Peter Economy - Building Your Custom Home For Dummies

In 1889, Oklahoma was emerging as an appealing opportunity for settlers looking for land. Oklahoma Station and Guthrie Station were two promising railroad outposts destined for urban development. In one of the strangest and most chaotic stories of land acquisition, the government created an exciting and unprecedented process for claiming land: a race! Rules were posted allowing people to gather at the nearby Arkansas and Texas borders ready to run, ride, and walk to their desired parcel of land on April 22, 1889. Upon arriving at their parcel, they would claim it by staking a flag and filing a claim form. People already in the territory (“Legal Sooners” as they were called) would cheat by staking their flags early even though prohibited by law. Thousands of people, including single white women and African-American men and women, raced that day and made Oklahoma their home. It was exhilarating and brutal. “It is an astonishing thing,” the New York Herald observed on the eve of the opening, “that men will fight harder for $500 worth of land than they will for $10,000 in money.”

Although it may be true that the value of something is based upon what someone is willing to pay for it, land value has other factors to consider when determining its ultimate usefulness for building a custom home. You need to take into consideration the cost of getting the land ready for the build. You also must factor in limitations on the size of the home.

When determining the value of a particular piece of property, a lender’s appraiser looks at other comparable land sales in the area to create a number for the lender’s purposes. Keep in mind, however, that this appraisal doesn’t guarantee your ability to resell the land for the same price. Nor does it mean that your custom-home budget will be able to absorb the price of the land. Consider all the factors associated with your build — especially financing — before purchasing a lot. Chapters 9and 10can help with understanding how lenders evaluate your land in relationship to the entire custom-home project.

The relationship between utilities and your lot can have a significant impact on the lot’s value. A lot requiring a septic system can add costs (which may decrease its value). The need to drill a well or to add off-site additions, such as sidewalks and parkways, can also negatively impact a lot’s value. Be sure to explore the cost of installing utilities and amenities before you buy any lot.

This section contains some “due diligence” items for you to consider when figuring the ultimate “cost” of your lot. Ask these questions of the seller and your agent, or research them with the appropriate county or city agency. Then create a list of all possible costs to prepare for your budget and estimate how long it will take to work through the permitting or approval process. Here’s a short list of questions to ask:

Does the lot require gravel, asphalt, or concrete for its driveway?

Will you need to install sidewalks?

Will you need to install street lighting?

Will the lot require extensive earthmoving or a special foundation?

How far is the electricity from the build site, and how much will it cost to extend it to your property?

What is the cost of connecting to the sewer or installing a septic system?

Will the property support a required septic system?

What is the cost of connecting to water or installing a well?

Many people get so caught up in the dream of building a house that they sell themselves into impractical situations. Keep your cool and do your homework. Buying a piece of land without researching all the issues and costs can leave you with a crushed dream and a useless piece of land.

Nearly every city and county attaches building restrictions to land when the land is first put into development. This is called zoning. Zoning determines many factors you must consider, including:

The type of building you can put on the land

The lot’s minimum size

The number of dwellings or units you can build on the lot

Finding out and understanding the zoning of a particular lot before you decide to buy is important. The information is readily available at your friendly, local city hall or county government building; your local government also has a guide that can tell you what each zoning designation means.

Most urban and suburban lots for houses are zoned residential R-1. If a zoning designation has a higher number, you can build more units on it (for example, a duplex or triplex) based on whatever number is designated (R-2, R-3, and so on). Some commercial lots can be used for residential, but the rules vary among municipalities. Most large, rural properties are designated RA for residential agricultural. When the zoning has a number such as RA-5, the designation means your lot must be at least 5 acres in size. This information is important to know in case you want to split the property into more than one lot. If you have 9 acres with RA-5 zoning, you can’t divide the lot in two. ( Remember: Each lot needs to be at least 5 acres.) You can split a 10-acre parcel with RA-5 zoning in two, providing it meets all other county zoning guidelines.

Don’t take today’s zoning for granted — the local government can zone to meet with the needs of the community on almost a moment’s notice and without your agreement or even advance knowledge. Although this change happens mostly in rural areas, check with the local government to see if any zoning questions for your area are scheduled. While you’re at it, be sure to ask if any special tax assessments will affect the property. These assessments can add to your expenses as well. And remember that many municipalities will allow you to petition to have a property rezoned, but it may cost you, and it’s not likely to be approved.

Even though you can, in theory, build a single-family residence on a lot zoned for commercial or apartment use, you may want to take the zoning into long-term consideration. Often, a property owner may destroy a small house in a commercial area and build apartments or office buildings, which can change the neighborhood’s tone for the worse (think noisy neighbors and cars parked everywhere), reducing your home’s value.

Zoning only affects the general plans for the property. More detailed restrictions for building may also be stated in the covenants, conditions, and restrictions (CC&Rs) that are recorded on the property, as well as in the design review guidelines. We talk more about CC&Rs in Chapter 4and design review guidelines in Chapter 6. Ask the homeowners’ association (HOA), your real-estate agent, or the title company for a set of CC&Rs and design review guidelines to find out about other restrictions, such as setback limits, style limitations, and height limits, before you agree to purchase any lot.