First House: build or buy?

[naaman]

Anyone here have experience building their home? I'm starting to move in the direction of settling into a permanent spot, and am shopping for houses.

The area I'm in now is rapidly developing so there is a lot of competing real estate in my area, which drives costs down.

However, one thing that I am positively opposed to is living in an HOA, which is almost mandatory in my area. I can't stand the idea of paying someone to tell me when to take my Christmas decorations down or how many of my OWN cars I can park on my OWN property. HOAs feel like self-imposed communism to me. And it's a hard pill to swallow. My wife is still trying to sell me on the idea, though, as an alternative to living in the boondocks with no local amenities.

I, too, would prefer a semi-urban lifestyle, but all the houses I'm able to find that are not part of an HOA are at least 40 years old (though many are certainly in nice shape), which leads me to question their energy efficiency (the electric bills in the summer are very steep even with double pane glass and ceiling fans and all the latest methods of insulation. I suspect it would be worse with an older house (?).

So, what are some options?

If I could do it 100% without compromise, I would buy 3 or 4 acres, design my own house, give my ideas to an architect, have him finalize it, hire a contractor and have my house built. But, when comparing buying to building, which one will stretch my dollar further? Can I have as much house for the same price if I build? With a custom house, I imagine it takes way longer to build, because "new" problems may need to be solved that would have already been worked out with the cookie-cutter homes that populate the HOAs.

What's everyone's take?

 

[Olyar15]

I recently had a house built for me. Purchased a relatively small plot of land(1/2 acre), which is still much larger than the lot I had while living in Vancouver, and had a modest 3-bed, 2-bath rancher style house built. Has an attached 2-car garage, 24x26'.

Overall, it went smoothly, and I don't regret it at all. However, you will most likely spend far more building it than if you were to buy a comparable home already built. While it is nice to be able to spec exactly what you want in a house,it can be quite overwhelming if you don't know exactly what you want. And if you never owned a home before, then it is likely that you don't really know exactly what you want.

Also, are you sure that this will be the last time you will ever move? It would suck to build the home of your dreams, only to be forced to move several years later because of career or family.

I understand your desire to not deal with HOAs. This must be an American thing, as I've never seen them in Canada. Any chance you can find an HOA with very lax rules?

 

[Nukem]

I was going to say Buy 1st. Definetly changed my mind on what I want in my dream home. I don't regret it. I do want to build my next home(when I know I will be somewhere for a long period of time)

 

[Aero]

I did what you want to do. Bought 3 acres and completely designed my own house and did all the contracting. Picked every single detail that went into the house. (We're slightly in the boondocks though) In most markets today you can probably buy a house for about what it would cost you to build a quality house. After we finished our house was probably worth a little bit more than what we had put into it. If we'd had to pay a contractor to build it we'd probably lost money or broke even. The quality you'll get from a contractor 'spec' house will probably be awful unless you're looking at a high end builder. When picking out things to go into our house there was a 'contractor grade' line of stuff (low quality) and a line of things people would actually want to put in that will last. If a 'contractor/builder' put that quality stuff in their profit margin would almost be zero compared to other builder houses that may 'look' the same but are not even close on quality such as insulation methods, window quality, construction matls etc. Our house is about 5500sq ft (plus 2200 sq ft insulated garage space) and our electric bill is about $150-200/month.

If you are lucky you could find a house for sale that was 'custom built' a few years ago and probably come out ok on $$$ compared to building. I've heard some HOAs aren't so bad but some are nightmares. If you found one like that you like and is good quality, you can always talk to several neighbors and see what the HOA is like. Also review the neighborhood covenants to make they aren't super strict, like you can't park a truck outside the garage etc.

If this is your 'first' home though and not sure of the local area yet I would probably buy a starter home that is a good deal and build equity until you're sure you will stay. All depends on your situation and what you want.

 

[docjohn]

Being your own contractor is not for the first timer...using a contracter to custom build a home is a luxury which you will pay for.....If you have plenty of money and expect to live in the home for many years and have a very stable job...then consider your dream home,otherwise pick the least invasive hoa.

 

[DocL]

I've only lived in HOA communities, but down here in Florida that is the norm. I built my first home in a new community four years agowith no problems with the quality of the home. What I did was to visit the site everytime a supervisor was there and I asked for custom changes to be made that weren't a conflict with the plans. No structural, electrical, or plumbing changes, but many esthetic changes. I always gave them a few hundred bucks and I recieved in return a few thousand dollars worth of custom detail that no other home has. I also gave some of the laborers working a few extra bucks to add cosmetic details that I wanted that the builder/contractors wouldn't do. For example, I gave then 4x4in pieces of brown marble to inlay between the tile throughout my house while they were putting the stock tile in. It looks great and during the walk though the agent was surprised at the amount of custom detail I had and didn't pay the builder for.

I suggest going with a reputable builder in a new community and adding your own custom features at your will with their subcontractors.

 

[naaman]

All excellent feedback. I'm going to take a drive through some of the HOAs my wife was looking at and see what all the fuss is about... We did see one house out in the boondocks that we both really liked, but she likes to "walk" around outside and have nice shrubbery to look at etc. I'm trying to convince her that a hike through the country landscape can be just as much if not more rewarding...

One of the main reasons that I want to live out in the country is so that I can have a larger piece of property with more room to play with my cars.

 

[SilverStone05]

Like another poster said I wouldn't attempt to build your own place the first time round.

Another tip- when touring neighborhoods, don't feel akward getting out of the car, knocking on doors, and talking to people who are out and about. You will be surprised how warm people become when you tell them you are thinking of moving into the neighborhood. You will also find out about squabbles with the HOA, and potentially troublesome neighbors. If the people are weird or rude...well- you don't want to live there anyway. :biggrin:

 

[DocL]

It's also important to look into the finances of the HOA. If you are serious about buying a house ask the realtor to get a copy of the financial stgatment of the HOA. You need to make sure they are operating within their budget and that aren't many homeowners who haven't paid. My HOA forclosed on a home where the owner didn't pay the dues for four years.

 

[Vega$ NSX]

There are a lot of merits of building your own house and in experiencing the process (and pains) along the way. However, if you were to remove that and look at it on a strictly financial standpoint here are a few things to consider.

1) As of right now (which could potentially change) house values are so depressed that most homes $/sq-ft are in a very cost effective range. Meaning you get a lot of value for your dollar. In certain places (like parts of Vegas) some home values are so low that you could buy an entire house, less than the cost of the materials to actually build one. While house prices are recovering, at this point in time, it's going to be hard to build a house for an equivalent price for one you could purchase. In this market, building your own house is more of a luxury in that you will be able to tailor your home, rather than a cost saving venture.
2) Unless you have a lot of cash, financing can be a very difficult process. Getting a full mortgage on existing house is pretty standard because the house is the collateral. However, banks are much more leery of financing a loan amount to something that doesn't yet exist. Especially if this is your first time at the rodeo. In other words, don't expect a bank to just drop off a sack of $250,000 so you can start buying lumber, appliances and fixtures. Depending on how it goes, they will most likely only meter you small lumps of cash at a time and have a very strict construction deadline that you MUST meet at all times. They will constantly have inspectors checking out the current progress and you need to demonstrate significant progress checks or they won't release the next batch of money. I know of several instances where homeowner were caught in a pinch because they didn't get allocated enough money to complete the progression check point (or something went over-budget) but without significant completion the bank would not release more money. So they had to choose to either fund it out of their own pocket or foreclose the house. Unless you have a lot of contingency cash, or a great construction mortgage arrangement, I would be very careful of building your own property.

 

[naaman]

Thanks for that detailed response, Vegas... those are some things that I've been wondering about.

It's looking like I'll probably either move to thee boonies or settle on a nice house in an older neighborhood. I told my wife that we could live in her neighborhood of choice provided that we did not have to join an HOA. She agreed, so at least we're on the same page there.

 

[NSXASTY]

Just getting started to build on the lot can be very time consuming. Dealing with architects, engineers, survey, geotech, and the city or county.... Might consider buying a fixer and leaving a 1/4 of the original property and it will be considered a remodel, instead of a new construction. Much easier, faster and more cost effective.