Welcome to Operation: Red Dot's New Construction Division! Building a house is most likely the biggest financial decision you will ever make. Whether you have no idea how to build a house, or you've been through the process before, it must be done carefully. Click through the following icons to learn about the process from start to finish!
Answer the question: Why do you want to build?
- Are you tired of paying rent?
- Have you decided to pay your own mortgage instead of the landlords?
- Have you outgrown your current home?
- Would you rather have something custom made just for you?
- Are you looking to build multi-family rental properties?
- Do you want more control over where you live?
- Are you frustrated with the inventory currently on the market?
Having a clear sense of your reasons for building will help you choose the right property and path.
Answer the Question: Do you have the resources to build?
Building a home is like going through a pregnancy. There's going to be some morning sickness, and it's going to take about 9 months to a year to complete your new home. There are well over 25 different companies/people that will be involved in this process from start to finish. Everyone from Surveyers, to permit managers, to feasability specialists, to contractors, to lenders, and the list goes on. We strive to make this process streamlined and simple from start to finish. We have established relationships with the best industry professionals in the area. We've worked with them for years, and they are ready to tackle your project. Instead of having to manage all of these different people, our program does all of that for you!
Having said that, most people who build a home need between $20,000 - $30,000 in the bank ready to allocate towards getting this process off the ground. Some things just can't be rolled into a new construction loan. If you want to get an accurate analysis of what it could take to build your specific house, we can schedule a free consult.
Whether you're looking to build your dream home, a rental property, or just want a home that no one has ever lived in, we have the system to get you going!
Before you commit to building a house, it's a good idea to make some simple preparations:
Build your application document file for Pre-Approval:
You will need these documents to secure financing for your property and having this put together is going to make the process SO much easier. Your packet should include the following:
- 2 Month's Bank Statements (All)
- Investment Account Statements
- Credit Card Statements
- Auto Loan Statements
- 2 Recent Paystubs
- Last 2 year's Tax Returns
- Copies of Leases for any rental properties
- 401K statements, life insurance, stocks, bonds, or mutual account information
Check your Credit Rating:
Your credit score will have a huge impact on what type of property you can buy, and at what price. It is first recommended to check your credit rating with an experienced lending institution to determine what you can afford. The lender will research your credit ratings from the three credit reporting agencies Equifax, Experian, and Trans Union. If you are going to run your credit outside of a mortgage lender, we recommend going to the credit agencies themselves, not company's like Kredit Karma. Our preferred lender is happy to run your credit for free, and can help you get the ball rolling.
Be Careful with your Finances:
Now is not a good time to make sudden career changes, or large purchases. You want to approach your property purchase from a position of financial stability.
Building a property requires making many important financial decisions, understanding complex issues, and completing a lot of paperwork. It helps to have an expert in your corner when undertaking such a large project. We can guide you through this process and provide you with access to builder vendors in real time.
Here are some factors to consider when choosing a real estate professional to help you build:
- Look for a full-time agent -- One who has experience completing transactions similar to yours.
- Ask: Are they familiar with the area in which you are interested?
- Ask: How much time the agent will have for you, and if they are available at night and on the weekends?
- Ask: Are they knowledgable on the latest real estate trends and keeps up to date on industry changes?
- Does the agent return your calls promptly? Time is money when building a house, this is important!
- Choose an agent who listens attentively to your needs and concerns. Pick an agent that you feel comfortable with. Operation Red Dot has several super-star agents to choose from.
You know what you want. You've been Pre-approved. Awesome! If you haven't already, you should sign up for our free "building a home" class! (Link to signup)
The class will detail more of the home building process, who the vendors are, and what tools we offer you to make the process smoother.
Now... the Hunt begins!
Take a Drive!
We can't build a house without getting the land. If you don't already have a parcel, we'll need to find the perfect plot for your new home. Get to know the neighborhoods, complexes or subdivisions that interest you. Drive around and get a feel for what it would be like to own a property in the area. Start getting a sense of the properties available in those areas. Your Red Dot agent can help
Narrow Your Search!
Select 3 - 5 properties that interest you the most and have your Red Dot agent make appointments to visit them with you. Ask your agent about the potential long term resale value of the properties you are considering.
Time to Offer!
Once you have picked out the land you want to purchase, your agent can help you make an offer that the seller will want to accept. A good agent will recommend an investigation of the potential costs and expenses associated with the new property. An agent can also help draft your offer in a way that gives you the advantage over another competing offer.
At this point, the seller has accepted your offer, and there is a legal agreement between the prospective buyer (you) and the property's seller.
Some important tips to keep in mind to streamline the process:
- Keep records of everything. Your agent will provide you digital or hard copies of all agreements and addendums. Don't discard these documents, as they are important!
- Stick to the schedule. The contract has multiple deadlines, all of which your agent will ensure you are aware of. Now that the seller has chosen our offer, we will be given an opportunity to mark every stage of the process of closing the deal as we move forward. Meeting these deadlines on time ensures a smoother flow of negotiations so that each party involved is not in breach of their agreements. During the process we will keep you constantly updated, so you will always be prepared for the next step.
Inspections & Feasibility:
Once your offer has been accepted by the seller, you will want to have a feasibility specialist inspect and analyze the land to ensure your home will meet all relevant building codes. He will also estimate the cost to develop the land, to prepare it for the builder. It's important that we stay within the time frame that was agreed upon in the purchase contract. We have established relationships with amazing inspectors that are affordable, and incredibly thorough. We are happy to refer you to them when the time comes.
Depending on the outcome of these inspections, one of two things will typically happen:
1. Either each milestone is successfully closed and the contingencies will be removed, bringing you one step closer to the close...
2. The buyer, after reviewing the property and the inspections, requests a renegotiation of the terms of the contract (usually price or repairs).
Appraisal and Lending:
It is imperative that you keep in close communication with your lender, who will let you know when additional documents are needed to approve your loan application and fund your loan. If the agreement is conditional on financing, then the property will be appraised by a licensed appraiser to determine the value for the lending institution, via a 3rd party. This is done so that the lending institution can confirm their investment in your property is accurate. Appraisers are specialists in determining the value of properties, based on a combination of measurements, building costs, recent sales of comparable properties, operating income, etc. As we get closer to the closing date, we'll want to check with the lender to assure that they have everything they need to close the deal smoothly, and on time.
If the property that you are purchasing is conditional on an HOA association approval, then we will request the rules/regulations and other documents from the seller as soon as we enter into a contract to purchase the property. We will need to make sure the application documents and processing fees are submitted to the appropriate person at the association by the required time. You'll want to fill out the application completely, and legibly to prevent any delays in the approval of the application.
If you are obtaining a loan, you will be required by your lender to purchase a certain amount of insurance on that property. The value will depend on the lending institution and the purchase price of the property. You may be able to save hundreds of dollars a year on homeowners' insurance by shopping around.
You can also save money with these tips:
- Consider a higher deductible: Increasing your deductible by just a few hundred dollars can make a big difference in your premium.
- Ask you insurance agent about discounts: You may be able to get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters, or fire-retardant roofing materials. People over the age of 55, or long-term customers may also receive special discounts.
- Insure your house, NOT the land under it: After a disaster, the land is still there. If you do not subtract the value of the land when deciding how much homeowners' insurance to buy, you may pay more than you should.
We would be happy to recommend experienced and knowledgeable insurance agents for every property type.
The Closing Agent:
Either a title company or an attorney will be selected as a closing agent. The closing agent will hold the deposit in escrow and will research the complete recorded history of the property to ensure that the title is free and clear of encumbrances by the date of closing. Some properties are subject to restrictions which limit various activities such as building or parking restrictions. There may be recorded easements and encroachments, which limit the rights to use your property. If it can be found, the closing agent will find it.
How to Hold Title:
You may wish to consult with an attorney or tax advisor on the best way to hold title. Different methods of holding title have different legal, estate, and tax implications. Especially when selling or upon death of the title holder.
We finally made it! Welcome to Closing Day! Hopefully it's been a smooth and fun process for you! Here are some things that we will do to wrap up this transaction and get you the keys to your new home!
Final Walk Through Inspection:
More of a formality than anything else, the final inspection takes place a day before, or on the day of closing. You will visit the property to verify that all is in working order, everything is the same as when you last viewed the property, that there are no extra items left behind, and that everything included in your purchase contract is still at the property.
Home Services and Utilities:
It is likely that your escrow closer, or even your home inspection company has services that takes care of transferring over your utilities into your name. Ask your agent to confirm.
We are ready to assist you should an unforeseen glitch pop up, even at this last stage. Something at the property breaks down, or some other minor detail - no need to worry. We have encountered these problems before so we know how to handle them efficiently and in a stress-free manor.
The closing agent will furnish all parties involved with a settlement statement, which summarizes and details the financial transaction enacted through this process. You and the seller will sign this statement, as well as the closing agent, certifying its accuracy. If you are obtaining financing, you will have to sign all the pertinent documents required by your lender. If you are unable to attend the scheduled closing, arrangements can be made depending on the circumstances and notice the closing agent receives. If you are bringing funds to the transaction, you can elect to either have the funds wired electronically into the closing agent's escrow account or bring a certified bank check to the closing in the amount specified on the settlement statement. The seller will arrange to have all property keys and any other important information for you at closing.