Save Money on Your Next Custom Home

 Building a custom home is an exciting undertaking. However, if you ask owners who hired a custom home builder to deliver a fixed price home, over 65% will tell you that they encountered some large and expensive surprises. How can you avoid these surprises? Follow these 5 tips to save yourself thousands of dollars on your next custom home.

1. Bring an Expert. You should be inspecting the work yourself or have arranged for someone to do this on your behalf. Unless you are a contractor yourself, bring a friend who understands construction methods at least once a week to your project. Make a list of what they find. Even the most conscientious builders and their contractors are going to miss things. Who ends up paying for mistakes? You do, unless you catch it close to the time it happens and notify your builder. If you forgo these inspections because you are busy, or do not want to pay someone to do this, you are likely to pay another 15% for the home, or live with mistakes that could not be corrected.


2. Make a list of the items in your builder's contract that say "variable" or "depends on." These are items that are not fixed in a Fixed Cost Contract. These are the surprise areas. Any builder who has started a custom home knows that not everything can be predicted - from weather conditions holding up the schedule and/or damaging work already done, to unintentional errors caused by sub-contractors. Areas that cause over-runs include excavation, footings, and plan errors. Ask your builder to help you calculate what these things could cost worst case and be ready. If things go well, you will be happy.


3. Double-check the materials list. Are you completely sure you picked out all of your fixtures and appliances? Lighting? Where wall switches go? Review these in detail. If you have gotten so close to the plans and lists that you're not objective, ask someone else to look at it. When you move in to the house and realize that the bathroom fixtures are not the ones you chose, it will not be the builder's responsibility. How do you think I found that out?


4. Keep a list of action Items for the builder. Your builder will appreciate the attention you are paying on your home; it makes his/her job much easier to have an informed owner. Most top grade successful builders have a dozen or more homes underway at any given time and a limited number of superintendents. They may not get to the project every day, but you will. Keep a list and email routine items to the superintendent for action once a week.


5. Builders will warranty your home for a year. Many owners simply move in and forget about the warranty unless something obvious goes wrong. This is a mistake. You should keep a detailed list of issues you find - and you will find them - and once a month email them to the builder. This helps the builder by allowing them to schedule your items. Items can include loose toilet tanks, grout cracking, nail pops in drywall, vinyl floors lifting, windows that are stuck, places they forgot to caulk, adjusting the heating and cooling vents for balance, etc.

When you take the time to actively manage your custom home project along with the builder, you will save yourself from the typical financial shocks and end up saving yourself a considerable amount of money. You'll also end up with a higher quality home.

Lisa Turner is an engineer and building contractor residing in Hayesville, North Carolina. Prior to her engineering position, Lisa inspected homes for home buyers, sellers, owners, and mortgage companies.

Real Estate Buying Tips First Time Buyers Don't Usually Hear

 If you're beginning to think about buying real estate for the first time, you've probably realized that there's a lot you don't know about the loan process, home values, down payments, and mortgage insurance. Here are four little-known tips for first time homebuyers that may make the process easier and less stressful.

1. Make sure you have enough money to cover closing costs. The closing is the actual purchase of the real estate, the day that it becomes yours. The money you'll need to have in order to cover closing costs is more than just the down payment. It also includes title insurance, attorney's fees, recording fees, the pro-rated taxes for the year, and everything that goes into escrow if you decided to use it, including around 15 months of your homeowner's insurance, around seven months of your taxes, and your mortgage insurance premium if you put down less than 20%.

2. Pre-qualify for a loan before you start looking at houses. Sitting down and talking with a mortgage broker before you step foot in any real estate on the market will give you a realistic idea of how much house you can afford. Remember, you're paying homeowner's insurance, taxes, and sometimes other costs on top of your principle and interest every month. The broker will be able to give you an idea as to how much your interest rate will be and can show you different purchasing scenarios.

3. Putting more money down than is required by your loan is never a bad idea. If you're looking to put less than 20% down, you'll have to pay mortgage insurance every month, which is calculated by taking a percentage on what you still owe on the loan. This is money that you pay that you won't get back in investment value. In fact, you can't remove this cost until you owe less than 80% of the selling price of the house. The more you can put towards this number, the more money you'll save in the long run.

4. Real estate investments aren't recession proof. As many people learned during the recent housing bust, home prices aren't guaranteed to go up. In fact, it's possible that they can fall so much that buyers can wind up owing more than their "investments" are worth. Predicting future value is really difficult because it depends so much on human whims. However, if you're looking for the stability of owning your own piece of property, and you're emotionally and financially ready, it's the right time to buy for you.

Purchasing real estate is part of the American dream, and it's a goal held by many people. We've all heard advice about buying when the market is low, looking in neighborhoods with good schools, reading carefully through the inspection reports, and making sure you completely understand all the loan documents. However, these four tips are advice that many newcomers aren't given.