The Guide for Buying Land, Building a House or Buying New Construction
Here are your options for starting from scratch, finding a builder and customizing your home.
Building your dream home requires plenty of research, diligence and patience.(Getty Images)
Sometimes, buying an existing home just won’t work. You may be a homebuyer who’s tired of competing for highly desired homes in the neighborhood you want, or maybe you just don't like the idea of living in an older house.
Either way, you have options if you'd prefer to live in a brand-new house.
Whether you’re planning to buy a teardown and build a home on the perfect plot of land or buy into a new housing development, prepare for a process that differs from purchasing an existing property.
Read:How to Vet a Neighborhood Before Moving. ]
Here’s your guide to getting from flat land to the home of your dreams, and what it’ll cost you to get there.
Buying Land to Build a House
If you’re starting from scratch, the first thing you need to do is buy land, which can be a simple process – or prove fraught with problems if you fail to do your due diligence. Be sure to follow these steps before you close on a plot of land.
Find the Land You Want to Purchase
Just like a search for an existing home, you can start your search for vacant land online. While you may occasionally see land listings on sites like Zillow or realtor.com, there are also websites dedicated to buying and selling land, including LandCentral, LandHub.com and LandWatch.
You can also inquire with state lank bank authorities, which commonly have thousands of plots of state-owned land for sale. The land may have previously been used for public purposes, been foreclosed on after private ownership or be completely undeveloped.
Check the Zoning and Condition of the Property
It’s fairly common for people to buy a plot of land because it looks nice or has good views, but they fail to check on the time and costs associated with changing the zoning. They may also neglect to test for soil contaminants or check local specifications for building to protect against hazards like floods, fires or earthquakes.
Steve Pallrand, owner of design-build and renovation company Home Front Build in Los Angeles, says it becomes a vicious cycle for some plots of land: “Someone buys it because it’s really cute, they can’t build on it and put it back on the market. Some other sucker buys it, and it happens again and again and again.”
Check the zoning, grade and soil quality, as well as other details specific to the area that may keep a house from being constructed on the land. Even if there’s an existing home on the property, it’s still important to check, as zoning or soil quality could have changed since that structure was built. A real estate agent familiar with buying land can help you with the due diligence process.
See If Utilities Are Hooked Up
Undeveloped, vacant land or a dated house may need additional work to enable it to reach utilities, including electric, gas and plumbing. If utilities are not available or old plumbing needs updating, factor the additional work into your budget.
This can be pricey: A sewer hookup, for example, may even require construction on the street in front of the property, which requires additional permits and more money. Pallrand notes that if a septic system is required, you'll need to factor in additional soil testing before you can get started, which can add hundreds or even thousands of dollars to your total. "And that's not even (including) the cost of the septic tank," he says.
Demolish Any Existing Structures
If there’s a house or other structure on the property that must be demolished, you have a couple of options: A mechanical demolition with excavators and heavy machinery will take a house down the fastest but cost more, while a smaller-scale demolition by hand will be cheaper but require more time.
Before you demolish anything, it’s best to select a team of professionals to build your house. In many cases, a design-build firm may want to retain a portion of the structure and can help oversee the demolition.
You may need to hire a separate contractor who specializes in demolition as well. A contractor can manage details such as ensuring utilities are shut off for demolition, securing the necessary permits and notifying the local fire department.
How Much Does It Cost to Buy Land to Build a House?
The cost of land varies widely based on the size of the plot, where you live and if there’s already a house there. When a house exists on the property, keep in mind that you typically won’t be able to pay the land value only. The existing structure, regardless of its condition, is considered an improvement on the land and will be factored into the overall value. That said, a seller desperate to close on a deal will likely consider lower offers if the property is a teardown.
At the end of the day, demolition of any kind is a big project that can come with a hefty price tag. The average house demolition costs $18,000, according to HomeAdvisor, but it depends on the size and location of the property as well as the experience level of the contractor.
How Long Will It Take From Start to Finish?
From start to finish, you could buy land and have a home built on it in about six months if there are no delays and ideal weather. On the opposite end of the spectrum, it could be years before you’re even ready to break ground.
Similar to buying an existing house, your land purchase could take just a few days if you’re paying cash, or it could take closer to 30 or 40 days if you need to secure financing for the land. A separate construction loan to cover the total cost to build your home will require the plans and detailed information about the property as well, so have that paperwork ready when you apply for financing.
If a major change is required before construction can start on the property, like a zoning change or making utilities available, the timeline is more dependent on the municipality or county. In some cases, it can take years to get a zoning change approved by the necessary planning board.
Once you’re ready to break ground on your new house, it will likely take at least take a few months, depending on where you live, who your builder is and the availability of both labor and materials in the area. The U.S. Census Bureau reports the average single-unit building took 7.7 months to complete in 2019, with properties built for sale taking 6.6 months, contractor-built properties taking 11 months and owner-built properties taking 15.9 months.
READ:How to Decide Where to Live. ]
Building a Custom-Design House
With your vacant plot of land, you’re free to build your own house. That is, as long as you’ve received the proper approvals from your local municipality, including permits to build, approval of the size and placement of the structure and confirmation that the home plans meet local zoning and code ordinances.
Here are the steps to build a custom house:
Hire Your Team of Professionals
You'll want to assemble your team even before you’ve purchased the land to ensure the house you want is within your overall budget and is a fit for the property you’ve purchased.
Your team will likely include an architect to design the house, a builder and subcontractors to complete each step of the building process.
Rather than seek out each of these pros individually, you could hire a design-build firm, which employs architects and construction specialists like electricians and carpenters, reducing the need to hire more people and helping keep the process efficient and your budget on track.
As with hiring any professional, you'll want to research a few companies before moving forward with one. Ask friends or neighbors who have had positive experiences for referrals, and research companies that operate locally and showcase examples of their work online that might be to your taste. You can even approach multiple firms to bid on your project.
Pallrand warns that you might not see a realistic total cost in some bids. “One of the three people who’s bidding either doesn’t know what they’re doing or is disingenuous,” he says.
A significantly lower bid may be enticing, but it can indicate inexperience with your type of project. You're also more likely to get change orders during the process, which are additions or deletions from the original project plan that increase the total cost. With any firm you choose, make sure your budget is a part of the discussion as you make design and material decisions with your team.
Design Your Home
Now comes the fun part. Selecting an overall style and preferences for rooms and materials is certainly consuming, but keep in mind that the design often has limits to ensure that your home’s basic systems, like electrical and the HVAC, can run properly.
As the design of the house develops, you’ll find that much of the budget you thought would fund a state-of-the-art kitchen or home theater actually goes toward things like lumber, ductwork and plumbing. "When you're building new (as opposed to renovating), you're dealing with the systems that are supporting the house and are hidden, and that's where all the costs go," Pallrand says.
You may choose to design your own house, but keep in mind that the structural and code requirements in a blueprint must be approved for construction. According to HomeAdvisor, the cost to hire an architect ranges from $2,016 to $8,576. It might be a good idea to at least consult an architect about your plans to ensure the structure will be sound. Your local planning board may even require a licensed architect or contractor to sign off on the plans before you move forward.
Get Municipal Approval
Many cities or counties require permit approval before any new construction starts. Be sure all of your plans follow local code and zoning requirements to get approval.
Then, once construction actually begins, you’ll likely need inspectors to sign off on different steps to ensure, for example, the foundation was laid properly and the electricity was installed correctly.
The municipal approval and subsequent inspections are often cited as things that can draw out the timeline of a new construction project. To get ready to break ground, "permits can take weeks or months," explains Ben Caballero, founder and CEO of new home marketing company HomesUSA.com. During construction, municipal inspections to approve certain stages of work can take just a few days, but work may be halted while you wait for the inspection.
Keep Your Timeline Flexible
Permit hiccups in the timeline or any number of weather events, accidents or labor shortages can draw out the time it takes to complete your home. As a result, don’t go into a home construction project with an expectation that it’ll be done on time.
“If you start a home from scratch from the bare lot, the builder can maybe give you a target month,” Caballero says. Later in the process, estimates of the completion date get more precise.
How Much Does It Cost to Build a Custom House?
According to HomeAdvisor, custom home construction typically costs between $350,000 and $1.5 million. Of course, that wide range is due to the fact that the cost of labor, materials and permitting vary widely not just from state to state, but even from a more urban setting to a suburban or rural area and based on the size of the property. For custom builds, you can expect to pay $50 to $400 per square foot, according to HomeAdvisor.
Unlike with an existing home purchase, you'll likely pay throughout the process with a custom build, because you first pay for the property, then you may pay for project costs in installments. Also be sure to budget appropriately for a scenario in which you receive change orders that alter the bottom line as the house is being built.
Buying a New-Construction House
A much simpler way to buy a new home without the hassle of a custom design-build job is to seek a builder who has created a development in your area and purchase a home built to your specifications.
Here’s how you can buy a newly built home from a builder:
Start Your Search Earlier Than With an Existing Home Purchase
By purchasing a home from a builder or developer, you won't be responsible for the fine details that purchasing land and building a custom-designed house entail.
But don’t expect the process to move as quickly as it would with an existing home purchase. Plan for construction to take between six months and a year or more to see a complete house from the time your offer is accepted.
If you spot images for a new condo community coming to your neighborhood, expect even more time to pass before you can move in. David Sigman, executive vice president and principal of LCOR, a real estate investment, development and management company, notes that a community in Cambridge, Massachusetts, that LCOR started work on in 2020 won’t be complete until 2022.
Find Developers and Builders in Your Area
You can research national builders, regional builders and local builders, which all offer different floor plans, home types and community perks that will factor into your purchase decision.
Check out master-planned communities or neighborhoods where builders appear to have lots for sale, or look online for builders with homes available for purchase. Real estate agents familiar with new construction homes can also be a great resource.
Check Out Customizing Options
By purchasing a home to be built in a planned community, you'll typically have a few floor plan options and the ability to customize add-ons, paint colors and surface and fixture materials to fit your preferences.
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Make Sure Your Lender and Title Company Are Flexible
Typically, buying a home from a builder or developer means you won’t close on it until construction is complete. Sigman says that for a condo conversion project in New York City, many buyers locked in their purchase six months or more before they’ll be able to close. When you’re buying a new construction single-family house, the builder may not start construction until you’ve gone under contract.
Lenders and title companies that don’t frequently work with new construction homes may be less inclined to approve a mortgage for a purchase when a completion date can’t be determined right away. For a smoother process, Caballero says a national or regional builder may have preferred lenders and recommended title companies.
Keep a Flexible Timeline
Similar to the custom house, the timeline for new construction can hit a few snags. Caballero says closing may be pushed back by a few days, but once the community has been established by the builder, construction should be completed within the estimated month.
“The closer it gets to completion, the more definite the builder can be,” Caballero says.
How Much Does It Cost to Purchase a New House?
With a new house from a developer or builder, you may be able to save on overall construction costs, but these houses are typically priced on the higher end. HomeAdvisor reports that a house purchased from a developer or builder can range between $100,000 and more than $1.5 million.
Customization and a desire for luxury, however, can lead to much higher prices. Toll Brothers, a home builder known for its luxury designs, offers home options in the $300,000 range in parts of the Midwest and Pennsylvania, but it also offers houses starting at more than $3 million in some of its California communities.