From the time we started bidding on the property until we had the deed we were filling out the mound of paperwork for the mortgage lender and on the hunt for a house plan. We had interviewed two separate contractors that were business acquaintances of the family, both giving us almost identical quotes once we discussed our plans. We found just a few really good house plan sites, soon to discover that most of the websites had exact plans. The bigger webistes, such as houseplans.com and eplans.com had a large variety. The contractor found us an architect to help mold a plan to our needs, which costs $2,000. To us this was definitely worth it because he could move walls and change the plans whenever we wanted, at least before construction started. We were able to make a phone call and the architect could quickly make the changes.
It took us a month before we could finally settle on a house plan. The architect was able to change the elevation to look similar to the other three homes in the neighborhood. Our house plan has four bedrooms and 3 baths. Total square footage equals 3050 all on one level.
Today we received the final plans from the architect and paid the remaining 750 dollars of the original 2,000Last Friday our contractor had the percolation test done which cost 500 dollars. If you add the cost of the land, architect and the septic perc test we are thus far at a total of $53,500 out of pocket. Now we sit and wait for the county to approve our plans.
Tuesday, March 29, 2011
Sunday, March 27, 2011
Location, Location, Location
We have been living in the northwest Phoenix area of Peoria for seven years. Work, school, and church are all within ten minutes of our current home. We wanted to find a piece of land in the same area. Because this area has been developed for a number of years, this was going to be difficult. Only three small sections still had lots for sale. Near 67th Avenue and Happy Valley the prices remained over the top at 200,000 dollars an acre. 67th Avenue and Union Hills had just 2 or 3 lots for around 100,000 dollars, but the homes around it were build in the 1970s. Both of these areas were excluded from our search. The only location left was near 83rd Avenue and Deer Valley. Lots of open lots remained but mostly in neighborhoods already established with gigantic homes or located on main streets.
As I noted in a previous blog, my uncle informed me of a neighborhood to explore. In August of 2010 I found the neighborhood of four lots behind a gate with three beautiful custom homes already built. Everything in the neighborhood was for sale including the fourth and final lot. It was the corner back lot, exactly what we wanted. The gate did not really concern my wife and me; not a deal breaker either way. The price was set at 110,000 dollars. This was too much in our minds, so we continued to search for a home but kept an eye on this lot as well. After one month the price dropped to 100,000. That was interesting. October it dropped to 80,000. This was looking better and better. At Thanksgiving I was shocked to see the price at 70,000. This is the point where we began looking for a construction loan. We were hoping to pay no more than 60,000 dollars for a lot. We decided to get crazy and try to wait for the price to drop to 60K. Just before Christmas it dropped to exactly 60K and we jumped on it. We were afraid if we waited for anther price drop we would definitely lose it eventually to another bidder.
One thing we thought we had on our side was the other three homes had not sold yet. I called the real estate broker and put in an offer for 48K. She was not happy about the offer saying that we were very low considering how much the price had dropped in the past few months. I made it clear that 48K was our only offer. Within two days the bank responded with an offer of 59K. We came back at 49500. After three days the bank responded with with 57500. So we once again responded with 50K. When the real estate broker called us the next day she stated that the bank wanted to know our final offer. After much discussion, my wife and I decided to gamble and go for a final of 51K. Within 24 hours it was accepted.
In less than three weeks we had the deed to the land in our hands. I have bought two other houses in my life and this cash transaction was simple. Within the following month all three homes in the neighborhood had sold. We had gambled and won.
As I noted in a previous blog, my uncle informed me of a neighborhood to explore. In August of 2010 I found the neighborhood of four lots behind a gate with three beautiful custom homes already built. Everything in the neighborhood was for sale including the fourth and final lot. It was the corner back lot, exactly what we wanted. The gate did not really concern my wife and me; not a deal breaker either way. The price was set at 110,000 dollars. This was too much in our minds, so we continued to search for a home but kept an eye on this lot as well. After one month the price dropped to 100,000. That was interesting. October it dropped to 80,000. This was looking better and better. At Thanksgiving I was shocked to see the price at 70,000. This is the point where we began looking for a construction loan. We were hoping to pay no more than 60,000 dollars for a lot. We decided to get crazy and try to wait for the price to drop to 60K. Just before Christmas it dropped to exactly 60K and we jumped on it. We were afraid if we waited for anther price drop we would definitely lose it eventually to another bidder.
One thing we thought we had on our side was the other three homes had not sold yet. I called the real estate broker and put in an offer for 48K. She was not happy about the offer saying that we were very low considering how much the price had dropped in the past few months. I made it clear that 48K was our only offer. Within two days the bank responded with an offer of 59K. We came back at 49500. After three days the bank responded with with 57500. So we once again responded with 50K. When the real estate broker called us the next day she stated that the bank wanted to know our final offer. After much discussion, my wife and I decided to gamble and go for a final of 51K. Within 24 hours it was accepted.
In less than three weeks we had the deed to the land in our hands. I have bought two other houses in my life and this cash transaction was simple. Within the following month all three homes in the neighborhood had sold. We had gambled and won.
Saturday, March 26, 2011
Finding a Construction Loan
With the collapse of the housing market hundreds of banks around the nation collapsed as well. Most of these banks were heavily involved with new construction homes. I was not aware of these facts until we began visiting banks to apply for a construction loan. Our home bank has always been Bank of America, so we started there. On the website for the branch near our home was listed the name of several representatives for construction loans. We were surprised to learn that Bank of America was no longer involved with any type of construction loan. I then visited our credit card company Chase at a branch down the street which also stated they were no longer involved in construction loans. I felt I was beginning to see a pattern. After several more of the larger banks said no, we began to ask our family and friends if they could assist us. Luckily one of my close friend's mother worked for a mortgage company that still dealt in construction loans.
The first question was: could we use the land as a down payment? The loan officer said definitely. That was a big relief to us. The next question was: could we get a loan even though we already have a mortgage on our current home that is not sold. We qualified for only 260,000 dollars because we have not sold our current home. In this ugly market in Phoenix I was not surprised that the loan qualification came back so low. But as I stated in the previous blog, the contractor quoted 75-80 dollars per square foot. This would definitely fit our loan for 3,000 square feet. Not to mention the fact that we wanted a home that we could pay off in fifteen years. We could have qualified for 400,000 dollars if we did not have a current mortgage on our home. My wife and I were starting to feel a little better about this new possibility.
The first question was: could we use the land as a down payment? The loan officer said definitely. That was a big relief to us. The next question was: could we get a loan even though we already have a mortgage on our current home that is not sold. We qualified for only 260,000 dollars because we have not sold our current home. In this ugly market in Phoenix I was not surprised that the loan qualification came back so low. But as I stated in the previous blog, the contractor quoted 75-80 dollars per square foot. This would definitely fit our loan for 3,000 square feet. Not to mention the fact that we wanted a home that we could pay off in fifteen years. We could have qualified for 400,000 dollars if we did not have a current mortgage on our home. My wife and I were starting to feel a little better about this new possibility.
Build vs. Buying
In 2009, after the housing bubble was fairly deflated to normal prices again, my wife and I decided to start looking for a house. We were living in a three bedroom house with three boys, ages 8, 5, and 3. The house is a typical cookie cutter home here in Phoenix, Arizona built buy one of the big homebuilders in a community that looks similar to communist housing. They are all build on top of each other; each house only has between 7500-10000 square feet to the entire lot. Our three boys could barely move around the backyard its so small. This is very typical of any new Phoenix area home.
So our quest to buy was not only to have a little more square feet under the roof, but at least half an acre of land. We quickly learned that this was a special commodity in this area. The homes that have this size land were built mostly between 1970-1980. Each time our realtor would take us to look at a home we were sorely disappointed. Most of these homes had never been updated on the inside, yet they still expected at least 140 dollars per square foot. Two homes that we viewed within the first twenty four hours on the market already had over ten bids. It felt to us that there really was no recession at all. Our price range was set no greater than 425,000 dollars. So to ask for 3,000 square feet on half an acre seemed reasonable to us.
In addition to a larger lot, we wanted each child to have his own room that was at least 12 x 12 feet. We looked at homes over 3500 square feet that still had 10 x 10 rooms for the kids, yet a master bedroom uin which we could do cartwheels because of the ridiculous size. Proper utilization of space was important to us. By the fiftieth home we viewed we were beginning to get discouraged. We finally bid on a house that had the square footage and lot size we wanted. Many other things were lacking but we had given up on our dream home and decided to settle. I truely believe that things happen for a reason. The bank did not like any of the appraisal values because the house was newly built but in a very old neighborhood. We finally gave up and took a break. I used part of our down payment we had saved to buy a new truck and my wife a 2 carat diamond ring. We painted our entire house and fixed up anything we wanted changed. We had come to the realization that we might as well plant roots in the matchbox we were in.
At a family affair, my uncle tells me that he had done some landscape work for a builder that went bankrupt and for us to look at those homes. The builder had bought four one acre lots in a prime area of Phoenix. He build three custom homes before he went bankrupt. This left one acre available which was definitely the most desirable location. The lot came on the market in August of 2010 priced at 110,000 dollars. This was definitely more than we wanted to spend on a lot. We also did not know how much it would cost us to build. After talking to two different contractors, we discovered that labor costs had become very low in this area due to the glutton of foreclosures. Both contractors quoted between 75-80 dollars per square foot. To build our 3,000 square foot home for 240,000 dollars was definitely an easy option as far as money. The possibility of building our dream home felt like an option once again.
So our quest to buy was not only to have a little more square feet under the roof, but at least half an acre of land. We quickly learned that this was a special commodity in this area. The homes that have this size land were built mostly between 1970-1980. Each time our realtor would take us to look at a home we were sorely disappointed. Most of these homes had never been updated on the inside, yet they still expected at least 140 dollars per square foot. Two homes that we viewed within the first twenty four hours on the market already had over ten bids. It felt to us that there really was no recession at all. Our price range was set no greater than 425,000 dollars. So to ask for 3,000 square feet on half an acre seemed reasonable to us.
In addition to a larger lot, we wanted each child to have his own room that was at least 12 x 12 feet. We looked at homes over 3500 square feet that still had 10 x 10 rooms for the kids, yet a master bedroom uin which we could do cartwheels because of the ridiculous size. Proper utilization of space was important to us. By the fiftieth home we viewed we were beginning to get discouraged. We finally bid on a house that had the square footage and lot size we wanted. Many other things were lacking but we had given up on our dream home and decided to settle. I truely believe that things happen for a reason. The bank did not like any of the appraisal values because the house was newly built but in a very old neighborhood. We finally gave up and took a break. I used part of our down payment we had saved to buy a new truck and my wife a 2 carat diamond ring. We painted our entire house and fixed up anything we wanted changed. We had come to the realization that we might as well plant roots in the matchbox we were in.
At a family affair, my uncle tells me that he had done some landscape work for a builder that went bankrupt and for us to look at those homes. The builder had bought four one acre lots in a prime area of Phoenix. He build three custom homes before he went bankrupt. This left one acre available which was definitely the most desirable location. The lot came on the market in August of 2010 priced at 110,000 dollars. This was definitely more than we wanted to spend on a lot. We also did not know how much it would cost us to build. After talking to two different contractors, we discovered that labor costs had become very low in this area due to the glutton of foreclosures. Both contractors quoted between 75-80 dollars per square foot. To build our 3,000 square foot home for 240,000 dollars was definitely an easy option as far as money. The possibility of building our dream home felt like an option once again.
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