How to Buy a Home that Doesn’t Exist

     With spring inventory down to only 445 single family homes for sale in Anchorage and only 28 new building permits issued for the first two months of 2012, it’s an understatement to say that local home buyers are frustrated.  This is particularly true since much of the resale inventory is now reaching the 25 year age of functional and cosmetic obsolescence and requires major remodeling either by the seller prior to putting the home on the market or a major make-over by the buyer after the sale which results in cash out of pocket.

     One alternative for the homebuyer is to buy a home that doesn’t exist or in other words off a set of plans or even a schematic with a wall pushed out here and there. However, it’s a time-consuming effort, fraught with potential missteps. Presales, as they are called in the industry, are occurring in all price points from the $250,000 attached zero lot line to the custom $1 million home.  But, regardless of the price point, the first decision is the lot selection. There are uphill, downhill and flat lots and combining the topography of the lot with the house plan to make an attractive front facade is the first step.  An uphill lot generally requires more excavation and thus more costs, but may provide outstanding views.  Downhill lots can accommodate basements, either walk-out or daylight, and are an economical way to gain square footage.  Flat lots are very appealing for two-story homes. Before buying a lot, a home buyer should consult with a builder, engineer or architect.

     Select a builder who  is already in the subdivision or building close by. A Valley builder will not know the MOA building code requirements.  Likewise, an Anchorage builder who’s never built in the Valley won’t have ready access to Valley subcontractors and will have to charge you more for supervision and overhead.  Don’t be afraid to ask for references from other buyers and the builder’s lender.

     Try to find a plan that the builder has built before.  If you start from scratch, there will be an additional charge anywhere from $1.50 to $3.00 per square foot, including the garage, for design fees unless a builder has his own CAD system.  If the builder has never built the plan before, he can’t be 100% certain what his costs will be and therefore he’s most likely going to add a few percentage points to his price.  It’s better to take an existing plan and modify it to your specific needs, i.e. enlarging the master bath, adding an island in the kitchen, pushing the family room out a couple of feet.  These changes are relatively minor to the builder and because he’s built the plan before, he knows what to charge for these changes. Most builders will give you a fixed price if they’ve worked with the plan before.

     The builder should also provide you with a spec sheet.  That sheet should include a description and an allowance for all the items that are going into the home, including lighting, plumbing, carpeting, appliance, tile, vinyl, cabinet, countertop, mirrors, et cetera.  Buyers have a hard time saying no to themselves when it comes to making selections.  Most likely, they’ve saved and dreamed about a brand new home for years so it is important from the very beginning for the builder to define the allowance for all buyer selections. Upgrades beyond the builder’s allowances are usually non-refundable and are paid directly to the supplier. In some cases, they may add enough value to be included in a appraisal. But, remember, never commit to a builder without a spec sheet.

     If you select a builder who is building nearby, has built that or a similar plan before and have a detailed spec sheet, you’re three quarters there into having a creative and exciting new home experience, but there will always be a glitch or two.  When the home is framed, you may realize that you’ve missed an opportunity for a mountain view and so want to add an extra window.  Change orders should always be written down and priced out so that there are no surprises.  Don’t negotiate so hard with the builder that he will nickel and dime you for every little change order.  It’s a give and take and if you’re agreeable throughout the process, you’re most likely to get that extra window at a very reasonable price.

     Because of our weather conditions, many homes that are finished in the fall or winter receive a conditional certificate of occupancy.  This requires the builder to return in the summer to complete certain items such as a driveway, final grade, painting, and sometimes even landscaping if that has been included in the purchase price.  The estimated cost for these items is escrowed by the title or mortgage company and should never be released until the items have been completed and signed off by the builder and the homeowner.

     Due to local lending constraints for speculative new homes, many buyers in today’s market are not going to have much choice but to go through the above described process. The more details you can finalize upfront with the builder, the more likely you’ll be satisfied when you walk through the front door of your new home.