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Building That Dream House Series: Part One

I have had several phone calls in the last couple of months from potential customers and past clients that have asked me about building. My standard answer has been, if you can find a home you like, it is better to buy than to build. But lately I have been rethinking this.

In the latest issue of Money Magazine (April 2008) there is an article (Dream It, Build It) about building your dream home. The article makes an argument stating that" now "might be an excellent time to build that home. It says that "behind the dark clouds hanging over the houseing market is a very compelling silver lining. The cost of building your dream house is coming down."

Why would this be? Well, there are many factors, but the main one is; the cost of raw materials has dropped and contractors are not as busy as they once were. In interviewing some modular home companies I have found that the demand for modular homes is so far down that some companies are running on a skelton crew. What this means to you the consumer is; dollars are not coming out of your pocket. Money Magazine states that framing lumber is 18% cheaper thtn 18 months ago and that drywall is selling for 40% less.

Not only are prices dropping in the construction area ,but also land prices have dropped in Vermont; in some cases 48% of the asking price from 2006. This is not as true in resort areas such as Stowe. The list price of land might not have dropped, but the actual sale of land has done so. We have seen the listing price of large lots over 25 acres being dropped while the smaller lots prices have stayed the same. Overall, large or small lots have not seen a record number of sales, and this has lead to lower sales prices.

Before one rushes out to take advantage of this slump in the market there are some essential rules that one should follow:

1. Hire a real estate agent that is knowledgable in land sales and land development. This could save you headaches and thousand of dollars. That agent will know exactly what you might not know regarding state and local permits, septic issues, well issues and what lies below the surface, both figuratively and literally. Each town and state has different requirements and it is necessary to know all about those before you start. For instance: your daughter has a horse that she is devoted to, you purchase a parcel of land only to find out that horses are not allowed in the sub-division. Or you wish to build a 1200 sq. ft. house and the covenants state that you can build nothing less than 1500 sq. ft. In Stowe, you might be subject to Ridgeline Overlay District. You have just purchased a parcel of land with a trememdous view of Mt. Mansfield, but there are trees in the way. Your intention is to cut them so you have an unobstructed view. Then you find out that you are in the Ridgeline Overlay area and you have to leave many of the trees to create a canopy around your house. Just as you would expect someone to hire you because you are an expert in your field, you will want to hire a real estate agent to advise you.

2. Get pre-approved for a construction loan. I have seen many people that have not done their homework before they start the process of building a home. If you do not have the cash to build your dream home, it is important to go to a lending institution to make sure that you qualify for a construction loan. A construction loan is similar to an equity loan. You draw down on the amount of money that you need, or that you are qualified for, until you finish the home and then you convert this into a permanent mortgage. Some lending institutions will do a construction to perm loan which locks in an interest rate at the beginning of the construction period. This protects you from rising interest rates.

3. Hire an architect, a designer or buy existing plans before you build. If you truly want to save money it is important to have plans before you start and not give your builder something sketched on the back of a napkin. There are many magazines that have plans available. However, unless you are building on a flat suburban lot with water and sewer available, these plans may not be suitable for the terrain of your lot. Site, views, terrain, exposure etc. are all important factors that must come into consideration. Designers and architects can save you thousand of future dollars because of their knowledge. This may be in the form of passive or active solar, green building, something as simple as the way the plumbing in the house stacks up from kitchen to bathrooms. Do not always rely on the builder to know these things. Their job is to contruct the house and they usually rely on the designer, or architect to have consulted with the experts on structural walls, plumbing and electrical. This does not mean that your builder would not double check any aspects of the plans and bring to your attention defects if he saw any.

In the next series I will discuss how to assemble a confident team to guide you through the process. Meanwhile, you might find my phamplet on " What You Need to Know Before you Purchase Country Property" a helpful guide to get you started thinking about a land purchase. You can call me at 802 253-7358 ext. 13 and leave a message with your name and address and phone number or you can email me at www.peggysmithvt.com and I will send it to you immediately.

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