Get the Dirt!
By
Susan Krancer
Have you thought about investing in land? Maybe you are just looking to diversify your investments? Maybe you’ve always wanted to build a custom home? Now is a wonderful time to consider buying a piece of land. Inventory levels are high, sellers are motivated, and interest rates are still low! Whatever your reasons for considering a land purchase, I can give you some pointers to help you make the wisest choice. How should you start? Well, if you want to build a home, you should first think about the type of home you want. You don’t need the exact floor plan, but you need to know enough about what you want to have some rough dimensions for the foundation. Believe it or not, intelligent people do buy lots that will not accommodate their desired home. Either they fall victim to a slick talking salesman, or they just fall in love with a particular parcel, or they just come across a deal that’s “too good to pass up”. Take some time and browse through house plans on the internet. It’s fun! And you will get some great ideas. My favorite house plan sites are: coolhouseplans.com, dreamhomesource.com, williampooledesigns.com, dongardner.com, and frankbetz.com. Next, think about the location. Location is the main factor affecting the price of the lot. Answering the following questions will help you choose your location. What’s your budget? How much can you afford to spend on the lot and still have enough money to build the home you want? Do you want a “planned” community like Ford’s Colony or Kingsmill, or maybe a little more elbow room? How important is a view? How far are you willing to drive for work, shopping, school, restaurants, and recreational amenities? Other important questions: Are there any potential issues such as zoning issues, flood plain issues, drainage issues, shrink-swell soil, erosion concerns, etc? What about developer charges, HOA fees, club membership requirements? You need to factor everything in. Once you’ve chosen your lot, then it’s time to start negotiating! The best way to make sure you maximize your investment is to buy the property for a good price. You will want to look at recent comparable sales and compare the property with other similar properties currently listed for sale. You will want to include a study period contingency to allow yourself time to check the property out thoroughly. Ask a builder to walk the lot with you, and talk with him about your concept for the house. Make sure he doesn’t see any issues that you haven’t previously considered. Read the home owners documents CAREFULLY. If you are buying purely for investment with no intention of building a home, then you have some different considerations. The investment decision tends to be much less emotional and much more “by the numbers”. How long do you anticipate holding the property? The value will go up as land becomes scarcer, right? What better investment can there be than the purchase of a limited resource like land? You can count on it over the long term, but how long will it take? Other factors to consider are: Is the property divisible? How is the property zoned, and will you need to get the zoning changed? What’s involved with changing the zoning? What are the population growth projections for the area? Are there other costs involved with holding the land such as community fees, maintenance fees, and assessments?As you can see, there are many, many considerations when you purchase land. The best place to start is to hire an agent who is experienced in this particular specialty of real estate. Call or e-mail us today and let's get started!
More >Choosing a Builder
By
Liz Moore
If you're considering building a new home, you should consider the choice of builder as carefully as the choice of neighborhood and floor plan. Here are a couple of tips to help you choose a builder.The first consideration is what the community you have selected will allow. Is there just one builder, or will you have a choice? Either way, you need to do your homework.1. Ask for references. Rather than the builder selecting a few past clients for you to talk to, ask specifically for his or her most recent four or five sales. The more people you talk to, the more accurate an impression you’re going to get. Ask a lot of questions: Are you happy with the quality of construction? How were problems addressed? How responsive was the builder to changes during the process? Would you build with this builder again?2. Visit as many of the builder’s homes as possible. There is simply no substitute for seeing work first hand. Pay attention to the quality of construction. Find out what is considered standard, and what are upgrades.3. Ask for a copy of the builder’s contract. Review it with your Realtor well in advance of time to sign. It’s not unusual for builder contracts to be builder-friendly, so it’s important you understand the terms clearly, as well as what is negotiable and what’s not:a. How long does the builder have to complete the home? What are the penalties, if any, for delays? This is probably the biggest trouble zone in new construction contracts.b. How are upgrades handled? Will you need to pay separately, or can they be financed into the package price?c. Are allowances (cabinets, fixtures, landscaping, etc.) retail or builder’s cost? Most builders get significant discounts for volume, so check and see if they are being passed through to you as the homebuyer. Do you have choices for providers, or will you be limited to specific subcontractors? It’s always a good idea to investigate what your allowances will buy before you are committed.Realtors who specialize in working with builders and new construction can be invaluable to you; because they negotiate new home contracts every day, they know what to look for and what questions to ask. We would be happy to give you an overview of what to expect and how to get started!
More >Financing Your Lot
By
Kaja MacDonnell
There are several financing options to consider when purchasing a lot or a parcel of land. Selecting the best option often depends on how you plan to use the property. Generally, a bank or mortgage company will finance up to 75% of the property’s purchase price, which means you will make a down payment of at least 25%. Terms vary from 24 month loans, with “interest only” payments to 20-year loans that amortize based on the term, with fixed rate “principal and interest” payments. The amortized option commonly has a 3 or 5 year call which means the loan must be paid back in full on the call date or the terms of the loan renegotiated before this date. The principal refers to the amount of money borrowed that must be repaid.If you will be building a home on the property shortly after purchasing it, you might want to consider doing a “construction to permanent” loan. This loan provides funds during the construction process to pay for work as completed. As funds are dispersed, it is called a “draw.” While the home is under construction, you make “interest only” payments on the funds that have been drawn. Once the home is 100% complete, the loan is modified or converted into a permanent mortgage, one that is amortized over time by making “principal & interest” payments. When using a “construction to permanent” loan the initial draw can be used to purchase the lot. If you already own the property, the first draw could be used to pay off the existing loan if there is one.If you intend to build a home or sell the property within the first two years you may want to consider using the 24 month “interest only” loan to purchase the property because you would not have any real incentive to pay off your principal balance until the property is sold. This, however, is not recommended if you plan to hold the property longer before building a home.If you are not sure how long it will be before you build or sell the property you may want to consider a longer term, fully amortized loan so that you can begin paying off your principal balance over time. Keep in mind that with any real estate transaction there will be closing costs associated with purchasing the property and with borrowing funds for that purchase. Your lender should provide you with a detailed estimate of what those costs will be.
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