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What Comes First, The House (Chicken) or the Lot (Egg)?

blog / May 7, 2020

By Ryan Siebert
Custom Home Building or Custom Home Building
When it comes to building a custom home what comes first, the House or the Lot? Common sense would say you cannot build a home without a lot to build on.  But, how can you purchase a lot if you don’t know how much the house is going to cost? Let’s take a deeper dive into this idea during this blog post.

Why the Lot Should Come First

As a home builder I get asked for estimates on a custom built home. It happens so often that I will send a similar estimate to every client.  The estimate allows clients to see what all of the costs will be for their custom built home.  The budget isn’t complete until your architect designs your home for you.  The final design allows me to create a budget specifically built for your home.  Your architect will not be able to design you a home without a lot first.  Without a lot, how in the world will you be able to customize your home?  Without a home design, there is nothing for me as your builder to bid out.  Without a bid, there is no budget.  The reality is, lots are not made on trees.  Do you see what I did there?  This is why I believe when you identify what you want you have to go get it.  Lots are no different than shopping for an existing home.  Sometimes you have to take what you can get, especially in communities where there are few lots available.  Unfortunately, clients find that being overly aggressive with a purchase of the lot upfront leads to them not being able to fit their new home into their total budget. Wait a second, how do you know what you budget is for your lot if you don’t have a house to build?

Why the House Should Come First

Have you ever purchased a car without first looking online to see how much it is worth?  Do a quick search online.  Hit a few keys and kazaam you have a price range.  Try that with a custom built home and you will find yourself down a rabbit hole that is never ending.  Most of my clients start their conversations with me something like this, “We want a 4 bedroom, 3 bath, 3,000 square feet with at least a 2 car garage.  How much does this cost?”  With that description your home quote could be $500,000.00 for $5,000,000.00.  Back to the car analogy, I could be building you a Ferrari, or a Chevy Malibu. It is your job to identify your “all in” budget early and be transparent about it.
Custom Home Building
If you want to have a $1 Million home, including the lot, then that gives us a great starting place.  It is my job to help you understand what type of finishes you are looking at for the different price ranges.  Wolf Appliances for a $500,000.00 house is not going to happen.  10 Feet Ceilings, not likely to happen.  A 4 car garage, try again.  My goal is to help you envision what is possible for you, and what your home is going to cost you to build.  In other words, I am helping you come up with your dream home now, before you own the lot.  Assuming we identify the cost of your home is going to be in the $700,000.00 – $800,000.00 range, and you want to be all in for $1 Million, we know the most you can pay for your lot is $300,000.00 ($1,000,000.00 – $300,000.00 = $700,000.00).  Only then should you be shopping for a lot.
Custom Home Building
I’ve built homes with clients in both scenarios.  In situations where clients want to be in a certain neighborhood, or walking distance to a train the lot price is an afterthought.  If you have that kind of mentality, then by all means, get the lot first, worry about the budget later.  However, if you are on a budget, my suggestion is to identify that budget early so you can keep your emotions in check when it comes time to put an offer in on a lot.
Custom Home Building
If you are looking for help identifying your budget for a future new construction home, please email me so we can set up a time to talk, Ryan@SGHomeBuilders.com or call 847-602-7641.