We're building a custom home for our family! This has been a long-time dream - one I never really thought was possible. And getting to this point (closed on the loan and ready to break ground) has been a long time coming. There were so many steps leading up to now, things I never really thought about before going through it. So, I thought maybe recapping those would be helpful for someone thinking about embarking on a new build themselves.
Our traditional "After closing" pic...but no house and no key!
A bit of backstory to help put things in context…
We first had the idea to build on this lot in October 2019. We originally bought the house as a flip house, but after a few inspections and bids from contractors, we quickly realized that the house was beyond repair. So, we pivoted our plans and decided to tear down the existing structure and build a new house that we’ll move our family into. (Obviously, this is different than building a new home in a new neighborhood with land cleared and prepped specifically for new builds.)
At that point, we owned the lot, but would need a loan for the construction (which will turn into a mortgage after the construction phase is complete). We began to put some inquiries out to lenders to see what the possibility was for us to get a loan to take on a new build.
Our family on demo day in front of the old house
This was our first unexpected hurdle – a tear-down/re-build can be considered quite the risk for lenders, particularly in a neighborhood where this hasn’t been done much before. Part of the lending process is to get an appraisal on the new house, and when the appraiser doesn’t have many (if any!) options as comps, that’s really hard to accomplish! We went through literally maybe 6 appraisers before we found one that would take on the task.
One of the other really interesting things we had to do was demolish the existing house before we were approved for the loan. This felt like such a big risk, but we were pretty confident we’d eventually get approved, so we went for it. We also rushed that process so that the house would be gone before Jan. 1 to avoid (higher) taxes with the appraisal district. Not only did we pay for the demolition itself, we also had to pay for the permit to demo from our city as well as pay a tree company to take down the trees (they were infested and diseased….we love trees and were SO SAD to have to take them down). (All of this can run $5k-$10k)
Some other small, random things we had to pay for before ever closing on the loan (which was the big “We’re actually doing this” moment) were to get a soil test, pay for a survey that excluded the previous house (we had a survey from when we bought the lot/house, but it included the home), and disconnect and remove all the utilities. (In total, we spent about $2,500 here.)
And then the big stuff…
We hired an architect to create the house plans. As a designer, I had an initial drawing of what I wanted, but our architect finessed it and added in things like air returns and open spaces for plumbing and such. You know, the things architects are trained to do ;). That was a long process with a lot of back and forth since our plans were completely custom. If you plan to tackle something like this, I highly recommend having both a designer and an architect at the table for this portion of the work. As a designer, I was able to really visualize what it would look like and add in some elements that would build character into the house. (This can be anywhere between $2 - $10/sq ft, as there are many variables at play.)
Then we had to pay engineers to take those architectural plans and develop engineering drawings. These guys determined the requirements for framing, roofing, and the foundation. All of this is key to building a solid house (obviously), but also to developing a budget for the build, which you’ll need for the lender (your builder will compile the budget). (Expect to pay $4k-$8k)
From there, we needed Mechanical (HVAC), Electrical, and Plumbing plans. We waited to get these done until we were 99.9% sure the loan would go through. We had faced so many delays and obstacles (appraisals and COVID were the main ones), we just weren’t confident until we got our “clear to close” documents. (This was about $2k-$3k.)
Next, we had to pay for permits. The exact timing of this part of the process is a little loose…we needed the mechanical and plumbing to obtain permits, but as I mentioned, we wanted to wait until kind of the last minute for those. Since, we also wanted to be ready to go as soon as possible after closing on the loan, we ended up filing for permits the day before we closed on the loan. We are currently in the process of hearing back on our plan approvals but hope to “break ground” within 2-3 weeks. To note, for our particular city, fees differ for tear-down/rebuilds vs. totally new builds on originally empty lots. (Every city is different, but this will be somewhere between $3k-$6k)
In summary, there were a number of expenses that I didn’t realize would come up before we ever got our construction loan or broke ground. Those expenses are roughly as follows:
· Demolition: $5k-$10k
· All the small things added up: $2k-$3k
· Architectural Drawings: $6k up to $30k
· Engineering Plans: $5k-$8k
· Mechanical, Electrical, & Plumbing Plans: $2k-$3k
· Permits: $3k-$6k
So, your pre-breaking-ground expenses could be anywhere from $23k to $60k! See what I mean? So many expenses I didn’t think about!
Stay tuned as I bring you guys along on this new-build journey over the next many months!
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