Wednesday, April 4, 2012

Finding Land for a Panelized Home

Finding the correct lot or piece of land is one of the first and most exciting steps in the building process.  We recommend that you work with a real estate agent who is well versed in your local area, bare land sales and your local building department regulations.  It is also advisable for your agent to provide you with a Comparative Market Analysis of the home you are trying to build in your neighborhood.  Then the simple formula that is recommended to use is:

Land + Cost of Construction <  Resale Value of the House

The tricky part of this is the cost of construction.  We can help you with the costs of the actual construction of the house but there are many other costs associated with construction that your real estate agent should guide you through during your "inspection" or "due diligence" period.  These should minimally include:
  • The cost of septic and well or sewer and water.  In some areas it is wise to ask if there is a water moratorium.
  • The cost of electricity and any other services needed such as cable.
  • Permit costs including school fees, low income housing fees, any other fees required by your building department.
  • The cost of accessing the property which can include not only the drive but the type of material and any other special requirements such as perhaps a culvert or paving a steep section.
  • Any special soil concerns and any anticipated circumstances with the foundation.  It is impossible to predict all contingencies such as hitting a large rock but the building department should be able to tell you if you are going to need a geologist's report.  Some phone calls to determine the cost of the report and any anticipated problems would be prudent.
  • All departments of the building and planning departments should be queried as to any special requirements such as an unusual snow load, seismic zone, FEMA or coastal commission approval.  They should also be able to tell you if you are in any protected wetland areas or areas that might be affected by such things as Native American artifacts.
  • Any architectural review or CC&Rs that can affect the development of the property.
  • Any other issues with the property such as easements or other rights.
Although many of these items will not apply to most properties - on occasion one or more may be a very large expense.  We had one client who thought that the lot they were purchasing was an excellent deal until they learned that it was going to take a $100,000 bridge to access the property.  This is the additional kind of cost which is difficult to capture in the comparison to other similar houses.

If some extraordinary construction cost is discovered during the inspection phase it gives you as the buyer the opportunity to re-negotiate the price with the seller so that the formula works.

And please do not hesitate to call if you have any questions.

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