Building a Home Vs. Buying a Home

[mccartygirl]

What about the pre-built houses? The ones built in a factory and put together on the property? I know some people have a bad stigma about them but they're supposedly very well built and you can get a good deal. I know someone who's parents built one like that in Northern Michigan - you can't tell the difference. It all looks really nice and they're asking $750,000 for the "cabin".

[Snoopy2645]

We have looked into those prefab homes not sure if I would ever buy one but we thought it would be cheaper than building a brand new one & around here just the house no land or nothing these go for well over 100k & most houses around here with land & all dont go for that much so to us they are seeming kinda high!!!

[Diolla]

As far as loans, here you have to get a 'land loan' then a 'construction loan' then when everything is finished you get the whopper mortgage that rolls it all together. Unless you have experience building houses our bank will not give you a 'construction loan' you have to have a builder, plans and an estimate. They do not want to take a chance on loaning you the money to build and then it turns into a worthless pile. Sometimes they pay the contactor for you (to avoid contractor liens). Once it is finished an appraiser will come out and you will get a conventional mortgage on it.

[Ima saver]

I certainly would not buy a prefab house. They are not much better than a mobile home! They do not go up in value!

[Snoopy2645]

Well we just looked into them cause we thought it would be cheaper than building but I believe these are coming out of the same factories as mobile homes so guess thier is no difference!!! Except for around here they are going for alot of money when trailers arent go figure LOL!!! We have just been looking into buying land & building in the country or something & we thought this would be easier but we wont one reason is the price on these prefab homes like you said why when they are just a trailer KWIM

[bjl584]

That's a hard question to answer without knowing some info about the housing market and land costs in your area. It also depends on your personal financial situation. Also, what kind of house are you planning on building if you go that route? For most people, their first home is bought not built just because of finances. Probably cheaper to buy an existing home than to build one. Building a home is probably one of the largest undertakings that someone can do.

[dwalk29]

Well, there are alot of variables, but I will not keep you guessing. I did both (Purchased a Home and brought land with the goal of building a house on it). I will tell you that if do not puchase prefab home, you have done yourself a great favor. Unlike alot of people, I like to consider the bottom line....the $$$$$$$!!!! For example, if you purchased a home during the housing boom and before the real estate bubble bursting phase chances are that your home is worth nothing or almost nothing if you have taken an equity line of credit out against it. But, if you have purchased "Raw Land" and paid for it in cash, chances are that the "Raw Land" is worth more than most builder developed homes in today's market....again, this scenario is based upon a land puchase with cash and you owning that parcl (land) without any liens.

....to further demonstrate my example, I have provided an scenario based illustration below...

Scenario #1:

Purchased House
Price: $270,000.00
Line of Equity: $235,000.00
Total Owed: $505,000.00
House (Current) Value: $303,000.00
Asset Value: -$202,000.00

Scenario #2:

Built House
Land Purchase: $100,000.00
Development Work: $50,000.00
Total Owed: -$0-
Land Current Value: $331,000.00
Cost of House Construction: $400,000.00
Asset Value: $1,350,000.00 (In Today's Market)





Now you can look at the above scenario in two ways.

(1) I should have never taken out an Equity Loan against the property (The house value would be
only $33,000.00 In today's market; which isn't a whole lot of money)

-OR-

(2) DO NOT BUY A HOUSE THAT IS ALREADY BUILT!!!! Buy the land, Develop it (Construct a House to
live in)....Your Right!!!! You get more bang for your buck ($$$$). I will illustrate this...

Purchased House Square Footage
5,500 sq ft

VS

Built (or Custom) House Square Footage

11,000 sq ft

The numbers above are not inflated or numbers I just pulled out of my azz....those are REAL NUMBERS!!!!

My advice? Take your time....save your money....build your house in phases....AND DO NOT EVEN INVOLVE A BANK!!!! DO NOT BORROW THE MONEY!!!!!! DO NOT APPLY FOR A CONSTRUCTION LOAN OR MORTGAGE!!!!!

WHAT IS THE ADVANTAGE!!!

You will not be part of what is know as the "RAT RACE"!!! Work, go home! Work, go home! All of the investors are getting rich off of your money that you pay them in a mortgage note every month..while you have a mortgage for 30 years....that is 360 payments...so if you are a regular joe, you will be joining the rest of us "Dumb Azzez"!! You will have a better chance at hitting the lottery without even playing it. I have also included myself in that group....but now I know better. We are all "Enslaved" with a mortgage of any kind. Don't be a Fool.

I hope I have shed some light on this particular issue for you and hopefully you won't make the same mistake that I have made by purchasing a house from a builder or a seller.

[dwalk29]

I also forgot to include the process (I will try to be brief):

(1) Find a 1-2 acre lot for sale (parcel, land, wooded lot, etc.)...5 acre lots are best
(2) Survey/Appraised the land to determine the market value (You may be able to save big in this
area)
(3) Purchase it (with cash if possible) or (Get a lot loan - these are tricky I can explain in
detail if you would like....let me know
(4) Hire an Residential Architect to assist you in designing your home
(5) Find an reputable residential home builder (General Contract or you can be the General
Contractor and the subs working for you)-----even more savings if you do this.
(6) Hire a Land Engineer to help you put a "Building Permit Package" together. The package
should include the following items:

(1) Full Set of Architectual House Plans

(2) Site Plan

(3) Sewage Waste and Management Concept Plan

(4) SWM Technical Plan & Maintenance Agreement

(5) Sediment Control Plan

(6) Tree Conservation Plan

(7) Right of Way Dedication Plat

....there may be some additional documentation not included with this list. Please check with your county to determine what will be required.

All of this has cost me about $15,000.00

The work above represents work that is required for a "Builders Permit"....You can't even put a shovel into the land you have purchased until everything above is completed.

Once completed....

You have permission to build your house. Alot of money up front...but it is worth it...

I have a $1.3 dollar house that is paid off....A regular joe!!!!

ICF built, solar energy powered, Geothermal HVAC, steel I-Beams and Trusts...the works

the best part about it is that I OWE NOTHING ON MY HOUSE!!!!! 10 Bedrooms; 8 Bathrooms; 4 Car Garage; Green House effects Great Room...etc. The list goes on...

[dwalk29]

....more....In comparison to "Prefab" or "Pre-existing" homes....your home's value is subjected to the "Comparables" or "Comps" of the same type of home you have. So if you have done alot of upgrades in your home expecting to increase your value....GOOD LUCK!!! it will never happen...

However.....

A custom home is not held to that "LOW" typically "Cookie Cutter" mediocre home that you see with builder grade home communities in which during construction, you are on someone else's time frame and schedule. It appears you like to be in control; well you lose that when someone else builds the house for you.

A custome built home is whatever you want......prefab house cost only $75,000.00 for the materials and probably less than that for the labor. A custom home does not have to be built on a grand scale...that is a "Misconception". It can be built to spec. and can look like a cookie cutter or prefab home. The choice is always yours....

You will be happier with purchasing a lot and building a house on the land..I know I am..

[Redraidernurse]

Wow, how many people are living in this 10 bedroom home?

[samson smith]

Originally Posted by Ima saver

The references are a very good idea. We have reference letters from every house we build, complete with addresses and phone numbers. We encourage people to call as many as they want. We have stayed friends with all we have built for, some we have built for more than once. We are going out to dinner with one couple tomorrow night and to a halloween party with another couple. We have a two year waiting list, that is as long as we will take. DH prefers spec houses so he can build them the way he wants. He builds every house as tho he is going to live in it himself.

Yes, I agree with you, references always play an important role!!