What to Expect When Building a House From the Ground Up

A custom-built house with everything your client could want sounds much more exciting and adventurous than going through the typical home buying process. But in reality, the process of building a home from the ground up can be daunting, expensive, and time-consuming. Here is a guide to help buyers manage expectations and understand what is to come.

A realistic timeline

Your client decides to build their own home and, understandably, they want to get the process started as soon as possible. It is important to have realistic expectations on the timeline. On average, a single-family home in Massachusetts could take nine to ten months to build. Then factor in locating and buying land (including financing the purchase and construction), determining permits and zoning regulations, hiring contractors, engineers and architects and obtaining legal representation – they may be looking at an even longer period of time before they can move in.

There are also additional factors that can affect the timeline. One of the major bottlenecks is supply chain delays in materials. Since the builder cannot control supply issues, they tend to factor potential delivery delays into their schedule or only use in-stock materials. Your client may have to forego that marble tile from Italy to stay on schedule, but only they can decide if it’s worth holding up the project for specialty materials.

Incorrect or missing information in the permit application and other paperwork necessary can also cause delays and prevent the project starting on time. It behooves buyers to review all paperwork carefully to ensure there are no errors that could cause unexpected delays.

Establishing the budget

The first step in the home building process is to set a budget and determine how much your client can afford and wants to spend. Although this may seem obvious, many first-time homebuilders underestimate the importance of this step – or overlook it entirely. A lack of good budgeting can easily lead to cost overages and delays. When considering a budget, your client needs to also determine the type of loan they will need, which most often is a construction loan. The best course of action is to seek expert advice from their banker, accountant, and/or financial advisor on the type of loan to apply for, what amount they qualify for, and the application process.

Generally, when your client is assessing their financial situation, it is important to consider the following factors:

  • Cost of land. The amount generally spent on purchasing the land that the new home will be built on can be estimated at approximately 20-25% of the overall cost of the project.
  • Hidden expenses. Don’t overlook hidden expenses. These include extra site work needed for the land, the purchase of new furniture and fixtures, appliances, landscaping, and more. Comprehending financial limits allows your client to modify building plans to meet their needs.
  • Market prices. Look into market prices for materials, labor, land in the desired location. The cost to build can vary significantly by state and region.
  • Ask for advice. The builder or general contractor can advise your client on details in their budget as they relate to local market prices, as well as any state and local regulations they should be aware of that may have extra fees associated with them.

Finding and buying land

Choosing a plot of land is one of the most critical aspects of home building. You can always design a home to suit a landscape, but you may not be able to alter a landscape to accommodate a home. The configuration of rooms, the placement of windows, the location of the driveway and garage, and many other design elements will be affected by the land your client purchases. The cost of a plot of land should also be considered. Land prices in Massachusetts are some of the highest in the country, averaging roughly $102,214 per acre. However, the average cost of land for residential use in the Boston metropolitan area is significantly higher.

Paperwork, permits, and zoning

Building permits are required for all new construction and renovations in Massachusetts. Permits ensure that the house is built according to local building codes and rules and regulations to protect your client’s safety. There are penalties and potential fines for homeowners and contractors who begin projects without approved building permits. Additionally, if your client decides to sell their home in the future, it will be difficult to sell if the proper permits were never obtained.

If your client is using a general contractor to build the house, the contractor is typically responsible for obtaining and managing all the necessary building permits and inspections. Most permits can be obtained either in person or online with local municipalities. For new buildings, most cities/towns in Massachusetts require a long-form building permit application. To obtain the building permit, homeowners or general contractors need to complete the form and submit with the construction drawings to the local municipality. The cost of the building permit varies by municipality, so your client will need to check with the contractor or do their own research and factor this cost into their budget. They should also keep an eye out for additional permits that may be required along with the long-form building permit such as fire/smoke, plumbing, electrical, and so on.

Site prep, labor, and construction

This is where the fun part begins! Now that your client has found the perfect plot of land, and the financial paperwork and initial building permits are addressed, it’s now time to focus on the construction of their home.

If the land has many trees or uneven terrain, it can be costly to clear and prepare the property in order for construction to begin. Taking the time to consider the site and determine whether any alterations need to be made before developing construction plans are critical to both your client’s building plans and their budget. It is beneficial to hire a land surveyor or engineer before even purchasing the land to determine the viability of the land and to ensure success.

In Massachusetts, homebuilders are not required to have a license to build. Technically, anyone can build a house – although it is risky to do so alone. Much time, research, and dedication are required to manage the many aspects of homebuilding and ensure the house passes all safety and other inspections at the end of its construction. Not using a licensed builder may save on labor costs, but it will most likely cost your client in the long run. Homebuilding is not something people can learn as they go. A safer approach is to hire a licensed contractor to oversee the homebuilding process. A general contractor typically charges anywhere from 15% to 25% of the total project cost.

One of the biggest draws to buying land and building a house is the ability for buyers to make it into their dream home. Although building a home can be a lengthy and stressful process, an A-team consisting of real estate agents, a financial advisor, architect, general contractor and real estate attorney can ensure your client is set up for success.

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