Shopping for a home can be tough. You’ll inevitably have to compromise on a few things, only to pay extra to renovate after you’ve moved in. The best way to get exactly what you want is to buy some land and have your own home custom built on it. Your checklist should include ordering a land inspection before purchase, conducting thorough research, hiring the right professional and setting a budget with the understanding that unexpected surprises are inevitable during the building process.
Buying Vacant Land Checklist
When you start looking for a house, you likely enlist the help of an experienced real estate agent. The same should apply to purchasing a vacant lot. An agent can help you track down the perfect piece of land, while also knowing exactly what you’ll need to accommodate the home you plan to build.
After you’ve found a lot, there are some things to research, including whether it’s ideal for all the services you’ll need, including utilities, sewer or septic and electricity. You’ll also need to have the property surveyed to designate the exact lot lines that apply to avoid conflict. Once you’re ready to proceed, you’ll also have to make sure that landscaping and fencing plans stay within your land boundaries.
Research the Property
As with a home purchase, it’s important to make sure you understand the property you’re buying. Make sure the land is free of all liens. If there’s a building on the property that needs to be demolished, you’ll need to price the cost of that destruction before making an offer.
It's also important that you conduct a professional land inspection before purchase. Even if the seller has hired a surveyor and can provide paperwork, you still should hire your own surveyor who will act on your behalf. Legally, you can only rely on surveys that have your name on them, so it’s important to get your own.
Check Into Loan Options
Banks see land loans as riskier than home mortgages, so you’ll typically find they’re tough to get on their own. However, if you’re planning to build a home within a short timeframe of the purchase, you’ll find it easier. In the buying land and building a house process, it’s important to understand your options.
Small credit unions and local banks are typically more willing to issue loans to land buyers. But a Federal Housing Administration Construction to Permanent Mortgage loan may be the best choice for someone planning to build soon. You’ll face restrictions when it comes to choosing contractors, but this will also protect you as the buyer. The FHA option also usually features lower interest rates and easier qualification.
Choose the Right Builders
When you’re having a house built on property you’ve bought, part of your buying vacant land checklist should be to track down the right builder. You can get some great ideas by looking into other builders who have constructed houses like the ones in your area. But your due diligence should extend well beyond that.
Your local builders’ association should be able to provide a list of local builders who are members. Of course, real estate agents will likely be your best resource, especially the agent who helped you purchase your land. You can also reach out across your various networks to get recommendations, although you should check into the builder’s license status and ask for other references before moving forward.
Leave Room in Your Budget
Budgets are a very important part of the buying land and building a house process. You likely have a price range in mind, but there will be unexpected costs along the way. Your expenses will include:
- Preconstruction expenses – This category includes the cost for permits, land inspections and any wiring or construction that will be necessary to get utilities on your new property. If your project includes demolition, it will also fall under this category.
- Home plan expenses – Your builder will need a floor plan to get started, so one of your first steps will be to have a floor plan drawn up.
- Building costs – In 2017, the average cost to build a home was $428,000, but that’s based on a 2,800 square foot house. This price point can vary by location and the type of materials you use. Your builder’s estimate will include site work, foundations, home framing, exterior finishes, wiring and ductwork, interior finishes and miscellaneous costs. Your most expensive cost, though, will be what the builders charge to sell it to you, which is where they get their cut.
Of all of the line items in your budget, the miscellaneous category provides the best opportunity to give yourself some wiggle room. There will be unexpected expenses along the way, and this cushion will make sure you understand the full costs. If you come in below that amount, it will be a pleasant surprise.
Building a House Timeline
In addition to your buying vacant land checklist, you should also have a homebuilding checklist. Although some delays are unavoidable, and every builder works independently, here’s a typical timeline for new home construction.
- Prebuilding phase – Ask questions, line up resources and purchase lot
- Week 1 – Clear, excavate and level lot
- Weeks 2-5 – Framing of floors, walls and roof
- Weeks 6-8 – Installation of heating, cooling, plumbing, electrical, insulation and drywall
- Weeks 9-11 – Installation of flooring, cabinets, trim and molding
- Week 12 – Delivery and installation of appliances like the refrigerator, as well as installation of faucets, sinks, light fixtures and plugs
- Weeks 13-14 – Cleanup and final inspections in preparation for closing
Throughout each phase, you’ll likely pay multiple visits to the homesite to monitor progress. It’s important to raise any concerns as early as possible along the way to ensure things are done according to the plan you presented.
Construction Inspections During Home Construction
There are several points during the buying land and building a house process at which construction may have to pause for an inspection. These might include after the following actions:
- Power pole installation
- Foundation pouring
- Basement digging and pouring
- Termite pretreatment
- Plumbing and electrical installation
- Door and window installation
- Bath and kitchen rough-in
- Heating and cooling installation
There will also be a final walk-through before you move into the home. You should pay for a home inspection to ensure that everything is built to code. During your final walk-through, you’ll be expected to provide a list of any final requests, but this isn’t the end of the road for your builder.
Issues and Problems After Move-In
Your dealings with your builder probably won’t end once you’re all moved in. Your builder should have given you at least a one-year warranty, covering any defects in workmanship that appear during the coverage period. Read this warranty carefully before closing on your house to make sure you’ll be protected if something goes wrong. Even if you’ve done a house and land inspection before purchase, this warranty is still important.
Whether you have a warranty that covers your house’s particular malfunction or not, don’t feel that you can’t contact the builder if there’s a problem. Many builders want to maintain a good reputation and know that your recommendations and online reviews are integral to that. Petty issues that you can easily fix yourself don’t count, but typically you can count on builders to stand by their work and fix any problems that would make them look bad.
- Bankrate: What Property Buyers Should Know About Land Loans
- Bankrate: FHA Construction Loan Can Build Your Dream Home
- DaveRamsey.com: How Much Does It Cost to Build a House?
- Safewise: What to Expect When Building a New Home: A Timeline
- Southland Custom Homes: How to Build a Custom Home: Checklist
- Federal Trade Commission: Warranties for Newly Built Homes
- US News & World Report: The Do's and Don'ts of Buying Vacant Land
- Fit Small Business: Top 19 Tips for Buying Land from the Pros
- Dave Ramsey: Homebuilding 101: The Budget
Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.