Very few people have unlimited budgets, so staying on budget is or should be a top priority. An owner may make a change during construction or incur a cost to make a repair which adds to the overall costs of a project. The owner pays for these changes or repairs if a subcontractor is not liable for the repair. This money must be accounted for. A builder would provide some help in this area since a builder should be tracking these cost overages and would provide a change order or invoice to account for the extra money it would cost to make a change or a builder would bear the cost of repair if the builder made an error. An owner building his own house may overlook these extra expenditures or the overall impact of these expenditures which were made during construction until the owner notices that there is not enough money to finish out the job. The owner who gets overwhelmed during construction will end up paying more in the end to get a builder to come into a project in progress than he would have paid to use a builder from the beginning.
It is not impossible to build your own home and it is possible to save money on the costs of building your home, but you should not underestimate the seriousness and risks of such an undertaking.
Hiring a Residential Contractor
Hiring a builder is the most efficient way of getting your house built. A builder should save you significant time in the construction process. A builder should have the knowledge to get the job done properly. A builder may or may not end up costing you more than if you built your house on your own, but you should read the discussion above about the risks of building your own house. Since you own your lot and you have decided to use a builder, you are not purchasing property and the contract that is used is not a purchase agreement as is typically used to purchase a completed home. Instead, you will use a Contract to Build. The Contract to Build will cover many of the same topics as a Purchase Agreement, but the Contract to Build focuses more on the performance of the parties during construction. The builder must perform certain acts and the owner must perform certain acts during construction to keep the process moving. The exact arrangement between the parties is somewhat flexible, but the main focus is on the builder completing certain aspects of construction before the owner funds the work that has been completed. There may be items which the parties have agreed that the owner must supply or pay for in advance which would also be detailed in the Contract to Build. No matter what the parties have discussed about the details of construction, it is extremely important for each of these items to be written into the Contract to Build or written up as a change order or addendum to the contract to prevent disputes about these items later. As the owner, you should also verify that your builder has a reliable way of communicating the details of the project to all subcontractors whether such details are written into the house plans or they are included in a separate project summary which is provided to the subcontractors. You and your builder will avoid a number of mistakes if the details are provided in writing to all of the subcontractors who will work on your house. the Contract to Build is not the only alternative to Building Your Own House on your lot, but it is the most common.
Please feel free to call Wesley Daniel at 225-279-5410 if you would like to discuss anything further relative to building on your lot.