Step Nine - Getting Estimates and a Snag

Once we had final design plans it was time to have a few contractors look at the plans and prepare estimates.  From here we would choose one contractor to move foward with.  We decided it would be best to get bids from three contractors.

The first contractor we approached was the contractor who works with our architect and who had done the earlier estimate before we finalized the plans.  Obviously, this contractor has the advantage of having a working relationship with our architect before, so we know the job will be done as designed.  However, this contractor is rather far away from our building site, so we have some concerns about the cost of travel/shipping adding to our cost to build, as well as the environmental impact of that travel and shipping.

The second contractor we apprached is a relative in the contracting business.  Being a relative, we trust that this contractor would be more honest with us in his assessment of the plans and about the cost to build.  However, we know that working with family can sometimes lead to more problems than working with strangers, so while we definitely want his input and opinion, we are on the fence about working with him.

The third contractor was a local contractor that we had heard about and with whom our architect had worked before.  We liked the fact that he was local, knew the area and could hire subcontractors from nearby, hopefully for less money than the two other contractors who were from further away.

All three contractors made their bids without seeing the site first hand, The third did request to inspect the house before submitting his bid, though timing did not allow it.  In the end, after waiting more than six weeks, we finally had bids from all three.  All three came in over budget, obviously not what we wanted to hear, but all three were also confident that with some minor changes we could get the cost within our original budget. 

With the estimates in hand, the next step would be to pick one and sign an contract, but unfortunately, we ran into our first real snag in the whole process - our appraisal came back lower than anticipated. 

The loan that the bank promised us was contingent on the completed house being appraised high enough so that the loan was no more than 80% of the value of the house.  Because we approached the bank to make sure that the budget we were working with was realistic before we had finished plans, they made the loan offer based on their analysis of what we could afford, not on the 80% of value number.  Unfortunately, the appraiser valued our finished project to be worth only the amount we were looking to borrow, thus causing the bank to lower the loan they were willing to give us.  Changing the plans to be smaller or less expensive would also change the appraisal, so we now need to come up with an alternative way to make our plans work.

We are currently exploring three possible means of moving forward.

The first, and most simplest, would be to get a new appraisal.  The original appraisal, while fair, did not take into account the green and energy efficient aspects of the plans, which obviously add cost, and should add value to the final home.  We have petitioned the bank to consider an appraiser that specializes in green valuation.

The second would be to find a new bank and obviously new appraiser, but unless we could get a guarantee that the new bank would use an appraiser who specializes in green appraisals, the results would probably come back the same.

The third would be to get a home equity loan and make the basic changes planned to the existing house.  We could then add the addition once we had paid off the home equity loan.  This plan, while putting our final house on hold for a while, would allow us to skip an appraisal altogether, and get into our new house faster.

All three options have their pros and cons and carry risks.  As we explore them we'll be better able to decide which route to take, at which point we'll have to choose one of the three contractors to move forward with whichever plan we go with.

Step Eight - Finalizing the plans

It may seem like I haven't posted much lately, but that doesn't mean we haven't been moving forward on our house.  We and the architect have been busy making decisions and finalizing details so that we have a complete set of documents to send to the bank's appraiser, the contractors who will be bidding on the project, and the township for permits.

Apparently not all architects go through this step of choosing finishes and appliances.  They simply prepare the documents for generic items, and the homeowner makes these decisions with the contractor.  While it has taken a while, and not always been easy to make these decisions, we're glad our architect is helping us with this.  To begin with, when we have contractors bid on the project, we know we'll be comparing like bids using the same materials.  Secondly, we won't have to sit with each contractor to choose finishes and possibly have them suggest different products that they are more familiar using.  Thirdly, it allows us to get the plans appraised even while we're waiting for bids, since the materials are already decided upon.  Fourthly, since we're designing a Leed home and our architect specializes in green construction, we know that the materials being chosen have the least impact on the environment and will be energy efficient.  And lastly, we know that the specific items we have chosen have been integrated into the plans, so we won't have to make changes to accommodate our choices later, or have problems arise from items not working together as expected.

Choosing the flooring and wall finishes was not particularly difficult.  We knew we mostly wanted wood floors, with tile in a few places, and cork in the kitchen.  We also already had ideas for color and design schemes in most of the rooms of the house, so it was simply a matter of finding the materials that matched our vision and price range.

Choosing our mechanical systems was not all that difficult either.  Firstly, we didn't actually choose the brand and model; we left that up to the experts.  But we did decide on what types of fuel we wanted to use for the various household systems, and how we wanted them to work.  Again, we had some pretty specific ideas about how we plan to live in our new home and what will be easiest and best for us, making the process pretty quick.

What really was difficult was choosing our appliances for the kitchen.  We knew which kinds of appliances we wanted, but researching and choosing the exact brand and model took a long time.  Our architect asked us to do this early in the process so that his engineers could make the appropriate decisions regarding electrical and ventilation features.  This way we'll (hopefully) have fewer changes once we start construction, as everything's been considered in advance.

We have not completely finalized every possible decision that could be made.  Some decisions won't affect the plans very much, such as paint color or cabinet hardware.  These decisions can pretty much wait until we go to paint or install hardware, so we did not push to decide on those yet.

Having made these sorts of finishing decisions, our architect and his engineers were able to draw up a complete set of plans for every imaginable system.  Which means that we finally have a complete set of plans!  And while we're eager to get going with construction, first we're scrutinizing the documents ourselves to make sure everything is as we wanted, which is not a particularly easy task.  I know these documents are standard, and those in the construction industry are used to seeing and reading them, but to a lay person building their first house, they can be intimidating and difficult to read.  But we feel it's important to understand our plans so we can better supervise the building of our house, so we're taking the time and effort to do so.

Step Seven: Determine your Costs

Before we even purchased our property, we spoke with a mortgage broker to determine how much money we might be able to borrow to finance our dream home construction. She provided us with a loan amount she expected we could get based on our credit scores and the estimated purchase price of the property. As we began working with the architect, we kept that number firmly in our minds and did our best to keep our estimated costs significantly below that number. Our architect gave us an estimate based on the square footage of the construction, with the caveat that this was only a ballpark, and we would need to have a contractor review the plans to give us a more accurate estimate. Still, this rough estimate helped us compare the relative costs of our various options and certainly influenced our choices when making decisions.

Once we had finalized the general floor plan and determined the mechanical systems for our home, our architect drew up a schematic plan that was submitted to a contractor for a more detailed estimate. After waiting several weeks, we received the contractor's estimate, which includes line items and estimates for most of the components of the construction. While this estimate is still not set in stone, it is more accurate than a simple estimate based on square footage, and will carry more weight with the bank when we begin applying for a loan.

I'll admit we panicked when we saw the contractor's estimate. Not so much because of the number, but because of all of the things not included in the estimate. For example, the current house that will need to be partially demolished has asbestos siding. The estimate did not include the cost for dealing with the removal and proper disposal of the siding. It also noted that normal waste removal was not included, which was a bit surprising to us. We had discussed with the architect that we would purchase the kitchen appliances and provide them to the contractor for installation. We believe this will allow us to get a better deal on the price of the appliances, but because we planned on doing this, the kitchen appliances were also not included in the estimate. When we started adding in all the things not covered in the estimate, we were sure we were going to be over budget.

Our architect pointed out that the contractor's estimate includes a contingency amount for items not included in the estimate. While it seems for now that this contingency amount will cover the known items not included in the estimate, it gives us concern that if unknown costs arise, we may not have the money to continue. We agreed that as we move forward with the design plans, we will keep a careful eye on the cost of each material and finish we select to make sure we come in as much under budget as possible.

Step Six: Designing Your Dream Home

The design process has been the most exciting part of the journey so far.  We initially met with our architect to show him our style and discuss what we were looking for in our home.  He then drew up plans and we met weekly for two months to discuss, tweak and alter them, until we finalized a floor plan that met all of our requirements and our budget. 

I mentioned that we had difficulty finding plans that met our particular design requirements.  Mostly these were my own rather strong views on what I wanted in my house, some of them reasonable, and some of them strange idiosyncrasies.  Here are a few of the things that we had difficulty finding in readily available plans for purchase.

• No attached garage.  This one falls under the personal idiosyncrasies.  I have a strong dislike for attached garages.  I feel as if they are a waste of architectural space and I hate the idea of a large void as part of my house.  I somewhat understand the arguments for them, ease of access to the house in inclement weather, etc.  But to be honest, I've never had an attached garage and I can't remember ever thinking gee, I wish I could just get out of my car and already be inside my house.  I'm not usually one to complain too much about the weather, and I don't melt in rain or snow, so I think I'll be fine without the attached garage.  I'll note that this one point alone rules out about 90% of the available house plans on the market.
• All the bedrooms upstairs.  Some of this is reasoned, and some of this is personal taste.  I think of my house in zones: there's the formal zone, where unexpected guests or small invited groups can be sequestered; there's the informal zone, where larger invited groups, or close friends and family are welcome; and there's the private zone, where guests are generally not invited.  Having a second floor, and putting all the bedrooms there, easily demarcates the line between the public and private rooms.  A large number of modern plans put the master suite on the first floor.  Some of this is for space reasons, but largely I think the current thought is that in your old age, you won't want to be climbing up and down the stairs.  I see the logic in that, but I also think having the parents' bedroom significantly separated from any children's bedrooms is a problem.  Navigating the entire house at night because a child had a nightmare or wet the bed or whatever, seems like a pain to me.  Plus I think having the children's rooms upstairs, where the parents rarely go, could lead to less supervision and more trouble of one kind or another.  With just these first two bullet points, we've pretty much ruled out ever house plan on the market.
• Both a living room and a family room.  A lot of plans these days are doing away with formal areas altogether.  As I mentioned in my first point, I like the idea of formal areas for entertaining and welcoming guests.  Having a formal living room means you can have ladies' night or guys' night at your home without sending your partner out.  It means teenagers can have their friends over in a room where they aren't bothering their parents, but can still be somewhat supervised.  It means unexpected guests can be welcomed in a mostly clean, uncluttered room, without any sudden cleaning to find room for them.
• A room for a library.  We own a lot of books.  We currently live in a two bedroom house, of which one bedroom is the library/craft room.  We have ten bookshelves, and not enough room for all of our books.  Having a room that could be designated as the library was important for us.  But this additional room adds square footage to the house, and of course is not something most people look for in their home, so finding plans with enough rooms for everything we wanted, was difficult.

Working with the architect, we were able to meet all of our requirements.  We looked at three alternatives for the lot we now owned: 1) tearing down the existing house and building a completely new structure; 2) reusing the oldest part of the original house, tearing down the additions and building a new addition around it; and 3) reusing the existing floor plan and building an addition around it.  In the end, option 3 gave us everything we wanted at a price we could afford, so we are moving forward with that.  The new home will be 2400 square feet with three bedrooms, two and a half baths, dining room, living room, kitchen, office, and a two floor great room with built in bookshelves.  We're excited to break ground, but there a few things that have to be settled first, like obtaining the financing and finding a contractor.

Step Five: Finding an Architect

We actually hired our architect before closing, after we learned of the health department’s requirements regarding the septic, because our attorney advised us that we would have a better negotiating power if we had plans already drawn up. We didn’t actually need those plans to reach an agreement, which is good because it took us two months to finalize our plans, but I get ahead of myself.

We tried to find floor plans that met our needs in the myriad available on line, but nothing we found met our (or really my) requirements for what we wanted our home to be like.  After much frustration we reached the conclusion that we were going to have to hire an architect and design a home specifically to our desires.

As with finding the property, we probably did not go about finding an architect in the normal way.  We knew we wanted to be as green and as energy efficient in our building as possible, so we asked for recommendations and did a web search for architects who specialized in green construction and were LEED certified in our area.  After our research we found one whose website and credentials we particularly liked and we went to meet him.  We liked him immediately and didn’t search any further, though apparently it’s customary to meet with, and get quotes from several architects before deciding which you’ll use. 

I have to admit, in our research to find an architect who would design something we liked, we never considered the cost of such services.  So we were a little put off at first by the proposal we received.  But, we did a little more research and learned that the general rule of thumb is about 10% of your overall budget.  The proposal we received did fall within that window, and the after getting over our initial sticker shock, we also realized that the amount of work the architect was committing himself to, and his hourly rate were indeed reasonable for a trained professional.  So, we agreed to go forward and hired Jason Kliwinski of Designs for Life to design our dream home.

Then we began the design process.

Step Four: Closing

Closing was actually pretty anticlimactic.  We did a walkthrough of the house, to ensure that everything looked right, that the sellers had cleared out their belongings and everything was in order.  There were no problems.  We then went to the settlement where we signed a few papers, wired the money and left.  I had expected closing to be a long drawn out process, but we were done in less than an hour, and most of that was waiting for the wire to clear, which apparently happened much more quickly than normal.  So, no hiccoughs, and suddenly we were homeowners.

We met our next door neighbor and learned a lot more about the state of the septic system.  Apparently it stinks and overflows and the now former owners were living in some pretty unsanitary conditions.  While we weren't happy to learn just how bad the system was, we were glad that we decided not to move in until the new home is built.  Our neighbors seemed nice and were obviously thrilled that we would be fixing the place (and septic system) up.  Good to know that we don’t have big shoes to fill as neighbors. . .   

Since we would not be occupying the place, owning a home didn’t feel much different, other than our now empty bank account.  We installed locks on the doors and gate and lowered the heat to 55°.  We called the electric company so we would have power on the site and ordered oil for the heater, since there was almost none left.  We turned off the water and drained the house, to prevent frozen pipes if the heat failed at some point.  We notified the post office of our names so we would get any mail sent to us at the new address, even though it’s mostly spam at this point. 

Then we started planning for our dream home.

Step Three: Inspection

I can’t imagine purchasing a property without a full inspection, but I guess some people feel more confident in what they’re purchasing.  Even though our plan was to tear down the existing home, we still had a full inspection done so we had a sense of what we might be dealing with during demolition.  The inspection was actually enlightening.  We learned that despite its appearance and age, the home was in surprisingly good condition.  The floor joists were basically whole tree trunks, and showed almost none of the normal signs of rot.  The basement was dry, even though it had been a pretty damp month and there was no sump pump.  Most of the basic mechanical systems were either new or in good repair.  The water test did come back negative, but that would be easy to fix with a filter or ultraviolet system.  We already knew about the state of the septic system, but the inspector confirmed that it was cracked and taking on ground water.  Learning that the house was in such good condition made us start to rethink the idea of completely tearing down the house.  We started to wonder if we shouldn’t preserve this historical construction, which had held up so well for so long.

We also had the property lines surveyed.  This was so we could better see where the property lines were, other than just the word of the owner.  It was also important to us because the property does not actually have any frontage.  It is accessed from the road by a right of way across a neighbor’s property.  We wanted to be sure that there would be no legal problems regarding the right of way, so we made sure to research the deed for such and make sure it was included in our new deed.

During this inspection phase we received our first real setback.  The seller’s attorney sent us a letter amending the seller’s disclosure.  Where she had initially noted that there was no litigation against the property, we now learned that the health department had initiated litigation against the property for repair of the septic system.  As I mentioned before, we knew the septic system was in poor condition and would need to be replaced.  But now we learned that the health department was involved and would require us to install holding tanks and put money in escrow for replacing the system before the sale could go through.  Since we had been planning to take out a construction loan, we had intended to include the price of the septic installation in that loan amount.

We spoke to our attorney and she spoke with the attorney for the health department, and explained our plans to build.  Given our plans, the health department was willing to be more flexible in their arrangements, but we still had to agree to not occupy the house until temporary holding tanks or a new septic system were installed.  This put an end to our plans to move in while we built, but in the end, this actually offered us a bit more flexibility in deciding whether to reuse the existing house or tear down and rebuild.  So despite this hiccough, we moved forward to closing.