Building from the Ground Up: A Home Construction Q&A for Realtors
As a Realtor, you may find it a little difficult to stay up to date with everything that goes on in the home construction process. From buying the land plots, gaining building permits and planning the architecture to actually building the home … it sure seems like it would be easy for things to get lost in translation.
We talked with three homebuilding professionals to ask the questions you may have in order to better serve your clients when they come to you with the tough ones. You’ll hear from Dennis Ciani, marketing manager of Pacesetter Homes in Austin, Texas; Lee Whitaker, sales manager of Pacesetter; and Sheri Scott, owner of Scott Architecture in Dayton, Ohio. Here’s what they had to say!
Q: Where does lot development begin and end?
Ciani: Not all builders develop their own property. Many will develop some and also purchase some from other developers. Depending on the municipality, approval to develop the land can take up to a year or, in some cases, even more. Before a land plan can be submitted for approval, based on market demand, a decision is made as to what lot size to offer and amenities, if any, to include. Development is done in phases and, depending on weather, it can take about six months to produce a buildable lot.
Q: How does the builder work with a buyer to make sure they are creating the home of their dreams?
Ciani: Communication starts with the onsite sales representative to represent what the homebuyer gets with the purchase. In most cases, the homebuyer will meet with a professional designer to help choose the colors that will go into the home. A prestart meeting with the builder will be held to review all paperwork including any options and upgrades the buyer may have selected and to confirm the placement of the home on the homesite. At Pacesetter Homes, once the home has started, weekly phone calls are made to provide updates on the status of the home. When the home is complete, the builder will conduct a homebuyer walkthrough to make sure the home meets the customer’s expectations.
Q: What is the average time it takes once a buyer decides to build with you until move-in day?
Ciani: Once a contract has been executed, then the buyer must get their loan pre-approval and colors and options selected. Then, the builder can submit for building permits. This can take anywhere between 45 and 90 days depending on the buyer’s cooperation with the lender. Once the home is released to construction, smaller homes can take between three and four additional months to build. Larger, higher-priced homes with lots of upgrades can take an additional five- to six-plus months depending on market conditions at the time the home is released to construction.
Scott: There are so many different factors, but for me, I deal in true custom residential. I ask clients to give me six months to a year to do design, construction documents, bid out to builders … all of that work takes six months to a year. Then, building averages at a year. Sometimes it’s as quick as nine months, which is really quick for a custom home, and it could be as long as 18 months, but not usually.
Q: What are some common questions homebuyers have about the home construction process that you have to answer quite frequently?
Ciani: Can I have an independent inspector review the completed home before closing? Yes, but the homebuyer will have to pay for it. Can I choose my own lender? Builders offer incentives if the buyer uses a builder’s preferred lender. The reason for this is better communication between the lender and the builder during the construction process, reducing the number of closings being delayed because the lender did not get the paperwork approved in time.
Scott: When they come to me first, most of their questions are: What does the process look like? Who do I talk to first? How does all of this work? It’s a one-time thing for most people to build a custom home. The answer to that is to find a Realtor you trust who’s going to lead you through the process and/or find a residential architect that’s going to start that process with you.
Q: Are there any difficulties you’ve noticed about the buyers you’ve worked with or things they need to know that could be corrected with more information from a Realtor?
Ciani: Homebuyers need to understand that many factors have an effect on the building process. Weather, shortage of trades, shortage of materials, and local and national events. Depending on the size of a home, the process can take anywhere from four to eight months. Homebuyers need to plan for the unexpected.
Scott: The biggest thing is financing and appraisals [for custom homes] and to have someone that’s going to explain that entire process to them. Hopefully, the homeowner can find an expert in [the appraisal process] that’s not an architect or a builder. If you’re not going to get local comps to justify the price of the house you’re building [to an appraiser], you’re likely going to be expected to bring up to 50 percent of the home value to the closing table. A lot of buyers don’t understand that until they get to that point, after they’ve designed their dream home. If there’s a way that a Realtor could become an expert in appraisals and guide people through that process up front, that would be very helpful.
Q: Do you have any advice for Realtors to help make your job or a Realtor-homebuilder relationship easier?
Whitaker: Builders are not the enemy; the process does not need to be acrimonious. We both want a smooth process.
Scott: I’ve worked in projects where the Realtor was involved before, and the thing that could make it easier would be for the Realtor to establish their role early on. A lot of times, the Realtor ends up being, and I don’t mean this in a derogatory way, almost the third wheel — no one quite knows where they fit in. So, I think if they could be a little more forthright or aggressive in the beginning to establish a role and let everyone know what they’re going to be helping with and where they can lend a hand, that would be really helpful.
Q: What are some facts or miscommunications builders may want Realtors to know about the home construction process?
Whitaker: There are going to be issues during the construction process. Humans build homes and humans make mistakes. They will be fixed according to a schedule, it may not be immediate or make sense, but it makes sense in the framework of a production schedule.
Scott: From an architect’s standpoint, I would want Realtors to know that homeowners need an advocate. Whether it’s the Realtor or the architect, I think that there really needs to be a third party involved through the entire process, and for a Realtor to be that third party in the beginning makes perfect sense. I think that they can really, really be an integral part of starting out that process strongly.
Q:Can you think of a small list of steps for a Realtor to provide to prospective buyers about the home construction process?
Whitaker: Contract, design, start, pre-construction meeting, foundation, frame, mechanicals, drywall, cabinets and countertops, flooring, trim out, walkthrough and close.
Q: Are there any topics or concerns we haven’t mentioned that you’d like to provide information or comments on?
Ciani: Realtors should look at a builder’s available inventory as an extension of their own listings and not competition. In many cases, the commission offered on a new home will be higher than the commission offered on a resale home.