October, 2002

House-Building Home Page

house-building.com NEWSLETTER #209
New House Building: Money Saving, Convenience and Healthy House Tips

James Todd.
October, 2002

Beginning with this edition, newsletters will now be archived
online at: http://www.house-building.com/newsletters/newsletters.html


CONTENTS:

1. Biweekly Mortgage Payments
   Save Thousands in interest and Cut Years off your mortgage
2. The 10 most common mistakes in the building of a new home
3. Useful Links
4. Thought for the Day
5. Subscription Information
   

Please forward this newsletter to anyone whom you think may be interested!


1. Biweekly Mortgage Programs

Biweekly mortgage programs are an important and significant cost saving item that you should consider. The Wall Street Journal, The New York Times, Money Magazine and many other influential publications have endorsed the concept.

The concept is quite simple. Take your current monthly mortgage payment, divide it in half, and pay this amount every two weeks. By doing so you will make one extra payment each year that will be applied against principal. This reduces the total interest paid over the life of a mortgage by tens of thousands of dollars. It also reduces the number of payments you will need to make by about 80.

The logistics of doing this aren’t much more complicated. The biggest issue is that most mortgage companies won’t know how to process a half payment every two weeks, so don’t try to do this. What you need to do is send the extra money in along with your regular payment. While you can certainly do this yourself, the odds that you will do this are not very good; statistics show than less than 3% of people have the discipline to do this. That is the reason there are a number of companies offering biweekly mortgage programs to assist you.

House has recently launched such a site. It is called Biweekly Home Mortgage.com. This site has a mortgage calculator that will show you how much money you can expect to save with your current mortgage.

Many of the major lenders in the U.S. offer such programs, like Countrywide Mortgage, Wells Fargo, and Bank America to name a few. The lenders charge application fees ranging from $250 to $395 dollars. House’s fee is only $69. Take a few minutes and go to the Biweekly Mortgage site and learn more about this important money savings opportunity.


2. The 10 Most Common Mistakes in Building Your New Home

This is the first in a series from Mr. Chris McMinn. His firm, McMinn & Associates are professional cost analysts and consultants. They review and analyze a large range of residential and commercial construction projects, applying the same methods and techniques of cost engineering to residential construction projects as they do for their commercial customers.

If you are looking for a professional cost consultant, we encourage you to contact Chris. If you are looking for written Guide to many of the same issues Chris points out, we encourage you to take a look at the House Building Guide.


Part 1– The First Pitfall...
Copyright © 2002 C. S. McMinn
If you long to build or remodel your own home– consider the following: building a new home is– for most– a once in a life time dream. But in order to prevent your dream from becoming a nightmare, you need to learn how to avoid the pitfalls most homeowners experience. If you're serious about building for the lowest price without getting ripped off, read this article carefully. There's much to grasp, not the least of which is that overconfidence is both common and very costly.

Many are surprised to discover that intelligence and education is not enough. You may be a doctor or attorney, or an expert in your field. Your mind may be as fast as Einstein's– but unless you have three to five years of full time construction experience working with contractors– your skills will not protect you from the maze of hidden problems embedded in your dream.

Whether you have the capacity to do some of the work yourself, or need to hire contractors for everything, your inexperience leaves you totally vulnerable to potential abuse and overcharging. This is not to say that contractors are dishonest or out to get you. The vast majority are diligent, intent on delivering a good project. The real problem is simply you– the homeowner– do not fully understand the complexities, details and ramifications of what you're getting into.


How big of a house are you going to build?? Find out what size of mortgage for which you qualify. IndyMac Bank is your best online source for home mortgages. Online applications, quick approvals.


Don’t let your credit history become a headache in your new home building process. Check your credit. Get your free credit report today.


That's where we like to help. With over thirty years of construction experience, the last fourteen as full time consultants, we specialize in showing homeowners how to prepare for success– not failure.

As an introduction, you'll find presented here ten pitfalls experienced by 97% of all homeowners. In each case, they discovered their ignorance too late: their dream crumbled into massive cost overruns– and lawsuits. Don't let it happen to you.

This article is one of many focused upon preparation and cost saving strategies for any residential construction project. Each problem presented here is dealt with more fully in our books and addressed on an individual basis (if requested) through our Online Technical Support, available anywhere in the USA.


The first pitfall: asking contractors for estimates before plans are ready.
Getting a handle on overall costs is very frustrating for most homeowners. "How can we know if we can afford to build (or remodel) if we don't know what it's going to cost?" So people start asking around, calling contractors for rough estimates. It's no surprise some builders will give low-ball numbers. How do you put a price on a dream? Who can tell what that potential building site looks like, or the utility configurations needed for power, water, sewer or septic?

Most homeowners really only want to hear one thing: Yes! We can afford this dream (please?). So, naturally, wannabe homeowners tend to respond to (and pursue), the contractor who supplies what they want to hear: the lowest verbal "guesstimate."

Consider this contractor. He gets calls and inquiries from young and not so young hopefuls. Does he tell them best case or worst case scenarios? Do they show him a complete set of plans and a site plan? Probably not. So, knowing he has the experience to modify any verbal bid in his favor, he gives them his lowest, chicken-shed-with-a-Porta-Potti number. Excited by that figure and blinded by enthusiasm, they rush ahead.

They have begun a process without basis in reality, fueled by an "expert" who knows that, no matter what, he will not lose money. Their journey towards financial reality will bear more than its share of disillusionment and bitterness.

Is there a better way? Absolutely. If you really want to know how much your dream home might cost, but you haven't shelled out thousands for plans and site surveys, use the following approach: First, locate four or five new homes built in your area by local contractors. Contact those homeowners and ask them if they would be willing to explain to you how much that home really cost (ouch!) Some will be too embarrassed to talk. Others simply won't know– or don't want to look. But you need to find three homeowners who will share with you actual dollar figures. In most metropolitan areas within the USA, expect numbers in excess of $100/square foot. In California, $200 plus is quite common.

Whatever these figures are, when you finally meet with those homeowners, make sure you take notes. Look at their plans, measure square footage, amenities and so on. Ask if they will let you see contracts for construction and site work. Make sure you offer to pay for their time when you first call. After sitting down with three homeowners and listening to their experiences, you'll probably be scared– and depressed. Don't give up. Wise men and women always count the cost of the tower before they start building.

Next, find the biggest and best developer in a town near you. Ask around. You're looking for a company that builds small subdivisions of six to twenty homes. Through friends, contacts and maybe contractors, again, you want to meet with and then pay that developer for some of his time. You want to sit down with him and ask what his hard costs are for each home, complete, with and without utility connections. This requires persistence, because he (or she) is always busy and possibly reluctant to give out information. Offer a free lunch at an upscale restaurant. You need to know what the experts are building for in your area. Typically, you'll find hard costs are running $65- $110 per square foot, depending upon location, site work etc. etc. Again, take all the notes you can. Some developers will give you floor plans and elevations. These are valuable.

When you're done, you might end up with the following ranges: custom homes-$140/foot, plus or minus $30. Subdivision homes $80/foot, plus or minus $10.

o now what? If you prepare your project well in advance, and follow our guidelines, you can build an equivalent size home for something like that subdivision figure, plus 25% of the spread between those two. This assumes you will hire contractors for most of the work and that you will allow yourself six months lead-time between completion of plans and start of construction. If you really put our strategies and principles to work, you can build close to that subdivision home price.

All other quotes, "guesstimates", ballpark numbers and so on are basically suspect. No matter what any contractor says to you, if a developer cannot beat that square foot price for a new home, neither will you– unless you take on a fair amount of the work yourself.

Are there still ways to build for even less? Yes. The vast majority of these are for people with a fair amount of time and some construction experience. (E-mail us and we'll send you one of our articles on Alternative New Home Strategies).


3. Useful Links

The following are useful links relating to the modular housing industry may be of interest.

Home Detective gives you a free online home inspection tutorial. http://www.homedetective.com/start.html
Warmair.com is good comprehensive source for information on heating and cooling systems. http://www.warmair.com/


4. Thought For The Day - Action

The smallest good deed is better than the grandest intention

Do you have tips or suggestions you would like to share with others? Please email these to
info2@house-building.com