So We Built a House

It’s 2005 and we have just moved to a new state. We have new jobs. A pile of money from the sale of our first house and a baby due in 5 months. (Part 2 of 4 – Personal backstory)

Once we zeroed in on the area/school district where we wanted to live, we needed to find a house that would work for us. We looked at a lot of real estate. After a dozen houses or so we come across a new construction that we liked, only to find out it was already sold. We look. We tour. Drive around town, but nothing comes close to that one we liked, so we have this bright idea.

What if we find that builder and have him do that house again for us. So, we built a house.

Enter Tom, our builder. Tom is unusual in that he is a general contractor that does much of the work himself. He contracts out for some areas but it was him that was there everyday, mostly by himself, building our house. There is a lot of stress involved with building your own house. Even after you have chosen a layout, there are a hundred smaller decisions to make. Every one of those decisions involves a dilemma to spend more to get more or go cheap and keep the budget under control.

The prebuild process involves a contract and a ton of ‘Allowances’.

Here is where doing some initial footwork pays off. The allowances are for various aspects of the construction like; flooring, cabinets, plumbing, lighting, paint You get the picture. After you sign, it is probably too late to up those limits, so everything you ‘add-on’ increases the final cost. It is better to negotiate these allowances before you sign. Some rough estimates can be found on the internet. Actually going to the stores and pricing out your ideas will give you a better picture of where you need the allowances to be before you ever start on the actual house.

There is a lot of advice out there on the internet. Read it all first.

If I had spent more time on-line I would not have; installed a jet tub, used hollow internal doors, skipped on insulating inside walls, accepted a 10 SEER A/C unit (minimum is now 14 SEER). I did make some good calls like having the basement finished for $10,000. This would have costed 2 or 3 times that amount if I did not choose to do it at the same time as the rest of the house.

Other advice seemed OK to me but not necessary. One example, waiting to install granite counter tops or outside landscaping until you have lived in the house a full 4 seasons to see how things change.

When in doubt I think it is safe to say you can change the quality of the space you have. It more difficult to change the size of the space itself.

By the end, we were stressing out about the budget and left a few things undone that we should have just sprung for. Procrastination has a life all its own and we are just now this year, 12 years later, about to upgrade those counter tops. Our builder had moved on to the next job before we were fully done (this is common). We had to make a codicil to the contract of a per day penalty for Tom not finishing the ‘punch out‘ list on time.

When we finally parted ways it was like breaking up with a girlfriend.

I am glad we built a house, given the market in 2005, we did it for a square foot price comparable to buying a house. This is not always possible. I probably would not build again, but I think our experience was rather typical. Mistakes were made, teeth were gnashed, but overall were are good with the end result.

I think these would be the big 4 take aways;

  1. Be mentally ready, “this will not be over quickly, you will not enjoy this” *, it is not cheap.
  2. Pre-plan for your allowances, you should pretty much know the cost of your desires before you see your numbers.
  3. You should probably go ahead and get that upgrade. You are only building once and while the cost is fixed at closing, your income is likely to go up over time.
  4. Ride your builder moderately, he will stray if you let him, but you want to stay on good terms.

* I apologize for there being nothing humorous in this whole post. It reads kind of dry, so I embedded a movie quote above. Be the first to reply with the source and you will look cool for all of your imaginary internet friends.

P.S. One reader sent this tweet; great article! Would be curious to hear more in depth on how the payments/financing was structured (if any).

As to financing, we had a bit of an unusual circumstance.

Normally, to build a house, you would have to get a construction loan. Construction loans typically require interest-only payments during construction and become due upon completion (meaning that the house has received its certificate of occupancy). The balance due is then rolled over or ‘converted’ into a typical 30 year mortgage. They are very annoying because the bank releases certain chunks of the money required by the builder to complete a part of the house (i.e. foundation, framing…) after confirming the work has been done. This middleman slows up the process and adds to the overall headache.

We did not need the lender to give us a construction loan. Our builder was in the initial stages of a ‘spec’ house. Not a typical, ‘We Built a House’ scenario. He put up all the money to build the house, we simply contracted to buy it upon completion. This worked well as we were able to have input on all aspects of our house before the actual build.

11 thoughts on “So We Built a House

  1. Excellent description of the house building process! I’m with you on those upgrades seeming to never happen. I bought my house 11 years ago now and there’s plenty of rooms that I planned to re-do that are still on the “to do” list. I’ve made lots of improvements over the years, but it’s more of a slow and steady process vs. a fast one.

  2. I enjoyed the article 🙂 We bought an old house but do want to build our own “dream house” in the future. If you don’t mind me asking how did you find/decide on your contractor, and how long did it take the project to complete?

    • It took about 4-5 months altogether from clearing the site to move in ready. We chose the Builder because we knew he had built the one house we did want to buy (it had already been sold)

  3. Maybe I am a “little bit” late, but it seems everybody forgot the quote. My guess is 300. Just I liked more when Gorgo said it 🙂

  4. Nice house! So are you saying you preferred something better than granite counter tops? Is there something better than granite?

    • No, we just did laminate at first, we waited to upgrade to granite b/c we were worrying about costs, finally did upgrade, like 12 years later.

  5. Late (again) but. . . .

    When we built we did have to go the construction loan route. As you mention you pay interest on the outstanding balance – usually monthly. Our first construction loan interest bill showed up in the amount of $990 causing me to freak out. We still had an estimated 8 months to go and this would be the smallest interest payment.

    I stepped back from the ledge and called our lender the next day to make sure they had calculated the interest correctly. They hadn’t. The actual amount owed was more like $90.

    Waiting for a lender inspection can slow down the process, but they are giving you and themselves some protection by ensuring you’re actually getting what you’re paying for throughout the process and that the builder isn’t using the funds you’re borrowing for a purpose other than building your house.

    • I guess I never thought about it as an extra pressure on the builder to do the work in order to keep getting paid, that is probably more influential than me bugging him.

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