The catalyst to build

Four weeks ago, I decided to buy a vacant lot in my city. I had just lost a bid on a townhouse in an up-and-coming neighborhood. When I saw how much over the asking price the townhouse went for, I started to seriously consider building a new home. The local real estate market is so hot right now that, on average, homes for sale are being snapped up in little more than a week and median home prices are at a record high. I was in a no-win situation: I would either lose another competitive bid, or else win a competitive bid by paying well over fair market value. If getting into a new home in this sellers’ market requires paying a premium, I thought, then I would much rather use that investment on a new home designed specifically for me.

If losing the bid on the townhouse was the spark that set me off on a custom home build, the kindling was a British reality TV show called Grand Designs, which I saw on Netflix. In each episode, the host follows a family building a new home: from designs on paper through construction, ending in a big reveal of the fully built home several months later. Most episodes involve some combination of arguing with the spouse, exceeding the budget and compromising on the initial wish list for the new home. But whatever challenges they faced, everyone who appeared on the show seemed genuinely happy with the home they got in the end, a home that was truly their own: not just designed to their specific needs and taste, but also born out of the long stretches of time, hard-earned savings and tireless commitment they poured into it.

Perhaps some impossible hurdle will force me to abandon the quest to build a new home prematurely and I end up putting the land back on the market. There will be a lot of unknowns and a lot to learn: municipal land use and building codes, the pros and cons of building materials and finishes, the financial incentives driving contractors and tradespeople. Nonetheless, I’m hopeful that any frustrations I encounter on this journey will be more than offset by the joy of watching my dream take shape, and any challenges I face, if I survive them, will only serve to heighten my satisfaction and sense of achievement when I finally move into my new home. I intend to share everything I learn on this blog so others may avoid the pitfalls I encounter.

The site

Near the top of a steep ridge rising a few hundred feet from the valley, the site has potential for views of a lake, snow-capped mountains and a city skyline to the east. It is within walking distance of parks, schools, restaurants, grocery stores and a fitness gym. Only a mile from a major freeway I use to get to work everyday, it would also cut my daily commute by at least a half hour. Best of all, the corner lot is a ten-minute walk from one of my favorite bars in town, a casual hangout that serves good sushi and a broad selection of single malt whisky.

Despite a reasonable selling price, the property sat on the market for a while because the seller refused to entertain any contingencies. Typically, a buyer of vacant land has a negotiated period of time to determine whether the land would suit his needs based on municipal restrictions on what could be built on it and how much it would cost to build. In this case, the seller wasn’t wiling to tie up the land while a potential buyer did a feasibility study. One buyer who included such a contingency had his offer rejected. The upshot of the seller’s refusal to accept any contingencies was that there were no other buyers to compete with, and I was able to buy the property below the original asking price.

In order to get comfortable with the idea of not conducting a feasibility study and waiving all contingencies, I visited the city’s land use department and confirmed that it was legal to build a new home on the site. The city also provided the height restriction and setback requirements that allowed me to determine how large the home could be. I then called up a few builders to get a rough estimate of the construction cost based on the expected square footage. Not only did their estimates vary widely, the gap between their minimum and maximum estimates was large.

It was a prefab builder’s cost estimate that gave me enough comfort to take the leap. Their website showed pricing for several styles and floor plans. Because modular homes are built in a factory, construction is less subject to unfavorable weather and materials shortages than a conventional on-site build, thereby reducing the risk of cost overruns and allowing the builder to estimate construction costs within a tighter range.