Choosing a Home Builder: Custom Builder vs. Production Builder

With so many types of home building companies out there, it’s a little tough to figure out who does what and who builds what. Here’s a quick run-down on how to tell the difference between custom and production home building companies.

Custom home builders generally:
Build on land you own. Some custom builders also build on land they own. Build one-of-a-kind houses. A custom home is a site-specific home built from a unique set of plans for a specific client. Some custom builders may offer design/build services. Build single-family homes. Are generally small-volume builders (those that build 25 or fewer homes a year). Tend to build high-end homes.

Production home builders generally:
Build on land they own. Tend to use stock plans, but usually offer a variety of plan choices and options. Build all types of housing — single-family, condos, town houses, and rental properties. Are large-volume builders (those that build more than 25 homes a year). Generally build in many price points — entry level, move up, etc. Source: NAHB

Elite Homes

How long does it take to build?
It depends on the complexity of the build.  A production home typically can be built in 4-6 months.  A semi-custom home generally can be completed in 6-7 months.  However, a custom build that involves designing a plan with an architect, installing custom finishes or intricate trim detail could be completed in about 12-15 months.

Choose your location first!

Find the right homesite to build your special home. If you live in the area where you want to build, check www.CopperWest.net for new home communities and then drive to those communities to see the lots first hand.  If you live outside the area or state, we can share with you 50+ years of knowledge of several areas across the Front Range.  We are natives of Colorado, specifically Weld  and Boulder County - Longmont, Mead, Frederick, Firestone, Louisville, Lafayette, Broomfield.  And, we live and work in the Lafayette, Broomfield/Westminster area.  Call us.  Share with us what you are looking for and we will help you find the right location whether we market the community or another Realtor does.

Choose your builder next!

Don’t get stuck on a specific floorplan.   Almost any builder can build exactly what you want, however each one has a different personality and work style.  Select one that understands your ideas and allows you to share what you want with them.  Expect a seasoned builder to advise you about the positive and negative aspects of including a certain feature in your home.  Don’t get caught up in the numbers initially, but advise your builder of a true budget.  Every builder we work with will respect your budget and letyou know what can be done for that price without short changing the build.  You will be working with this builder for several months.  Make sure you choose someone you feel comfortable working with. As you will see below, we work with a myriad of builders that can build the perfect home for you.  Each one has their own specialty.  Contact us to find the right one for you.

Costs...
Please do not get caught up in cost per square foot!  Comparing builders by cost per square foot is like comparing an apple to an orange.  Focus on working with your builder to build the ideal home for you at the price you choose to afford.  In general, the costs involved in building a home include:

• Land
• Architectural fees (these vary depending on whether the plan is a portfolio plan or designed from scratch)
• Soils report and Engineering Fees  (these vary by location and soils conditions)
• Survey Fees
• Building Permit Fees
• Water and Sewer Tap Fees
• Hard costs (actual material and labor to build the home)
• Builder’s Supervision Fee and Profit
• Realtor Fees
• Loan and Closing Fees

*All of these fees are included in the price of the home when quoted by a builder unless the land has been purchased separately.
Keep in mind these same costs are passed through in the price when a home is resold.

Financing a Custom Home

Prices are beginning to rise in the North Metro Denver/Boulder County area.  We have seen increases in the last several months and most Realtors expect that to continue.  Building now and locking in a price will allow you to create additional equity in the home before it is finished.

Interest rates are at a record low.  Where will interest rates go?  My crystal ball is a little cloudy these days, but the mortgage professionals we work with tell us they expect them to remain relatively low through this year.  If you wait until next year, that may not be the case.  Lock in soon and enjoy the benefit of lower payments and more house.

Construction Financing 101

Options:
1.  Some builders can and will secure the construction loan for you.  There are benefits and disadvantages to choosing this route.
How does is work: Buyer and Builder sign a Builder’s Construction Contract that provides the details of the build process and the cost to build the home.  Most builder’s lenders will require 20% to 25% deposit to start the build.  That deposit will be non-refundable.  You may also be asked by the builder’s lender to sign a personal guarantee on the loan as well.  At completion of the home, a closing is held where title to the property is transferred and buyer pays the outstanding balance in cash or through a permanent loan.


2.  Buyer secures the construction loan and locks in permanent financing.
How does it work: Buyer contracts to purchase the lot from developer or builder.  Then Buyer and Builder sign a Builder’s Construction Contract that provides the details of the build process and the cost to build the home.  Regardless of whether Buyer chooses a one-time close or a two-step construction to permanent loan, the lot can be purchased under the construction loan.  Typically, interest is paid monthly by Buyer on the outstanding amount of the loan and may be tax-deductible. (please consult your tax consultant for further information.)
One time close loans allows for permanent financing to be determined up front.  Buyer qualifies for the permanent loan when qualifying for the construction loan.  In a two-step process, Buyer obtains a construction loan for the build, then obtains permanent financing when the home is completed. There are different fees associated with each loan and variables that need to be considered.

Talk to a seasoned mortgage professional that understands construction loans. Whether you choose a one-time close construction loan to permanent mortgage product or a two-step construction to permanent loan, the process is much simpler when working with a lender that understands building homes.

Cheryl Miller
Compass Bank
(720) 881-1015
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www.bbvacompass.com

Colorado Construction Loans
(303) 651-1615
T. Fanning (303) 931-3239
Bill Fanning (303) 587-4641

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www.coloradoconstructionloans.biz

- Past and Present Builder Partners - We only work with the BEST local builders in Colorado.