Building homes on speculation

As a custom builder of new homes in the GTA and surrounding areas I would like to educate the public on the costs and what we indure when building homes on speculation.

Please note that the purpose of building a custom home on speculation is to offer the buyer a home of a much higher level of quality while saving them the time it takes to build one themselves. You see the process of building a home yourself starts with finding the right property. Now when you are dealing in a area that is popular and sales come up less often than some areas a buyer without a builder helping in this process will have a difficult time. Remember that the builders compete against each other for these properties and are often associated with real estate agents in these areas. Builders also display their signs on properties that they are building on meaning they will often get calls from sellers before they even contact the real estate agents. This process that the builder takes makes it very difficult for a buyer to find the lot without a builder or at very least a real estate agent with builder contacts.

Now say you are fortunate enough to find your dream lot that all builders have over looked you will probably be bidding on this against several other people also trying to break into the area. So now what has happened is you have probably over paid for this lot if you really wanted to beat out the other bidders, something a builder never does as he has the sale wrapped up before the general public see the listing.

You now own a lot, which on average will take at least 3 months of waiting and searching if not much longer. Now you start the process of finding a Architect. Lets say you already sourced this out and now that you have bought the land are ready to start the design. Design of a custom home takes somewhere around 4 to 6 months when the client knows what they want. Remember that after the design is done engineering is required for all structural components such as the floor system, roof trusses, steel, heating system and heat loss calculation etc.

So you have found your land and have your plans ready for permit and you apply for permit after spending around 7 to 9 months getting ready for this day. Hopefully you have already met with a builder you like and have him in mind for your new home at this stage. You see a builder can give you a preliminary price on building your home but requires a full set of plans with all the finishes and specifications required to build this home in order to give you a solid final price. Now even though a builder gives you a final cost there will always be some hidden costs that they may not cover in their price. Usually permit fees, development charges, city deposits etc. are not included in the price of construction. Also make sure you have the proper insurance coverage as the builder may cover some things but not everything. Also things unknown to the builder like water issues on properties or unstable soil conditions will result in additional costs to the project.

So now you have a final price and you are just waiting for the permit to be issued. Some areas permit can easily take up to 3 to 5 months especially heavily treed areas that require going through a planning process. These procedures are to make sure that the natural vegetation stays the way it is insuring your neighbours are not impacted by your construction.

So now if everything has gone perfect for you then about 10 months after you started the process you are ready to build. Building a custom home for a client depends on their schedules and flexibilty. If you have unlimited time and can be on site for any and all question or concerns that may arise during the process then a home that is of high level custom finishes average size of about 4000 sq. ft. would take about 8 to 10 months. If your schedule is evenings and weekends only and you have to be out of town alot, you feel that a schedule given to you to make sure all the decisions such as tile, paint, railings, stone, kitchen cabinets etc. is going to be hard to keep then it may take 12 to 14 months.

So the whole process has gone perfect and you are in you new custom built home just the way you like and you spent around 18 months to 24 months through the whole process. Additional costs to you are the carrying costs of the property and construction costs during this process.

Buying a home that has been built on speculation by a builder will save you the extremely time consuming process of building a home and purchasing the products required for this home over a 18 to 24 month period. It will insure no hidden costs that may arise with problems due to the properties conditions or just the general process itself. It has included the costs to carry the project through this process and eliminate any dealings with a bank prior to a finished product. It eliminates the chance of fire, theft etc. that may cause you going through your insurance company and having to deal with more delays. It eliminates all head aches that you hear from clients that have built there own homes. It eliminates any problems you may have had with your new neighbours as you were not present for the whole construction process. All of our clients have said to us after it was over, that was a lot more work than I had banked on.

We listen to our clients when building their homes and keep track of the good things they do in their homes and listen to them when they say I wish I had done this or that. In the end we build what we believe to be a home of superior quality as we get to make the final decision on all the items going into the house and incorporate all the great ideas we have seen from clients in the past.

So in closing what I am trying to say is when you see a speculation home listed and you calculate the math, "building cost plus land value equals", don't forget to add in all those hidden costs I have mentioned in this article. Believe me buying a speculation home will be the best choice you can make for yourself unless you absolutly cannot find your style of home out in the market.

Steve Greer
President
Harvis Barklay Consulting Inc.

Visit our site at www.harvisbarklay.com