Articles – What You REALLY Need to Know about Building

What you REALLY Need to Know About Building
by Roy E. Grimm, PhD

Whether you’re a first-time buyer, or an old pro at the real estate game, buying real estate can be a daunting process. It’s an emotional time filled with difficult choices — and each decision you make has money riding on it. But, approached properly, it can also be an enjoyable adventure. This report is intended to provide you with the knowledge you need to make the process fun and profitable — in Sedona — or wherever you choose to live.

Finding the right home or piece of land to meet your family’s needs is a challenge. But knowing how to avoid paying too much for that home once you’ve found it is another job entirely.

For over a decade, we have helped buyers find their dream homes and save money at the same time. Out of this experience, we’ve developed this guide to help you avoid the pitfalls inherent in the process — particularly as it applies to Sedona. We’ll show you not only how to make sure you’ve found the right home here, but also how to negotiate to get the best price.

In today’s complex, fast-paced market, you can’t afford to learn these lessons through trial and error. The tips contained in this report will go a long way toward making you a savvy Sedona buyer.

Tip 1: Let us help you understand our local market — and then get focused on what works for you – a home or land…

Before you begin shopping, it’s a good idea to think through what you really want. As self-evident as that may sound, a surprising number of people come to Sedona with only a vague idea of what they are looking for. Is this going to be a second home or a primary residence? That usually makes a big difference when it comes to budget considerations.

Or, do you want an existing home at all? Perhaps you’d prefer to buy land and build your dream home to your own specifications. Many people find that process too stressful, but others wouldn’t have it any other way. In my conversations with Mike Bower, of the prestigious Design Group (928-282-4702), he had some things to say that will be pertinent to your decision as to whether you want to build or buy a resale home. Even though the Design Group architects are generally considered the most expensive in town, Mike’s comments are valuable about architecturally designed custom homes.

First, they are about a year out before they can begin the design process. Other first-rate architects, like Charlie VanBlock (928-282-1749) and John Kamas (928-282-4206). I’ve spoken with are saying six to eight months. Occasionally they’ll have a cancellation and you can slip in earlier, but obviously that’s not something you can count on.

Second, the design process normally takes between six to nine months. Again, you can probably get that done quicker, but the design and detail of the drawings may not be up to the level of quality that you want.

As for architectural fees, typically you’re looking at 10% of the construction costs. The Design Group charges 12% and they feel that they can justify that with innovative design and extraordinary detail in their architectural drawings. Good drawings that can keep the contractors on track can save time and money down the road.

Once the design phase is complete and construction begins figure on a minimum of a year to completion. Year and a half would be more prudent, especially if you have extra features like pools and guest houses. So, figure on two to three years out before your new home is completed.

As for building costs, Mike suggests asking pointed questions about whether the builder’s estimates include landscaping, appliances, and standard or upgraded appointments and amenities. He’s seeing $300 as square foot as a minimum, more likely $350 and above if you were to go with a fair number of upgrades, Charlie is seeing a bit less than that. That’s for building on a relatively flat lot. Steep terrain can add a bundle in site preparation for buildings and pools. He cited a few homes that were built recently in the $850 to $1200 a square foot range. Admittedly those are way beyond the norm for now, but they are an indication of what’s happening on that end of the range.

Keep in mind, too, that the farther out you go with building timing, the more you are going to be affected by rising materials and labor costs.

On the other end of the scale, here are the sorts of costs you’re looking at with a builder’s model home plans. For that I talked with Chris Dolan of Casa Natural Builders (928-300-1745). Chris’s company is known for its good, mid-level, nicely designed Santa Fe style homes. He works with a couple of different architects to develop models and builds those relatively inexpensively. Chris quoted me a figure around $200, “turn key.” Again that’s on perfectly flat ground and even then I think he’s being a bit optimistic regarding the future escalation in building costs, but that does include things like travertine flooring and granite counter tops. For a custom designed home, he figures about $250 a square foot.

He estimates a construction time of seven to eight months for one of his models and nine to eleven months for him to build a custom home designed by one the architects with whom he works. Again, I would suggest throwing in a fudge factor. Not to be too skeptical, but I have yet to see a builder wrap up a project within the estimated time – especially when, as inevitably happens, the home buyer comes up with changes during the construction process.

Count on it costing more and taking longer than you expect. If you’re not in a hurry, that may be within your tolerance limits. One test that is helpful in the “should we build?” dilemma is to check to see whether or not you can buy an existing home for less than it would now cost to build it. In Sedona, that is often the case.

Land prices have escalated sharply in the past three years with the median price now over $450. First-rate luxury home sites with great views and some privacy are going to start around $650,000 to $750,000, and can top a two or three million dollars for the truly extraordinary. Typically we’re seeing prices in the $750,000 -1,500,000 range for really good parcels.

Home and land prices have appreciated about 12.5% a year for the last decade, but in the last two or three years they’ve been well over 20%. The current median “sold” price for a home is over $550,000, but to be honest, that doesn’t always get you a whole lot of house. If your budget is significantly below that, consider a condo or something outside of Sedona in the rest of our Verde Valley. Prices are dramatically lower there. We generally have a strong Seller’s Market below $750,000 and a bit of a Buyer’s Market in the more expensive homes. The best bargains are in the above $1.5 million range.