Is now the time to build a home?

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Dear Steve,
Is building a home wise during these times of low market value? We’re retired and have decent pensions. We just bought 15 acres in the country and our current home is fully paid for. I seldom see any discussions about this.
— M. Edwards

Dear M.,
Then let’s start a discussion. For starters, previously owned homes typically provide more space for the dollar, particularly in this market. But since you’ve already bought the acreage for the project, there’s probably no better time than the present to get things rolling.

Costs for drywall and lumber have dropped since the home-building boom ground to a halt a couple years ago. Trade labor is also plentiful and less expensive and pricing is more competitive among vendors and subcontractors. Most builders are offering a wide array of inducements. Take full advantage of these and ask for additional throw-ins.

Though financing is a little harder to find for new construction, that shouldn’t be a big issue with you, given your full equity position in the current home. In fact, you stand to benefit from relatively low interest rates at present.

But building a house is not for the squeamish, especially if you’re a novice at it and want to construct a fully customized house. It may seem like you have a full-time job again once the process commences. There are many basic home models, I might add, that can be slightly modified at a much lower cost that will still project that custom feel and look.

Whatever tact you take, do your homework. Make sure you get a clear snapshot of present home values in the area, especially if near-term resale potential is of primary importance to you. Talk with several builders and have a budget in mind before you do.

To avoid wasting your time, do a Better Business Bureau search before meeting with them. Some builders are in deep trouble at present. Among the many books in the self-building library are “Be Your Own House Contractor: Save 25% without Lifting a Hammer,” “The Complete Guide to Contracting Your Home” and “Everything You Need to Know About Building the Custom Home: How to be Your Own General Contractor.” You can’t do too much research on the subject.

Realize that in a new-built home, there are unseen and additional costs to factor in, including lot preparation, grading, driveway construction, permits and the laying of infrastructure for utilities. Also, in determining your home-building budget, it’s good practice to factor in up to a 10-percent buffer for cost overruns, upgrades and unexpected expenses.

It’s rare that a new-built home comes in on budget. And when construction begins, visit the property frequently to make sure everything you’re paying for is being done.