Build New or Buy A Resale?

 

Get everything you always wanted in your dream home.  The right location, the right floorplan and all the right upgrades...or settle for a resale home that almost has all you want. 

The decision gets more difficult as the spread between the cost of a new home and the cost of a resale begins to widen.  Resales can be very inexpensive due to foreclosures.  But they are also much riskier due to possible abuse by the former owner and especially the potential of a hidden mold problem due to having the electric turned off for a prolonged period.

Here is a condensation of an article in the Orlando Sentinel that discusses the rise of new home prices.  This trend is already taking place in Palm Coast as our new home builders begin to fill their pipelines with orders.  As I shop for the right builder for prospective home buyers I see this happening first hand.   

 "Rising costs could dampen new-home market TALLAHASSEE, Fla. – DEC. 17, 2012

 Just as Florida’s new-home market prepares to finish its strongest year since the housing slump, prices for drywall, cement and lumber are fast outpacing inflation.

At a time when inflation is running about 2 percent, lumber prices throughout the country are up 35 percent from a year ago, according to the National Association of Home Builders.

The cost of interior walls for new homes has increased more than 14 percent from November 2011, according to a report released Thursday by Associated General Contractors of America. And suppliers of that drywall, also known as gypsum board, have put builders on notice prices may spike an additional 30 percent in the coming year.

“We did get notice the gypsum board would be going up a substantial amount, and we are seeing pricing pressure from other suppliers and from labor,” said Ken McDonald, president of David Weekly Homes’ Orlando division. “It’s a balancing act. We will be raising prices to cover the increases. We’ve been doing that this year.”

The pressure on prices is mainly the result of two things: rising demand from homebuyers eager to take advantage of record-low mortgage-interest rates, and supply problems because of the shutdown of manufacturing plants in recent years. In terms of demand, for instance, David Weekley Homes started 80 houses last year but expects to end this year with double that number.

McDonald said the price increases also reflect a home-construction industry that is trying to rebuild its profit margins, which were decimated by the housing slump and Great Recession.

“Pricing all went to an all-time low, and now business is trying to get their margins back,” McDonald said.

“I think it will slow the housing recovery, because new-home buyers are very price-conscious,” Basu said Friday. “What builders might do is move their product to be more upscale; affluent buyers are more likely to spend 5 (percent) to 10 percent more to get what they want. … Value-oriented buyers are more likely to purchase an existing home.”

Greg Hardwick, president of Hardwick General Contracting Inc. in Maitland, said a lack of skilled labor is also going to affect the new-home market in 2013.

“The thing that may get us next year is the labor. There is a huge theme throughout the industry that not enough masons, drywallers and framers are available to meet demands,” Hardwick said.

“We’ve lost a lot of that labor and those resources. They’ve gone to different industries, and now the demand is going back up.”

Copyright © 2012 The Orlando Sentinel (Orlando, Fla.) Distributed by MCT Information Services.

 

THEIR TEAM...MY TEAM...Emphasis on Listing vs Emphasis on Buying

By holding an open house in Palm Coast Plantation every week I can really stay on top of what property buyers are looking for.  And, surprise, many of them don’t know.  At least, they don’t know yet.  They have not made some important decisions yet:  Build a new home or Buy a Resale?  Buy a Single Family Home or a Condo?  Live in a gated community or not?

 “Teams” are the new concept at large real estate agencies.  They are small groups of specialists.  The emphasis is on getting Listings.  A  group of  three or four agents within the agency work together and pool their commissions. 

A common way to organize an internal real estate team is like this: One member of the group is the Listing Specialist.  The Listing Specialist responds to listing leads, gives the listing presentation and closes the deal with the Seller.

Then there is a Buyer Specialist.  This member is responsible for qualifying and driving buyers around to look at properties.   Instead of spending time soliciting listings, the Selling Specialist stays on top of what properties are on the market and puts together the classic sales presentation… Show one awful house that makes your listing look good.  Show one house like your listing that is priced way higher than yours.  And then show them your listing and close the deal.  It’s called “three and out”.  You see it in action on the real estate shows on TV.  (Worst case is to get a prospective Buyer who loves to look at houses and will have you driving them around every weekend for the next six months.)  

The person the Listers and the Buyers will spend most of the time talking with is the team’s Administrative Assistant.   The Administrative Assistant usually has a real estate license and can deal with almost all the  “After It’s Listed” and “After its Sold” interactions with both the Listers and the Purchasers. 

This makes the team very efficient. The Listing specialist can be out getting more listings and the Selling specialist can be out showing the group’s listings  to well qualified Buyer prospects.  And the Administrative Assistant can be herding the cats and passing out catnip.

But what about me?  I am a Buyers Agent.  A New Construction Specialist.  A homesite finder.  I don’t do Listings.   My goal is to find a Buyer Prospect, qualify them as “Hot, Medium or Cold” and work intensely with the Hot ones to find them the right property.  I can either earn a commission, if I find them the property myself.   Or I can earn a referral fee if I refer them to another Real Estate agent.

THE BUYING PROCESS:   I do a “Needs Analysis”.  If it turns out that a buyer wants to build a new home, I start looking for a lot and select builders who fit their price range.  (I talked about finding the right lot and the problem of estimating the cost of fill dirt in a previous blog)

These are either “Level One” builders who know the cost of every nail they need to build the houses they offer.  Level One builders generally target the entry level and lower priced markets.  They are reluctant or refuse to do major changes to their house plans.  They often build and sell  ‘Spec” homes.  (They are now calling them “Move In Ready” homes).  They buy a lot, build a house and put it on the market for sale.  They are often identifiable by a professional, salaried sales staff who work for them exclusively and sit in a model home. 

Then there are what I call “Personalized” builders.  They start from a group of house plans they have already built.  They know the cost to build those houses.  Then they interact with the Buyer to make major personal modifications such as enlarging the Master Bedroom and bath.  Including a third garage.  Moving a wall.  Eliminating some high cost features to stay within your price range.  Adding some upgrades you want.  These “Personalized” houses cost a more per square foot-there is risk involved costing out your changes to their standard house plans.    

Then there are the “Custom Builders”.  They design your house from scratch and are generally at the high end of the price scale. They, too, like to start by showing you houses they have built and know some cost information about.  But the emphasis is on the drawing board phase.  They are builder/architects and target the Luxury New Home market.

MY SPECIALTY:  Navigating through finding the right homesite and selecting the right builder is what I have concentrated on in Palm Coast since 1996. 

But not every prospect I meet is sure they want to build a new home.  They might be able to find just what they want on the resale market for much less.  Or maybe they should really buy a condo…So much less to take care of.

MY TEAM:  I have a team, too.  But I have a different kind of team than I would have if I was a Listing Specialist. 

As a Buyer’s Agent, I specialize in identifying and meeting Buyer needs.  So Ted’s Team consists of me—a New Construction Specialist. 

And a Resale Specialist with an intimate knowledge of MLS listed homes and our resale market.  

And a Condominium Specialist who knows the details about every condo complex in Palm Coast. 

Together we help you decide what you want, identify the best candidates and help you to negotiate and purchase  your selection.

New Construction or Resale, or Condo…if you are planning to purchase a property we have the knowledge and expertise to help you purchase the right one.  Work with me to analyze and prioritize your needs and to develop and efficient and effective plan to scour the market for options.  Use me and my team and you will gain important knowledge and  insight that will help you make good decisions and to help you find,  negotiate and purchase the right property .

Talk To Ted !

A Slippery Slope...Estimating Fill Dirt Costs

One of the first things you have to do if you want to build a new house is pick out a lot.  One of the most important things about selecting a lot, other than its neighborhood and location, is how much it will cost to prepare it for building.  You will need to clear it and fill it with dirt so that it is high enough to meet the code requirements.  Clearing costs are not a big problem for your builder to estimate with reasonable accuracy.  Spreading and grading the fill dirt is not a big problem to estimate with reasonable accuracy, either.

But estimating how much fill dirt you will  need before you make your offer to purchase is a big problem.  Many builders offer a fill dirt allowance as part of their “site preparation costs”.  They generally provide “10 loads of fill dirt”.  And often that is not near enough.

Florida is low.  “Buying Swamp Land in Florida” use to be a well-recognized joke.  But Palm Coast is now “developed”.  Buyers are not buying swamp land for their home sites.  But it use to be.  They dug all those nice canals and made all those nice lakes here.  And they piled muck from those canals and lakes right alongside them.  This land became our building lots.  Palmettos and Pine trees grew up, but the muck is still there.  So on some lots you find out, after you clear them, that you have to get rid of some muck and replace it with fill dirt.  Sometimes lots of muck.  Or sometimes it’s just a low lot.

You really can’t tell how much fill dirt you will need until you pay for a survey and clear the lot.  And you generally won’t spend money to do that until after you have purchased the lot and are ready to build. 

At about $100 per load, your ten load allowance can get used up in a hurry and you can wind up with a large and unexpected bill for extra fill dirt.

There is a “Feasibility Study” contingency clause in most Purchase and Sale Contracts for Vacant Land.  It is comprehensive and looks great, but won’t protect you from needing extra fill dirt.  You have to have the survey and clear the lot to see what you’ve got. 

I recommend you select your lot and your builder at the same time.  (Talk To Ted !)  Ask (insist) your builder visit the lot you have selected quickly, before someone else grabs it…and someone will if it is in a great location and offered at a bargain price.  

Your builder will have to cover himself six ways from Sunday because he also cannot know much about the lot until after survey and clearing.  But he has much more experience than you evaluating and purchasing lots, so his opinion is very important.  Ask him to put his guestimate, with his disclaimer that it is only his best guess, in writing.  And ask him if his contract says that you will be charged for extra fill dirt at cost or will it be charged at “cost plus”.

Darrell Cone (Darrell Cone Dozer Service) in Bunnell (386-437-5788) has been clearing and grading our Palm Coast lots since the ‘90s.  Maybe longer.  I plan to interview him for some up-to-date pricing estimates and some war stories about fill dirt and include them in a blog post.  Meanwhile, here is the Feasibility Clause I talked about (edited by me). 

And please POST YOUR COMMENTS if you have advice, information or experience you can add about evaluating a lot before you sign a contract to purchase it.

Feasibility Study: Buyer will, at Buyer's expense and within __ days from Effective Date ("Feasibility Study Period"), determine whether the Property is suitable, in Buyer's sole and absolute discretion, for use. During the Feasibility Study Period, Buyer may conduct a Phase I environmental assessment and any other tests, analyses, surveys and investigations that Buyer deems necessary to determine to Buyer's satisfaction the Property's engineering, architectural and environmental properties; zoning and zoning restrictions; subdivision statutes; soil and grade; availability of access to public roads.' water, and other utilities; consistency with local, state and regional growth management plans; availability of permits, government approvals, and licenses; and other Inspections that Buyer deems appropriate to determine the Property's suitability for the Buyer's intended use.

If the Property must be rezoned, Buyer will obtain the rezoning from the appropriate government agencies.  Seller will sign all documents Buyer is required to file in connection with development or rezoning approvals.

Seller gives Buyer, its agents, contractors and assigns, the right to enter the Property at any time during the Feasibility Study Period for the purpose of conducting Inspections; provided, however, that Buyer, its agents, contractors and assigns enter the Property and conduct Inspections at their own risk.

Buyer will indemnify and hold Seller harmless from losses, damages, costs, claims and expenses of any nature, including attorneys' fees, expenses and liability incurred in application for rezoning or related proceedings, and from liability to any person, arising from the conduct of any and all Inspections or any work authorized by Buyer.

Buyer will not engage in any activity that could result in a construction lien being filed against the Property without Seller’s prior written consent.

If this transaction does not close, Buyer will. at Buyer's expense, (1) repair all damages to the Property resulting from the Inspections and return the Property to the condition it was in prior to conduct of the Inspections, and (2) release to Seller all reports and other work generated as a result of the Inspections.

Buyer will deliver written notice to Seller prior to the expiration of the Feasibility Study Period of Buyer's determination of whether or not the Property is acceptable. Buyer's failure to comply with this notice requirement will constitute acceptance of the Property as. suitable for Buyer's intended use in its "as is" condition.

If the Property is unacceptable to Buyer and written notice of this fact is timely delivered to Seller, this Contract will be deemed terminated as of the day after the Feasibility Study period ends and Buyer's deposit(s) will be returned after Escrow Agent receives proper authorization from all interested parties.

Buy Now, Pay Later...Location, Location, Location

 

I strongly recommend that you secure the location for your new home now while lot prices are still depressed.  I am convinced ownership of a premium lot will be a good investment.  Its price will increase as the housing market begins to come out of its slump and inflation continues to erode the purchasing power of the dollar.

You can wait a while to hire a builder to build that house you love; but you can’t ask him to build  a lot.  One  near to where your family is living. Or an Intracoastal lot with the great view or that oversized lot with the big, mature trees.  Lota are all one-of-a kind!

Right now there are great locations available where the asking price is very low in comparison to the market prices of the surrounding homes.  But they are selling fast.  Builders keep a list of the best available lots and recommend them to prospective customers.  Investors are again hunting for property to flip. 

A lot on the market in Island Estates sold for $500,000 in 2009.  Now it has a Just Market Value of  $340,000.   One oversized, wooded lot in the desirable Lakes Section of Matanzas Woods was purchased for $46,500 in 2002.  I understand it sold last week for $10,000.

I received an article today about the increase in the use of Equity Loans…http://bit.ly/Vt0481.  Rubi Torres is Manager of the Palm Coast Branch of Hancock Bank.  She can help you determine the best way for you to obtain a loan to purchase a lot.

And Ted can help you find the perfect location for your second/retirement home and help you to buy it. 

Use Lesher for Lots!     Talk To Ted ! 

386-503-1101     tedleshersr@gmail.com

 

THRU GATE TURN RIGHT

Don't Get Lost... 

As usual, I held my Open House in Palm Coast Plantation this weekend.  But I had no visitors on Saturday and only one late Sunday.  She told me  the guard at the entrance gate was not giving out my Directions and Palm Coast Plantation Map as I requested. 

Instead, he told visitors who asked directions to my Open House to turn left and go to the Clubhouse where a real estate agent has an office provided by the Homeowner's Association.   

If you would like to see a beautiful Model Home, visit me on a Saturday or Sunday between 1:00 and 5:00.   

Request your Visitors Pass at the Gate House and turn RIGHT at the stop sign.  The model home is just down the street.
Talk To Ted !