Construction Loan Please help me understand

[axg275]

Easily Amused,

Thank you for your imput. I had just PM'd you. I just called Kent & Kent and their estimate of the architect and engineering plans run for $1.75 + $ 0.5 per square feet. Your right after I multiply these numbers by the house sq I want (2500 sq feet) I get ~5600 dollars + 5 K for lot clean and prep does not equal 29 K. I will have to ask him what thats all about.

Builder had said that he is in need for work so he is willing to build at 89$ / sq foot but really hoping that he can make it into 85$/sq foot. His work is costum he has a lot of upgrades in the house I want him to build.

Here is the house that he has build

<http://search.har.com/engine/dispSearch.cfm?mlnum=8070249&class=1&sType=0>

[EasilyAmused]

Who's the builder?

[axg275]

This is him
REALM Real Estate Professionals – Agent Profile – Joseph Petruzzi – Buy a Home, Sell a Home – Houston & Austin, Texas

have you heard of him? What are your thoughts? I liked his home so I asked how much he would charge for building some thing very similar "Bricks and sticks"

[RCH99]

......for what it's worth....Real Estate Agents and Builders are two completely different things. I'm sincerely concerned about your lack of understanding about the project you want to jump into here, and I mean that respectfully. Upon asking your initial question, several have responded with some very good and accurate information, and a few have thrown out mostly inaccurate statements.
My advice would be to seek out a builder that would be willing to outline and walk you through the many steps necessary to go from securing a home site, designing and specifying and engineering and estimating your plans. All of that can take weeks to months and doesn't begin to scratch the surface of everything necessary to get you into a completed and well built home.

I'm just saying, I don't think this is the best place to learn everything you need to know before proceeding.......

[EasilyAmused]

^^^ Agreed.

You are spending a good chunk of change and to do it properly takes time. I would ask Heights homeowners for builder recommendation......and then contact them all to get feel.

If that guy is truely JUST an agent, maybe he is included his "fee."

[Supermac34]

Seems like there is a conflict of interest there and this guy is an agent working for or with a builder. The intitial $29K sounds very much like the amount for an agent would get for selling the house, except it should come from the seller, not the buyer.

Proceed with caution.

Most new contruction contracts are designed for a whole price, with a spec sheet or cost card. Basically, you'll design a house (which shouldn't usually cost more than a couple thousand) and a builder will quote you a price to build it with certain allowances for all of your decorating selections.

So, if you go and pay $2,000 and design a house with a designer or architect you bring the plan to the builder.

The builder should then take the plan and quote you a price. This price will be in total and will include allowances for all of your selections. So you'll have a carpet allowance, an appliance allowance, a hardware allowance, etc. You can then select anything that falls within these allowance (if its truly a custom builder). Any good builder will let you move allowance money from one to another, so if you spend less on carpet, you can spend more on appliances. Any amount you go over on allowances will be "overages" and be due at closing. (example: you just HAD to have the brazillian cherry hardwood rather than tile and your flooring allowance was $12,000, but you just spent $20,000). You owe $8,000 more at close.

Once you have a plan and a quote from the builder, you can certainly counter with another price, work out changes that may save or cost more, work for more allowances, etc. Once this is decided, you can sign a contract.

What this does: it protects both YOU and the BUILDER. The builder will know what he's going to make and protect himself from losing money. YOU know what it will cost you and you won't have price creep down the road. This also puts the onus on the builder to build within costs. If its "cost PLUS" or something, the builder has no incentive to keep costs down. It also helps you not go overboard on your selections if you work within a range, so you don't end up with $50K in extras when you are done.

Realtors and agents are a personal choice at this point. A builder will most likely try to cover the realtor's fees in their final price to you, so even though the seller pays the realtor, on a contract a builder is going to try to pass that cost to you. The question becomes, does the value of the agent or realtor cover the passed on cost. Again: that is a personal choice depending on how comfortable you are in the deal.

[busyguy7447]

Originally Posted by Supermac34

Seems like there is a conflict of interest there and this guy is an agent working for or with a builder. The intitial $29K sounds very much like the amount for an agent would get for selling the house, except it should come from the seller, not the buyer.

Proceed with caution.

Most new contruction contracts are designed for a whole price, with a spec sheet or cost card. Basically, you'll design a house (which shouldn't usually cost more than a couple thousand) and a builder will quote you a price to build it with certain allowances for all of your decorating selections.

So, if you go and pay $2,000 and design a house with a designer or architect you bring the plan to the builder.

The builder should then take the plan and quote you a price. This price will be in total and will include allowances for all of your selections. So you'll have a carpet allowance, an appliance allowance, a hardware allowance, etc. You can then select anything that falls within these allowance (if its truly a custom builder). Any good builder will let you move allowance money from one to another, so if you spend less on carpet, you can spend more on appliances. Any amount you go over on allowances will be "overages" and be due at closing. (example: you just HAD to have the brazillian cherry hardwood rather than tile and your flooring allowance was $12,000, but you just spent $20,000). You owe $8,000 more at close.

Once you have a plan and a quote from the builder, you can certainly counter with another price, work out changes that may save or cost more, work for more allowances, etc. Once this is decided, you can sign a contract.

What this does: it protects both YOU and the BUILDER. The builder will know what he's going to make and protect himself from losing money. YOU know what it will cost you and you won't have price creep down the road. This also puts the onus on the builder to build within costs. If its "cost PLUS" or something, the builder has no incentive to keep costs down. It also helps you not go overboard on your selections if you work within a range, so you don't end up with $50K in extras when you are done.

Realtors and agents are a personal choice at this point. A builder will most likely try to cover the realtor's fees in their final price to you, so even though the seller pays the realtor, on a contract a builder is going to try to pass that cost to you. The question becomes, does the value of the agent or realtor cover the passed on cost. Again: that is a personal choice depending on how comfortable you are in the deal.

Excellent advice. I am building a home in Oak Forest and I would add that the neighborhood needs to support the project (i.e. if you're building a $500k home in a neighborhood where all the homes are $300k you're going to have a nearly impossible time getting a mortgage). Most construction lenders right now will loan 90 to maybe 95% of the acquisition cost, with a mortgage limit not to exceed 80% of the appraised final value. We were fortunate to buy our lot from family and while we did not get a "family discount" we were able to get a mortgage on the existing structure which we will tear down once we have our 5% of the acquisition cost on hand.

We have been working on this project for a year and it's taken some time for the comps over there to get to where our house will be in the ballpark as far as final appraisal/mortgage goes.

Hope that helps.

[desertsun41]

Yikes I got beat up on my info. BayouHome and Astro you are right, I am not completely familiar with land and home pricing. And things are done much different here then where my experience grew from. But Im learning quick. I was pretty tootin close. At least you both agreed with most I said.

[fordlover]

my engineering firm charges roughly .35 Cents a sq. ft. for a typical slab engineering, and that's using the total covered Sq. Ft. not just the HVAC Sq. Ft. I'd say nearly 30 grand for plans, engineering, and permitting is outragous. We've also worked on projects with Alan Kent in the past.