The Builder In You

The more you know the better prepared you will be to discuss construction financing. There are many terms that might be new to you, and helpful as you research your options.

1. Soft Costs – These are permit, architectural, engineering, survey, school taxes, utility connection fees and any other fees incurred before your actual construction begins. Funds from your construction loan become available at the beginning of actual construction. These soft costs frequently occur before construction begins. Based on your choice and your lender’s options, you may choose to be “paid back” for these costs when your funds are available at the beginning of construction.

2. Hard Costs - These are the actual costs for all materials and labor associated with the actual building of your home.

3. Closing Costs - These are the costs associated with closing your construction loan such as title cost, loan fees, discount fees, insurance, and appraisals.

4. Interest Reserve – This reserve account is established to pay the estimated interest on the loan during the construction process. This way, you do not have to make any payments during the construction of your home. In the rare occurrence that this reserve is depleted due to lengthy construction times, then you will begin to make interest only payments on your loan.

5. Contingency reserve – This reserve is created to cover unforeseen cost overruns in the construction of your home. It is usually equal to 5% of the hard cost of your construction.

6. Lot Value – The value of your lot will be determined by one of two methods. If the property was purchased in the last 12 months, the purchase price is used to determine the value of the site. If the property has been owned for more than 12 months, an appraiser’s estimate of the site value will be used.

7. Inspection fees – Some lenders require that inspectors determine of the progress of your construction project. If these are needed, there may be a fee charged for each inspection.

8. Loan to Cost Ratio(LTC) – This ratio compares the project cost of your home to the total loan amount. As an example, if the project costs for your home are $350,000 and your loan is $325,000, your LTC ratio is 93%. Maximum LTC ratios vary from lender to lender, and may be a factor you want to take into account when selecting a lender.

9. Draws – Monies drawn during construction to pay for materials and/or suppliers.

While there are a few more elements to construction financing than with your traditional mortgage, you are now better equipped to talk with lenders to determine how they can help you build your dream home.

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Remodeling can come in various shapes, sizes and levels of complexity.  It may be as simple as painting a room or as complex as adding a second story onto your home.  Statistics show that the average person moves once every six years, so why go to the time, effort, expense, and, sometimes, aggravation of a home remodel?  Families consider remodeling for a variety of reasons.

1. They need more room for an expected addition to the family.
2. The house is older and they want to update its interior and/or exterior.
3. They want a place for the teenagers to be with their friends, separate from Mom and Dad.
4. They need a place to store their boat or they just need more storage, period.
5. Loans for New Construction are not available.

The list is as long and as varied as there are homeowners but in each case they had to decide if remodeling versus moving to another home was the right answer for them. 

When considering whether to remodel or move, there are several factors you will want to think about.  With your family, consider these questions.

1. If we moved, what additional costs would there be over and above the cost of the new home itself?  According to the American Homeowner Foundation, selling your home and moving typically costs about 8-10% of the value of your current home.  Much of this cost goes to moving expenses, closing costs and a real estate broker. So any comparison to the cost of a remodel would need to take this into account.

2. How important is your current location to you and your family?  It is not very likely you will find a new home in your same neighborhood and school district. Moving to another neighborhood could change the schools your children attend as well as impact your daily commute.  If staying where you are is important to you, then remodeling may be the answer.

3. How much room is there on your current lot?  If you need to add a room, you will need to take into consideration what space there is on your land and if there are any setbacks or easements that could limit your usage.  If you were thinking of adding a second story, you will need to check for any height restrictions in your area.

4. Do you have any time constraints?  If your decision to either remodel or move is driven by, say a new addition to the family, you will need to determine if the remodel or a move are most likely to meet your timetable.

5. How long do you plan to stay in your home and if you remodel and what will it do to the value of your home?  The general rule of thumb is that any remodeling project that brings your home’s value up to the neighbor’s is a worthy investment.  Real estate experts recommend that a remodeling investment not over-improve (raise the value of your home) more than 10-15% above the median sales price in your neighborhood.  If you over-improve, you will have to hope that when you sell your home, you can find a buyer who likes what you have done, loves the location and is willing to pay your price.

6. Will it cost more to remodel than find a house that has the features we are looking for?  To answer this one, you will need to do some homework.  Take some time to do some preliminary design work and talk with a contractor about estimated costs.  Then, talk with your real estate professional about comparable homes in the areas in which you and your family want to live.  If the cost of one choice is significantly more than the other, then you will need to determine if cost is the most important factor for you and your family.  If the costs are roughly comparable then some of the other factors we’ve talked about here can help you determine what is right for you.

7. Can you to stay in your home during the remodel?  If not, where will you and your family live and for how long?  Ask your contractor what he/she recommends.  In some cases, you can live in the home throughout the remodel but may be limited in using portions of the house such as the kitchen, a bathroom or a bedroom.  In other instances you and your family will have to move out.  If you can stay in your home, you will need to take into consideration whether your lifestyle will accommodate the chaos and confusion created by a remodel.  As an example, if there is a new baby in the house, can your coexist with the noise that is normal to any building project?

Once you have answered these questions, you and your family can make an informed decision on what is the best way to create your dream home.

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While selecting a toilet for your bathroom may seem a pretty straightforward task, there have been many changes in this market in recent years.  Since the National Energy Policy Act of 1995 mandated standards for the manufacture of toilets, there have been many improvements in their operation and efficiency.  As part of that 1995 Act, any new toilets must use no more than 1.6 gallons of water per flush.  This is compared to 3-7 gallons used by many of the older models.  This represents a considerable savings to you in utility costs, and to the conservation of water throughout the county.

 

While the law mandates no more than 1.6 gallons of water per flush, manufacturers have developed high efficiency toilets (HETs) that use an average of 1.28 gallons per flush, a 20% decrease in water usage.  What this means to a family of four with an average of six flushes each per day, is a savings of 8,760 gallons of water each year.

Toilets are available in one or two piece construction.  A two piece model consists of a separate tank and bowl.  The one piece toilet, sometimes called a low profile toilet, is made with the tank and bowl as a single unit.  While the two piece toilet typically costs less, it is more difficult to clean than the one piece which does not have a crevice between the tank and the bowl.

The function of your toilet depends on the technology used for its operation.

Gravity flush system toilets use the weight of the water to provide the flushing pressure. These are more likely to clog and a not as likely to thoroughly clean the bowl.

Pressure assisted flush system toilets use water line pressure or a device in the tank to air pressure to flush the toilet.  This type of toilet typically averages 1.1 to 1.2 gallons of water per flush.  While there is significant water savings, these toilets can be louder than the gravity flush models.

Gravity fed Single Flush toilets operate like the gravity flush system but uses 1.1 to 1.28 gallons of water per flush.

Dual flush toilets are designed for light and heavy flushes and typically use a handle that moves up or down, a two button system, to indicate what type of flush is needed. This type is quite common in Europe.

Power assist toilets use a pump to force water down at a higher velocity than gravity toilets.  These models require a 120V power source to operate the pump.

Toilets come in a wide assortment of colors to match the décor of your bathroom as well as many types to meet the needs of your family.

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This term originated with UBuildIt in the late 1980’s and is commonly used in the home building industry today. An Owner/Builder is someone just like you who has chosen to manage their own home building or remodeling project without the use of a General Contractor. In doing so, they assume the entire Project Management responsibility for their dream home.

What does it really mean to “assume the entire Project Management responsibility?” If you choose to become an owner/builder, you are your own Project manager and are responsible for:

1. Working with designer or architect to finalize the plans
2. Obtaining construction financing
3. All tax, insurance and safety issues relating to your subcontractors
4. Working with your local municipality to file permitting and engineering paperwork
5. Finding, evaluating and hiring all subcontractors and suppliers needed for your project
6. Issuing, reviewing and accepting bids for the different trades needed
7. Scheduling all trades when needed and in a timely manner
8. Managing the construction budget to remain within the limits set by your lender
9. Paying subs and suppliers
10. Daily oversight of the project including signing off on the work done by subcontractors

Being a Project manager, you assume the legal, financial and daily oversight responsibilities for the building or remodeling of you dream home. You may choose to do part of the actual work on your home but that is not a requirement.

So what are the benefits to being your own Project Manager?

• Cost Savings - Acting as your own Project Manager means more of your construction dollars go directly to labor and materials instead of contractor fees and overhead. Many owner/builders can save from 15- 30% depending on their project.
• Instant Equity – By being your own Project Manager, your time and effort results in instant equity the day you move in.

“We had our one-story bungalow converted to a two-story English Tudor. We spent under $200,000 on the remodel through UBuildIt (one builder wanted over $300,000 to do it). Now our “new” old home with a captured view appraises for $590,000. Considering we bought it for $225,000, we have $165,000 in new equity for our remodeling efforts and UBuildIt helped us save more than $100,000 by not going with a contractor.”- Mark and Katie, Engineer

• Pride - You will have the pride of building the home you want, the way you want.

“I catch myself many times sitting in a room just staring and thinking “WOW! I did this”- Erica, 29, social worker

Is it right for you?

Today, one in 10 custom homes is built by an Owner/Builder. There are some great benefits and some new responsibilities associated with becoming an owner/builder, so how do you know if being an owner/builder is right decision for you?

Take a few minutes and ask yourself the following questions:

1. Do you have the time available to give daily oversight to the project including being on the job site every day?
2. Are you the type of person who is organized and can keep many balls in the air at one time?
3. Do you know what trades need to scheduled and in what sequence?
4. Do you have basic knowledge of construction to determine if the subs and suppliers have the done the job you need them to do?
5. Is managing the construction budget a strength for you?

Building a home may be the single most expensive undertaking of your life. Being the Project Manager for the job can be immensely rewarding, both financially and emotionally. If you decide it is important for you to do this but are unsure that all of your skills are up to it, contact your local UBuildIt office and they can help you through every step of the process.

“Working with UBuildIt really paid off. We benefited from their strong business relationships by receiving more favorable financing terms and supplier discounts, and we were linked with high quality, highly skilled subcontractors. UBuildIt reduced our risks considerably.”- Bob and Sally, retired

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Skylights let natural light stream into your home, bringing warmth and a feeling of spaciousness. When properly selected and used, they can reduce your need for electric lighting and minimize your heating and cooling costs. There are also health benefits to this wonderful sunlight that shines on us.  

If you lack sufficient sunlight on your skin, you will suffer health effects. That’s because the human body was designed to be exposed to sunlight on a frequent basis. We evolved, after all, under the natural sun, not under fluorescent lighting. Our environment was one with plentiful sunlight. Read the rest of this entry »

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When looking at one of these windows, doors and skylights, whether you are replacing old ones in your current home or buying ones for your new home, there are some factors you will want to take into consideration. These are called fenestration factors.

According to Wikipedia, fenestration is defined as, “Products that fill openings in a building envelope, such as windows, doors, skylights, curtain walls, etc., which are designed to permit the passage of air, light, vehicles, or people.” Read the rest of this entry »

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Cooling your home involves air being circulated over a surface which has been maintained at a lower temperature. This surface may be in the space to be cooled or at some remote location with the air being ducted to and from the space. Usually water or a refrigerant is the cooling medium.There are three basic cooling technologies you may choose to use in your dream home. They are air conditioning, heat pumps and evaporative cooling. Read the rest of this entry »

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With today’s modern technology there are many alternative products and techniques to build a home other than the traditional stick built home. One of the most popular alternatives is using Insulated Concrete Forms, also known as ICFs.ICFs are forms or molds with built-in insulation which accept reinforced concrete. Read the rest of this entry »

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HVAC is the acronym for Heating, Ventilation and Air Conditioning. These three elements refer to the equipment, distribution network and terminals that either collectively or individually provide heating, air conditioning or ventilation for your home.Your HVAC system has a significant effect on the health and comfort of you and your family as well as your ongoing energy expenses. Read the rest of this entry »

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There are two basic components to a window, the glass and the frame surrounding the glass.

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