We are finally getting very close to starting!
Yes, this blog has seemed dormant for a while and there has been no physical progress on the house, just lots of behind the scenes work.
After months and months of design and all the decisions about layout and exterior, the last 6 weeks or so has been dependent on paperwork and decisions that are out of our hands.
First, we had to get HOA approval for our design. Our neighborhood has pretty strong design requirements to maintain the feel and property values. Not just dictating that you can’t paint the house bright pink, but down to the point of defining how much stone is needed on each exterior wall, square footage requirements, the pitch of the roof and the list goes on. It sounds pretty constrictive, but in reality, we probably would have wanted nearly all the things they dictated even if they weren’t required. So, we had no trouble meeting those requirements with the exception of the roof over our screened porch which had to be more shallow than “required” so that it wouldn’t end up blocking upstairs windows. In the end, we obtained our approval with no concerns from the review committee.
Concurrently with HOA review, our builder started the permitting process. There are apparently multiple different types of permits– zoning, building, septic– and each has their own process and requirements. I’m just glad they are handling all that for us. The last we have heard is that the zoning and building permits have been issued and there is just some additional work to approve our septic plan. Septic is a completely new beast for me that deserves its own post some day.
The biggest question mark recently has been the financing. We had received preliminary approval for the amount we wanted to borrow for the project months ago, but now we had to do the formal application process where the bank’s fine tooth combs were put to good use. Seriously, I think I could have delivered my entire filing cabinet and forwarded them every financial email I’ve ever received and they still would have found something else they wanted.
As soon as we knew that the design didn’t need to be altered in any way, we entered a contract with our builder that lays out as many details as we already know with allowances for all the things we don’t know yet. I actually went through and increased our allowances in nearly every category knowing that we will want nicer things at many steps and because we’d rather plan higher and get pleasantly surprised rather than the other way around. (Even with that, I’ve already realized that we will definitely go over our cabinet allowance, possibly by $5-10K!). With the increased allowances as well as the general scope of the project, we ended up with a contract price that is about 25% higher than the budget we had thrown out to the builder in our initial meetings. I was pretty sure that type of thing would happen… I just hope there aren’t a lot of additional increases coming.
So, with a contract in hand as well as final plans, we finalized our loan application and have been waiting for that for the past 3 weeks. We were pretty sure our finances would be okay, but the concern was the appraisal. A bank doesn’t really care how much you spent to build a house, just what it ends up being worth. Well, actually they’ll loan based on the lower of the appraisal or the cost, but in our case the cost had potential to be significantly higher than the appraisal. If that happened, then not only would we be responsible for our 20% down payment toward the project, but everything above and beyond the appraisal. That’s why you have to be careful to not overbuild for the neighborhood. Like any real estate transaction, the value of a new build is based on surrounding similar houses. So, if every house in the neighborhood is about the size of the one you are planning to build and sell around $400K, but you decide to put travertine floors everywhere, a Tesla solar roof and all the bathroom fixtures are made of gold, it doesn’t matter that you spent $1 million to build that house, the bank is gonna say it’s only worth $400K, maybe a bit more, and you’re gonna be left with a ton of out of pocket cost.
That’s why the appraisal is so important. Luckily, our appraisal which came in yesterday was very good. Not great, but very good. Once we account for landscaping and the purchase of the land itself, the overall project cost is still significantly above what the appraisal says, but it does give us the option of financing more so that we can save some of the out of pocket costs for other things like window treatments, furniture, and pool. Of course, that does mean the mortgage payment will end up noticeably higher. Also, we hope the township assessor comes up with a significantly lower opinion of value when determining our property taxes.
Well, that’s it for now. I’m hoping we’ll be able to announce a groundbreaking date very soon and I will try to share some of our design journey with you.