Are you loving these land prices in Oklahoma or maybe you have some land that you’d like to do a custom build on?
Oklahoma is pretty sparsely populated compared to the rest of the US, so what would it take for you to build a custom house? Buying the land, hiring the builder, and finally closing and moving in; let’s talk about it. I’m going to give you the step-by-step process for this and how it could work to do a custom build.
As you may imagine, building a house, or anything really, is going to have some steps – a lot of steps, actually. It’s really important to take your time with something like this and hopefully, you’ve thought about this for a little while, don’t just jump into this! Doing a custom build is a lot of work. I’m Marcie Billen and I’m a real estate agent here in Oklahoma. I work specifically in the Oklahoma City Metro but these steps will help you wherever you want to do a custom build in Oklahoma.
MONEY
The first thing is money and I knew that you knew that, right? You have to figure out where your funds are coming from. So, if you’re building with pure cash, you don’t need to read to this part; skip ahead to the next section… But, if you do need financing for your own beautiful, dreamy custom build, then stay right here and we’ll talk through a few of these different types of loans. I’m just going to give you the overview because I’m not a lender. Here’s few things to consider when you have to finance your custom build: What would it mean for you to have the builder carry the loan? What would it be like for you to carry the loan on your brand new construction house? Or, maybe you want to try a one-time close?
Personal Construction Loan
If you do end up carrying a loan yourself, as many people do, you’re going to have to keep track of some of the expenses so that you can submit those to the bank each month and get your disbursements.
Now, if you buy your own land, maybe several acres, then it’s really common for you as the buyer or the customer to carry your own construction loan and this just means that you’re going to draw funds from your loan through the process you’re going to pay interest and you’re going to settle the loan at the end of the build and wrap it into you know whatever financing you and your bank agree on.
Builder’s Construction Loan
It’s also possible that the builder could carry the loan for you, which is really common if it’s a bigger builder and they have their own line of credit that they’re drawing off of from a bank. So, if the builder has their own line of credit and they can use that to draw funds while you’re building. You would just get a regular loan, like a conventional type of loan once the builder’s completed the custom build and you would buy it off the builder. Then the builder would pay their line of credit back with the money that you gave them from your own loan.
One-Time Close
There’s also a great option for a one-time close. I have a lender who does these and basically it’s like you can wrap your close for your land and your close for the construction loan because you have to close on that first with the bank before you start the build and then the close at the end. It sounds confusing, so let me explain. Normally, people have three different home closings or property closings, but if you do a one-time close, you would only have one close and that can save you some money on fees and just some headache, of course. I love these loans because you could put as little as five percent down, where normal construction loans need 10 to 20 down.
Sell Before You Build?
Another thing that may be happening as you are building your brand new beautiful custom build is that you need to sell the house that you currently live in if you own it. I’m a realtor, right? So let me just jump in here for a second and give you my two cents on something. Is that okay?
One of the biggest mistakes that I see people make is putting their house up for sale by owner when they’re trying to build their own house. I see this all the time and I’ve listed several houses that have been for sale by owner first and then you know, they decided to eventually list with a realtor.
Why do I say this? Why do I say this is a big mistake? I know some people may not trust me at all because I would make money off a sale like that, right? Well, when you put your house up for sale by owner and consequently, price it a little bit high, (because you’re not in a hurry) you really damage your chances of getting the most amount of money for your house. And keep in mind, when you’re building a brand new house, you’re going to have to buy new furniture, you’re going to have to do landscaping, all this stuff. So let a realtor help you to get the amount of money that you deserve out of your house, don’t miss out on your money and leave some on the table by listing for sale by owner.
All the boring talk is done now we can move on to building, design/style, builders and architects, location – the fun stuff!
Location
So, finding a location to build your custom home – you may already have land that you want to build on but, most people don’t. However that means there are some options. Of course, a lot of people build in what’s like a regular neighborhood, on a regular city lot. Many times builders will already own those types lots, or they’ve already claimed these typical lots from a developer. Usually when that happens, and you buy a lot like that from said builder, you have to use that builder when doing your custom build.
Alternatively, there are lots you can buy on your own and then choose whatever builder you want or whatever builder is approved by the HOA. And then there are neighborhoods where you have 1 acre, 5 acres, or 10 acres I’ve seen some with 20 acre lots, but that is not common. Ten acres is kind of the max that I’ve seen in Oklahoma for a custom build; you know, buying a lot to build a new house, if it’s in a neighborhood. You can buy 100 acres for yourself to whatever kind of custom build you want.
Here are some questions to think about when you’re choosing a location for your custom build. Do you want to be in a neighborhood? Do you want a neighborhood with small acreages? Do you want to be off by yourself in the middle of nowhere? Again, these are questions to ask yourself before doing your custom build, and you probably already know the answer to these. This is where a real estate agent can really help you to find the location for the land that you want to build on.
The number one caveat with neighborhoods is HOAs – 99% of the time in a new construction neighborhood, you’re going to have an HOA. HOAs (Home Owner’s Associations) outline the restrictions on what you’re allowed to have in the neighborhood, whether it’s the color of the roof, the size of the shop or the color of the shop, if they’re allowed. Also with the HOAs, they help monitor the road situation and keeps track of who maintains it, which is important because you don’t want three years down the line, a broken road, and no one is willing to fix it.
So if that doesn’t float your boat, and you don’t want to be in a neighborhood with an HOA, then you can opt to build a house on your own acreage that you buy that’s outside of an HOA.
There are a lot of different things that you have to think about if you’re planning to do a custom build on land, especially if it’s raw. For instance, how much is it going to cost you to run electricity? What about the well? Are you going to need to dig one or not? How much is that going to cost? Is the builder going to do that for you? What about the septic system? And of course, the all-important question what about the internet? Although, you’re most likely going to have fiber internet or satellite internet depending on where you are in Oklahoma and not dial-up because I don’t think that’s a thing anymore.
BUILDERS
I kind of felt like I needed to talk about the builders before I talked about land but, it’s hard to talk about builders if you don’t have a location because then you can’t really choose a builder. Since we’ve already discussed location, let’s dive into the builder conversation. As I mentioned, some neighborhoods are going to have a list of builders that are approved. This is really common especially if you’re close to a city center but, if you have a choice of builders to pick from, I would say to choose very wisely on the builder. You’re going to have to talk to this person a lot so here are my tips.
- Visit homes that they have finished. This is a no-brainer! Ask if you can visit homes that they are doing construction on to see if you like the work they are doing. Take note of the work site while you are there. Are materials tidy and organized or is there a mess all over the yard? Is the yard overgrown – may be an indication to how long the project is taking.
- Ask for references from homeowners that they’ve built for in the past two years.
- Ask the builder if they have any staff like an assistant or a foreman, this is really important information.
- Does your builder have architects?
- Do they work with any interior designers?
I have more questions that you can download and I have the link for that below. It includes a list of questions that you would ask builders, designers, architects, and things like that. All these questions and research are also something that a real estate agent can help you with. So some people choose to have a real estate agent involved in their custom build and some people don’t. I’m a real estate agent so I’m going to say have a realtor involved in your transaction. If they are involved in your custom build, have a conversation with that realtor before you get started on what your expectations are for them, like if they’re planning to go to design meetings.
If they’re not, whatever makes you most comfortable and what help you need, so you need to have that expectations conversation with your own real estate agent. It’s really up to you if you want a realtor to be included and definitely have that discussion with them about how they’re getting paid and what your expectations are. So this is already a lot and like I said I do have that downloaded in a link below; it’s a list of questions for builders, designers, and architects.
BUDGET
The budget conversation will be a consistent one with your lender, your builder, the architect, the designer etc. You have to submit plans, specifications, and estimates of course, to your loan officer. Ask your builder about materials that they use, and do your research when you’re asking questions of the builder. If they don’t want to answer those questions, they may not be the builder for you. You need to feel very comfortable with this person.
Architect
After you hire the builder so you may have already started talking about plans as you’re hiring a builder this is super common, maybe you’ve already picked out a house that the builder has already built before that’s totally fine. Most people make changes to those plans. So does the builder work with an architect? How is that architect paid? Are you comfortable with that architect? Have you seen other work that they’ve done? If they don’t get paid by the builder, meaning that the architect’s fee is not wrapped into the loan, then you need to ask them what their pricing is and see their contract. It’s usually easiest to work with the architect that the builder usually works with. They already have a line of communication open and that’s extremely important in these types of builds.
Designer
Next up is the designer, if you’re a builder who won’t work with a designer then I would say go find somebody else. The designer is really important, they help you make the house flow really well, they know current trends and designs, what may be a trend, and what may be something that stands the test of time. If you’re unsure about things like colors and fixtures and things like that, a designer is going to help you so much to figure out what’s going to look really good in your house.
Some builders have a designer on staff, some have several, and some will have a list that you can choose from and you can contract those yourself. Always have that conversation about who the designer is like ask them very specific questions like what their favorite design style is and of course go into houses that they’ve designed before. Get that Pinterest board going, so that you can have that conversation with the designer as well. I know you already have one. What’s usually easiest, is to work with a designer that the builder pays so that way it’s kind of like the fee is wrapped into the loan. That may not be possible so you may need to hire a designer outside of the builder that he’s comfortable with or she’s comfortable with. Of course have that conversation with a designer about what they will do for what fee they are charging.
Never be afraid to ask questions about how people are getting paid, they really appreciate it. I can tell you, coming from a contractor, I really appreciate that.
FINAL PRICE
Determining the final price of a custom build is something that you’re going to be working on through the whole planning process. You’re going to begin by submitting estimates to the bank at the very beginning and you’re going to have to get the builder approved. The bank is going to have to do an appraisal before you even start on the property. As you can see, there are so many steps to the custom build process that include money.
Your budget’s going to constantly be updated as you go through the process of working with the builder and the architect, putting in the specifications and talking with the designer. Builders will usually price a home in terms of square footage so they’ll say something like $150 to $170 a square foot. That’s how they price things out to give you estimates, and I’m just pulling $150 to $170 out of the air – that is a made up number, so don’t rely on that as a starting point. That price per square foot is going to go up and down depending on different things like the cost of materials, labor, the fixtures and finishes that you choose; everything really, that goes into the custom build. Even the amount of concrete that you put in, all that’s going to go into your estimate, or what the builder is going to bid out for you and your custom build based on your plan.
The specifications for the plans are things like the central heating and air system, and the fixtures, and the flooring, and all that jazz that goes into the house. These things are going to affect your budget immensely. Once you have a final estimate from the builder, then your lender is going to do an appraisal, this is a preliminary appraisal and then once you have all the paperwork together, the lender is going to give you a clear to close for the closing on the construction loan. That means that you can start drawing from your loan in order to pay the builder, and so that he can pay his staff and his contractors as you’re going.
The custom build process itself is going to come with ups and downs, it’s not going to be easy, it’s really common for the final date to be incorrect. Meaning that it’s going to get pushed out one month two months, or maybe even three months. Just be prepared and always be in conversation with your builder about this. Before the house is finished or right before the house is finished, I really suggest that you get a third-party home inspection on your home. This may sound crazy and you’re probably thinking, “Oh, it’s a brand new house, it can’t be in need of an inspection.” Well, builders will accidentally leave things undone. This is super common; no faults of the builder. In the home inspections on new homes or custom builds what we typically find is like “Oh well, this plug was wired incorrectly so we need to fix that.” or “This junction box was left open, or this dishwasher is not hooked up right”. This can be a great tool to have at your disposal right before you close on a brand new home, even if it’s a spec home or if it’s a custom build because you can use what was found in the inspection report to create a punch list. A punch list is a list of the things that the builder needs to fix before you close on your custom build or right after you close, because the house should be pretty close to perfect since you built it from the ground up.
Once your custom build is done, you have your home inspection, a final appraisal (which will show you how well you did on your budget), you have your occupancy permit if you need one, then you’re going to finalize or do your third close on your custom build, or your second close, depending on how you did this whole process. In Oklahoma, once that happens, the deed will be transferred over into your name and you’ll start paying your mortgage payments.
Guys this was a ton of information! If you have questions, my contact information is down below. Don’t forget about the download that I have for you, so it’s about loan officers, architects, designers, and questions to ask builders before you hire them. Of course, I’d be happy to help you through the process of doing a custom build – so give me a call by scheduling below.
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