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Living In Tallahassee

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    New Home Construction and Financing

    By February 9, 2022One Comment

    In January 2022, 240 homes were sold in Leon County. Of those, 39 were new home sales. The average price per square foot for new home construction in Leon County was $196.97 and the median sales price was $371,280. The lowest price per square foot was $122.25 in the Dawson Creek Subdivision. Of the FIVE homes that sold below $200,000, four of those homes were in Dawson Creek and the remaining one was sold in the Spring Valley subdivision. The highest sold price per square foot was a custom-built home located on Williams Road.

    Types of New Homes

    Tract homes – like the ones in Dawson Creek, Avery Park, Camelia Oaks, Southwood, etc. are built by developers and larger builders.  These companies can carry the overhead of the construction until they finish the home, and you transfer ownership. The bonus for the buyer is that there are NO payments while the house is under construction.  The downside, there may be NO changes you can make to the floorplan. There is no negotiating lower than the list price. Every home sold in January sold at or ABOVE the listed price. If the builder does allow changes, expect to pay for those up front and on top of the listed price. Some builders of tract homes will allow you to choose wall colors or cabinets/countertops if you put a contract down early enough.

    The second option is to purchase a ‘spec’ home. The Tallahassee Builders Association has a Parade of Homes every year and the builders pay a fee to enter their home in the competition.  Look for those homes in May of this year. These spec (short for speculation) homes are showcases for the builder and come with a significant price tag. The upside is that again, the buyer does not have to pay anything during construction and the quality is almost always top of the line. The downside is that the buyer can make almost no changes to the home.

    The final option for new construction is to build your home based on a floorplan you want.  Building your custom home can be overwhelming. The upside is that the buyer gets exactly what they want.  The downside is that the buyer does have to pay the interest on the loan during the construction. Usually, that is less than the cost of date night every month.  Check out our video interview with Rhonda Koenders as she explains the costs and what to expect.

    How We Can Help

    Negotiating is not everyone’s comfort zone. We do it for a living. My husband has been in the building trades for decades and knows what things ‘should’ cost and where unqualified contractors make mistakes. That experience means we check on progress, subs, timelines, contract requirements, bank requirements, etc., and all those things that come back to bite unwary buyers. Remember, if you visit a tract home, that Realtor works for the builder. While that may make it easier for the seller to get to the closing table, that does not mean that agent is looking out for you. Call us, we will.

    We also get professionals lined up that you need, like the geo-engineer, the builder, surveyor, insurance agent, lender, etc.  It takes an extended team to build a home and we help you do it with less stress since we take on the administration for you.

    We have ‘pre-negotiated’ a handful of custom builds for 2022. We have an experienced builder that will build 9 homes this year at cost plus 10%. For a small home (1,000sf), this has come out to around $155 a square foot (this will be lower for larger homes). That cost is higher than it would be for a larger home. They still had two bathrooms and a kitchen fit for a professional chef.

    Check out our YouTube Channel for Rhonda Koenders talking with us about construction loans and other mortgages.

    Required Loan Documents for Mortgages

    These are the documents that are needed for any type of mortgage and are standard across lenders. Check out our blog article about all types of mortgage options here.

    • Last two bank statements for all accounts. All pages please. Actual statements please.
    • Last two months or last quarter retirement/investment account statements. All pages please.
    • Last two paystubs.
    • Last two years W2s/1099s
    • Picture of your driver’s license
    • IF self-employed, last two years personal and business tax returns.

    The Home Construction Loan Process

    Whether you have the land or not, the first step is to figure out financing. Most buyers do not have the cash sitting in an account waiting to write checks to the builder for materials. Most construction loans require 5% down, if you are a veteran, it is 0% down. If you own the land or bought the parcel years ago, that equity can be used towards your down payment. During the construction phase, and after you have closed on the loan, you will make interest-only payments on the loan. Usually, this is less than a couple hundred a month depending on the size of the loan, the lot, etc. Veterans do not make these payments on a VA loan.

    It is important to know how much home you can qualify for before you sign any contract.  If you have the land, or your parents are going to ‘gift’ you land from a bigger lot, you will be able to use that equity as a down payment on the loan. Your name must be on the deed BEFORE you search for a builder, even if this is a gift from family.

    If you do not own the land, you will need to have the financing in place before you make an offer on the land. It takes approximately 45 days to close on a home construction loan.

    The Land

    A note about the land here.  Not all land is created equally of course. This means that you will need to have a geo-engineer test the land.  At one point, this area of Florida was underwater, and we have some significantly sandy and heavy clay areas.  That can impact the cost of your foundation.  We have one customer purchase a custom-built home that had to have the foundation built twice because the land under the home slid towards the lake. That second foundation was the cost of the house by itself.

    If you own the land, getting the engineer out is straightforward.  If you are purchasing the land and rolling it into the financing, the engineer needs to test the land within 10 days of the contract. Since there has been a rise in new construction recently, the engineers are busier now. Managing these timelines is something a Realtor does for you. They can also help you negotiate the sale of the land.

    Our MLS shows 118 lots were sold in January 2022. Only 28 of those in Leon County. The median cost per acre in Leon was just under $26,500 per acre. The biggest lot sold in Leon County in January was 13.76 acres on Highland Drive that sold for a cool $2 million.  The smallest sale was for an acre on Sir Richard for $20,000.

    The Floorplan

    You do not need to have a floorplan before you hire a builder, but it helps you to know what you like. Some builders have plans that have already been approved by an architect. This is key and more on that in a second. There are a ton of floorplans to choose from online.

    If this is your first home, it can be hard to decide which floorplan best fits your lifestyle (and it does matter).  This is where having a Realtor helping you can save you heartache.  We have recently sold a second forever home to a couple who weren’t happy with their first home because there was no way to have aging parents join them comfortably.

    I sold a lot in Mariana Oaks several years ago and the buyer has been daydreaming about the home she is going to build there. She had bought the plans before we closed on the lot. We had done the ground testing she needed, and we were good there. However, the house she wanted was too wide for the lot. Even though the lot is pie-shaped and she was hoping to put the house on the back of the lot for a giant front lawn, the setback from the back of the lot kept her from placing the home where she wanted.

    The architect helps the builder by providing the blueprints and the builder needs these blueprints to accurately price the house. With those prints, he will know how many 2x4s, tile, drywall, etc. he’s going to need to order to complete your home.  If you do not have floor plans picked out and can find some that the builder has already built, you will save yourself some money.

    The Home Construction Process

    The loan process takes approximately 45 days.

    Once you have the land set up, you are ready to finish the financing.  Submit your final application to the bank and send your final paperwork to review.  They will need your formal application and the builder’s information. There may be additional paperwork required if the bank needs to approve the builder (they may not already be on the bank’s list of local builders). This normally doesn’t take long and should not extend this process.

    Once the bank has all their numbers, you will be sent final disclosures to review and sign. The loan paperwork then goes to the processor. The processor reviews the file and tries to anticipate anything the underwriter may be concerned about. Therefore, you may be required to submit more paperwork.

    Once the processor has approved the file, it will be submitted to the underwriter. Their job is to make sure the value is there and that the loan meets all the federal and bank guidelines.  The underwriter will carefully review the file again. You may be required to submit more paperwork.

    Once the bank has the final building plans and specifications, the lender will order the appraisal. The appraiser will go to the property twice. Once for closing (before construction starts) to ensure the plans have the agreed-upon value. The appraiser will return when the home is complete and has a certificate of occupancy. This CO is needed for the bank to close the file.

    Once the underwriter has approved the file, you will receive closing disclosures to review before you sign them at closing. When the underwriter has given the final approval, you will receive a Clear to Close email or letter. The file is then sent to the closing department.

    The closing department works with the title agent or closing attorney to finalize the transfer of ownership. The new closing documents are sent to you for review from the title/closing agent. A time is set up for you to come to the office to ‘officially’ sign the paperwork.

    At closing, you will sign the closing disclosures in front of a notary. If you purchased the land, the seller of the lot will receive their money in full at closing.  Your builder will receive an upfront or draw check for 10% (minus any deposits paid to the builder).

    During New Home Construction

    During the construction of the home, the buyer will be required to make interest-only payments on the amount borrowed.  For the first couple months or so, that will be based on the cost of the lot (if any) and the first 10% of the construction costs.  That amount is usually surprisingly lower than expected for buyers.

    A lot of things happen quickly once you have closed on the loan. The builder submits the home to the permitting office and sometimes he needs to provide more information to get approval to break ground and start building.

    First, the foundation gets poured, then the frames go up. After that comes the parade of trades. It is a complicated dance that looks more like a mess than a house for several weeks.  Part of our job as Realtors is to sort through what it looks like and make sure it is on track for the bank timelines. One of the biggest challenges we are seeing is appliances and windows are on backorder.

    If you have considered building a home, we would love to sit down for a no-pressure meeting to talk about how we can help.  We have pre-negotiated a handful of custom homes with an experienced Tallahassee builder. He only has room for a limited number of customers and still provide his custom home build quality. If you have questions, contact us at 850-203-0209 or






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