Which Comes First: Buying Land or Finding a Builder?

Home buyers who have not been built a custom home often have a wildly incorrect understanding of the process. They imagine that they will start by finding that perfect lot, proceed to hire an architect, use the architect’s plans to solicit bids from custom home builders and then choose the best bid. While it can be done this way, the best results are obtained when starting with a builder. Better yet, a construction company that offers design-build services will eliminate the need for hiring a separate architect, streamlining the entire process. By starting with a builder, a buyer can save time, money and a whole lot of hassle.

Why Starting with a Builder is Better

Builders are Always Shopping for Lots

When shopping for a lot to build on, you’re not just competing against other home buyers. You’re also competing against builders and developers who are constantly seeking out and acquiring great lots before they are available to the general public. According to Steve and Hans Wydler of Wydler Brothers Real Estate, “builders and developers invest enormous amounts of energy and resources into trying to identify the best lots on which to build. … When they find a potential lot, they are prepared to pounce and quickly prepare a clean, cash-written offer with limited contingencies and closing terms customized to the seller’s needs.”In some cases, the builder you prefer may already have a lot you’ll love. In other cases, they are better positioned to secure the lot you’re interested in.

Builders have Experience

As noted in our article on what to consider before buying a lot, plenty of due diligence is involved in finding a great lot. Builders have a team of experts ready to evaluate a property in terms of history, paperwork, build-readiness and other features of the land. While a builder spends about a week on due diligence and preparing an offer, an individual buyer typically spends about a month. A buyer has to do all the legwork themself, plus they simply don’t have the years of experience necessary to quickly assess a lot. Steve Pallrand, owner of design-build and renovation company Home Front Build, notes, “I see people here in Los Angeles who [say] ‘I love this hillside, this is just so charming.’ They buy it, and then a few years later it goes back on the market because they realize they can’t build on it.” An experienced builder would know this from the get-go and avoid the hassle and expense of this kind of sale.

Builders Have a Vision

While a buyer might look at a lot and think they can envision their future home, that vision must be tempered or even amplified by know-how. Knowledgeable builders can look at a lot and see its full potential because they know the best conditions for building and what modifications are possible. “For example, most buyers look for a lot that is perfectly flat. Some of the best lots, in our opinion, have a gentle slope up to the house front and then a gentle slope toward the back lot line, and from one side to the other,” state the Wydler brothers. “Some lots that appear to have topography issues [for instance, too sloped] may in fact be great lots. Builders can also do wonders with regrading and retaining walls.”

Builders have Better Access to Financing

As an individual buyer, you would need to obtain a new construction loan from a lender. There are some advantages to this. For example, you can develop a relationship with a local bank, the bank must also approve the builder (which helps you with the vetting process), and banks offer a wide variety of loan types. However, new construction loans usually require more up front. Expect to pay 30 percent down on this kind of loan. If you purchase through a builder, builder financing may offer rates that are lower than bank rates. And because the builder already has an established relationship with a lender, the approval process is faster and the inspection process is streamlined (allowing you to draw funds more quickly to keep the project moving).

One additional issue worth mentioning is that if you buy a lot, you are liable if someone gets hurt on the lot while the house is being built. If the builder owns the lot, that liability belongs to them and is generally covered by their insurance. It’s another detail you wouldn’t have to worry about if you start with a builder before buying a lot.

With so many compelling reasons to start with a builder, your next step is to find a great custom home builder. And if you already own a lot, no problem! Visit the Custom Builders section of NewHomeSource to find a custom or build-on-your-lot builder today.