Perfect, high end, fast and cheap……..Sure no problem

There was a radio guy I used to listen too had a favorite expression.  Sometimes you just need to say it out loud to have it sink in.  If I were to summarize the conversations I have with most of my customers after I let them tell me what they are looking for (and I often do this for them) it would be the same for almost all of them. They would like a big but not to big house, they really want to just be done with it quickly without having to wait for ever for it, nothing to fancy but at least it should have all hard wood floors, a nice kitchen because they love to cook, an open floor plan with lots of natural light, they want it really well-built not some piece of junk but they have a limited budget. Summary, “Can you build me a perfect house, loaded with fancy things and do it really fast and really cheap.”  Read that again and this time read it out loud……..”Can you build me a perfect house, loaded with fancy things and do it really fast and really cheap.”   Now actually say the words out loud, they do in fact sound different when you say it out loud…..”Can you build me a perfect house, loaded with fancy things and do it really fast and really cheap.”

Of course I can…….is the answer any salesperson would feel obligated to give you.  Sadly, I am a builder and not salesman and with that, here is what I know.  The best subcontractors out there have earned the right to be discriminating and with that they chose not to work on jobs where they cannot make money and they take their time and will get it done when it can be done right.  Most people intellectually understand this, yet in the middle of a project that they just want done, it goes away.  The best materials out there are better, they install better, the work better, they wear better and they look better and they are a lot more expensive.   The world is full of products that attempt to be most of these things but they are either very expensive of they fall short in some way.  So does this mean it is hopeless?  No!!!  If you can have realistic expectations it is far from hopeless.

Modular home manufactures negotiate contracts with suppliers every year.  They go to companies that make Cabinetry, flooring products, Doors and windows as well as lumber suppliers and roofing and siding companies and try to set competitive pricing agreements with them.  They have all learned the lessons of cheap garbage products, ones that are difficult to install, fall apart easily and do not stand the test of time.  They have learned that Cheap usually cost you money in repairs and service calls.  What is interesting is if you were to go through 40 modular manufactures website, and look at the product lines they carry you will see the same names over and over again.  Why because they are the BEST VALUE.  In other words the manufactures have done the homework and research, product testing, market research and price negotiations for you.  Combine all these products and put them together in a controlled and inspected facility, which will allow the completion of construction to happen more quickly on site and well you are headed in the right direction.

Then hire a contractor who knows the sub-contractors in your area, has worked with most of them, fired many, lost a few to high prices and has weeded through to find the best value in workmanship and you are well on your way. The end result of combining a quality Modular home with a Solid General contractor is you get most of what you want.  It will not be perfect but it will be really solidly built, it will have the quality of products that you chose to pay for, it will be built considerably faster than the time it would take anyone else to build it right and it will likely save you a lot of money over building the same house another way.

That to me sounds like a really good choice.

Cost to Buy v.s. Cost to Own

You know for a long time I have said that you can buy more house on the open market then you can build new for the same money.  Sorry, that has not changed yet.

This is another way of saying. old house are cheaper.  But they may not cost you less to own.  Cost of ownership is a function of what you pay for it, plus what you spend to keep it up and live in it less the money you sell it for.  Let’s say you buy a house for $200,000 live in it for 10 years put about $40,000 ($4000/year) into improvements and maintenance and then sell it 10 years later and it sells for $240,000.   Add in annual taxes, heat light and power and interest expense on your mortgage and you might have lived there for a cost of $100,000 which sounds like a lot but really is pretty cheap.  Do the same math with a $1500/mnth apartment and you could be out more then double that.  If you are really smart and buy a house right, do lots of maintenance work yourself over the years and the market grows you could live for free if you sell your house for enough over what you bought it for.

Now if you bought a new house for lets say $260,000, clearly a lot more money then the cost of buying the older house.  But for the first 10 years your cost of Maintenance and improvements should be next to nothing so lets say $10,000.  Theoretically a newer house should be more energy efficient so the cost of heat, light and power should be lower. Now when you go to sell it, it is likely a relatively new home compared to the old home.  With that it likely more modern with a layout (floor plan) that is closer to what people are looking for today so it’s market value is considerably higher.  If this is true and again assuming you made good choices you could sell this house with the same 20% value increase for $312,000 with lower operating cost and living expense and might well find yourself getting paid back with a net positive 10 years later.

So while the up front Cost to Buy was higher the Cost to OWN is much lower.

All of this comes from my own experience.  My wife and I bought our second house a number of years ago and it was at the time the most popular house design on the market.  The classic center hall colonial on  a great lot in  a great neighborhood.   However, 10 year later we listened to a realtor tell us how no one wants a L/R and a Family room as well as a D/R with an eat in kitchen anymore.  Additionally the rooms were small and cut up and now everyone wants a big open great space with less rooms.  Our closets while they were the huge double door closets with lots of space, they were not walk in.   Because of these things and despite all the time and money we had spent keeping the house like new and modern it was still a floor plan that was very hard to sell, worse yet, it did not carry high market value.

We bought this house used at a time when it was the end of that designs run.  The needs of people are every changing and with it what holds value changes too.

Windows are like Sneakers…………

I am a runner and I have been for many years.  When I first started running I went out and bought a pair of Nike’s like you see in all the adds, the ones the professional athletes all use because they are the best. Six months into my running career I had my first injury and sought out the advice of an industry professional. My issue? I had the wrong shoes. 15 years later and hundreds of running shoes trial and error and I love shoes from a company called Mizuno.  You have likely heard of them but most would assume they are a second rate company smaller and without the technology of the big boys.  Yet, if you went to a road race you would see that many more seasoned athlete are running in shoes from companies like Mizuno, Saucany, and Asics then the big brands like Nike, Adidas and Under Armor.

As we go through the process of designing and spec-ing a house we are going to build for a customer the conversation eventually comes to windows. Everyone asks for Anderson, some say Pella or Marvin.  Why? because these are companies that have branded themselves as manufactures of quality products that we are all familiar with.  Yet if you go to builders job sites the brand you will see most builders using are from a company called Plygem. Why? because as a professional builder who has to offer a quality product we can stand behind without driving cost up this window is the industry standard.  Is is sexy? No! Can you brag about the manufactures name? No!  Is it a better window at a more reasonable cost.  Ask anyone in the industry and you will get a resounding yes.

Modular builders are always fighting the stigma of be second rate construction quality because for the early years of the industry they were.  However, today the modular industry is in many ways driving the choices the site built industry is making.  They look at what the Mod guys are using, they know they did all the research to determine what the best value is and they just follow their lead.  I believe some people feel that if they tell their friends they built a modular home but it has Anderson windows they get Street Cred for that.  When was the last time you were in a beautiful home and went over to read the label you can barely read in the lower corner of the windows to see if they were a fraud?  You don’t, you look at a beautiful well built house and think, Damn! this is nice.

Don’t get stuck on name brands, the simple business concept of most huge companies is that if they do an effective job branding their products they can charge extra without increasing the real cost of making the product and improve profits.  Don’t pay extra for things that do not have any real added value.

House Poor- safer than Life Poor

House Poor- safer than Life Poor

I talk to people every day about what they want to spend on a house.  I think the most common statement today is, “We don’t want to be House Poor”

At first I thought, “well that is smart”.  Unlike in the early 2000’s when everyone over extended, housing bubble, mass foreclosures, values dropping, you know the story, people are being smart and not spending more than they can afford.  However, the conversation usually continues with statements like, “our bank approved us for a lot more” but what we want it a payment lower than typical apartment rent.  We would like to own a house with a payment of $900/mnth including everything. Excuse me!!!

First, sadly in today’s world that is just not going to happen.  Take out a couple hundred dollars a month for taxes and perhaps Mortgage insurance and you are not going to buy and own a house for a mortgage lower than your truck payment.  Sorry, I would love to help you, but it is not realistic.  Additionally I learn that the bank, in today’s very conservative, post housing bubble restraints has approved them for a far more realistic $1500/mnth but instead they are going to stick with renting.

Since the 1930’s the federal government has been creating programs to promote home ownership.  HUD, FHA, USDA, VA loan programs are all created to make home ownership accessible. The reason for this is that smart people learned a long time ago that the best way for people to manage their life financials intelligently is through home ownership.  Think of it as a forced savings program.  You are going to make a payment every month so someone why not make it an investment in your future.   I am going to make the huge leap and speculate that the people who do not want to be “house poor” are not taking 20% of their paycheck each week and sticking it into a retirement account.  Instead they are paying rent and putting it in someone else retirement program.  Do the math, pay $900 a month over 30 years (assuming it never goes up which we know it does, a mortgage does not) and you have given $324,000 dollars to someone else. I am sure they will thank you.

Now go the other way and buy a house. Lets say you buy a $200,000 house at today’s interest rates with 20% down and your mortgage rates and your payment is $775/mnth add $300 for taxes in my area and you are now paying $175/mnth more than the rent. But roll it out 30 years, pay it off, figure most houses increase in value 100% over 30 years and now you have a $400,000 debt free asset, or savings account.  That is a $724,000 swing over renting over 30 years. All because you don’t want to not be able to go out to eat dinner when you want to or some other form of entertainment.  Strangely these same people always seem to have $800/mnth in vehicles payments which is another huge waste of money. But I digress.

Today’s banking requirements for Mortgages are very conservative.  At an average of 43% DTI the government and banks have a pretty good idea what you can realistically afford after normal life expenses and they will no longer loan you enough to see your fail. But no, they are not accounting for your social life.

If you are going to make monthly payments for some place to live, why put it in someone else pocket so that you can go out and have dinner if you can be putting a large portion of it into your own pocket. We have become very fond of complaining about the division of wealth in this country, but I think some of us are responsible for it ourselves.  We gripe about the wealthy apartment owners who take all of our money but we are unwilling to give up the toys to allow ourselves the luxury of owning our own place.  Meanwhile we have all of our money tied up in depreciating assets like toys and vehicles while they have it all tied up in investment properties. Who is at fault?

Get house poor, pour your money every month into a mortgage payment that keeps you from wasting it somewhere else.  Someday you will be the one with the resources to loan your kids money to buy their first home. What could be more rewarding?

Allowances- the new Bait and Switch

I warn people in my office about the par ells of price shopping.  This industry is like no other and shopping pricing is a lot like looking at online menu’s for restaurant pricing then finding out it was all a-lacarte.  You have gotten that dinner check before? Wow! Sticker shock.

I used to get people who would come in with a quote and I would send them back to the builder that gave it to them with a list of all the items that “NEED” to be included in order to get a Certificate of Occupancy and the price would double.

My industry has always been clever though.  The new tool of day for Bait and Switch pricing is the allowance.  It fools the banks as well as the customers.

It is normal in a construction contract to have a few allowances.  Simply put this is a number put in the contract (included in the price) for some items that have not been settled on yet.  Let’s say a customer is ready to go to contract but has not picked out the exact appliances they want yet.  They have looked enough to know they will likely spend around $3000 but they are hoping to get a holiday sale.  We include $3000 in the price and list it as an allowance.  If they only end up spending $2500 they get the $500 back or if they go over they pay the balance. Fairly safe.

How would you feel about a price to build your entire house but everything is in as an allowance.  Site work, septic, Clearing, Driveway, Foundation, Set cost, Finishes, Taping and painting, siding installation, Garage Construction, porches and decks, heating system, electrical, plumbing everything.  Then you go to a bank, get a mortgage for the contracted amount, but when the house is finished you get bills against the allowances for an extra $30,000.  Don’t Laugh! it is happening every day  now.  The good news is your house is all done, the bad news is you don’t get the keys until you pay for the allowance adjustments.

Suddenly the guy who gave you and estimate including everything that was $20,000 higher is not looking so much like he was trying to stick it to you is he?

Why? Well there are two reasons.  The first is simply that most of the people in this industry are not builders by trade, and they have no idea how to estimate a project cost. The second is, it is a way to make it look like the price is lower, say everything is included, document that, and still have the price have no solid foundation.

If a contractor allows $8500 for site work or $5000 for finishes, would you know if that was enough?  Sounds like a fair number right? So if the site work ends up being $10,500 and the finishes run $7500 they were not “way” off right? But if you go through the entire list the total number is WAY off.  On an open ended contract like that, how many times do you think the cost runs under?

My advice to everyone. Do not sign a contract that essentially says you will be required to pay an undefined amount ever. Even if it has a price on the top.

14 Ways to Piss Off Your New Home Buyer

This is a good article from another blog I thought was worth sharing

14 Ways to Piss Off Your New Home Buyer

Great Article on the impact of Primary Mortgage Insurance (PMI) on your new home

You have heard me talk about the expense of mortgage insurance

Good to see someone else talking about it

Read This

https://homes.yahoo.com/news/this-mortgage-cost-is-no-longer-necessary-223904035.html

New Home Inovation

I talk to people everyday about the decision they are trying to make between buying a home from existing inventory or building new. Because I am compelled by integrity the first thing I point out is the obvious fact that you can buy more house for less money from existing real estate inventory then I could possibly build for them new. I know, that is not a very good sales pitch, but it is true and I hate sales pitches. That said, there is another truth. Today’s construction standards are much different then they were 10 years ago and building materials and methods are considerably improved. I thought it would make sense to outline some of the tangible differences.

I like automotive analogies because vehicle life expectancies are shorter and more tangible. If you are old enough to have bought a new car in the 90’s you will remember that for people who drove a lot the trade in mark was close to 50,000 miles. The Japanese automakers started to build better cars and the life expectancy standard was raised.  Yes cars made it to 100,000 miles but the needed a lot of replacement parts starting around 50,000.  Today, most of the manufactures offer 100,000 mile warranties on the power and drive train because they know they will last that long. Why? because the are building them better with better materials.

So while you can get more house “used” then “new” it is a bit like buying and older car.  There are things that are ready to go and will need your attention. ($$$$) Additionally the government has raise the efficiency standards so that new cars will cost less to own.

The single biggest change in the housing code has been the focus on efficiency. Specifically how we achieve it.  The old standard was focused sole on R-Value, the more R-Value we added the better it was.  However, that failed the test of time. The efficiency rating was not getting better despite cramming more and more insulation in.  Essentially what we found was that if you made the house loaded with insulation but left the window open you were still losing a ton of heat.  Similar to having a 800 gram micro fiber coat on in -20 degree weather if you left it unzipped. So the new code requires us to seal the house without the expense of all that extra insulation it was still much more efficient.  Add in increase standards in efficiency of heating systems and you have a totally different house.  5 years ago we were installing 85% efficient heating units. Simply stated that means that 85% of the fuel you burned was converted into heat. Today most houses are getting 95%.  Given the cost of heating fuel doesn’t it make sense to get as much heat out of it as you can?

Modular homes lead the construction industry in Seal. There is a test that is done (called a blower door test) that measure the rate of re-infiltration of air after all the air is vacuumed out and while site builders are struggling to meet the new standards modular homes done the right way exceed this standard by a large margin.

Then there are the little things. Look at any house 10 years old that does not have a storm door and I promise you the bottom of the sames have started to rot.  Today they are all Fiberglass.

Floors are all glued down to prevent squeaking. Windows have a film on them to allow light Heat in without letting it back out and the two pains are Argon filled, in a fiberglass jam that does not rot. Vinyl siding is no longer put on a house that has wood soffits and fascia that need paint to be kept up.  Basements are poured concrete walls because to many block foundations failed.  We have better damp proofing on basement walls and have perfected the art of foundation drainage to keep water out.  Shingles have a 10 year greater life expectancy and we put this stuff called ice and water shield under them to protect the roof from back up damage in cold climates.  The lumber that we attached the house to the foundation with is treated to prevent rot and termites and we create a termite barrier.  Septic systems are built with bigger tanks and better pipe to improve their usable life.  Plumbing is done with plastic pipe (pex) that is more freeze resistant, lower cost to repair and oh yes, this like all of the items I mentioned here come at lower cost. Wiring in new homes is designed to accommodate the power demands of today’s home owners with Arch fault breakers to protect your children from sticking a fork in them and getting shocked.   We create and barrier between the house and the garage to increase the fire break between them and we wire every house so that if one smoke detector or CO2 alarm goes off the whole house does.

These are not sexy things like Granite counter tops and hard wood floors but the dramatically improve the home owners living experience and the long term cost of home ownership.

So yes like a “Used” car where you can buy a Mercedes with 100,000 miles on it for less money then you can buy a new Toyota, you can get more “Used” house for less money up front.  But I am pretty sure the cost of ownership over the next 100,000 miles will be considerably less with a new Toyota.

Which county to build in, Saratoga County, Albany County, Warren County, Essex County?? Let us help you

Most of our customers own land at the time they come in to see us.  Many of them have purchased it recently so you may be at the point right now as you start this journey to your new home, where you are trying to make sense out of where to buy that land.  As you know from our site that we have land and home packages that might meet your needs, but many people have very specific locations that they want to be.  If you know what town you need to be in (family proximity, school districts etc.) then this information is not for you.

If you are not tied to any particular location and you are trying to make heads or tails of which area suits you best then you may find this helpful.

Big picture….. By far the best value in acres per dollar in our area are Rensselaer and Washington county but you may want to look beyond the land/$$ ratio.  Lot cost in Saratoga and Warren counties are much higher and yet could be a much better value. Let me explain.

Take and average customer with a banking approval of $250,000 for their home. When a bank calculates this they use a formula called Debt to income.  In the simplest terms they take your total income (monthly) factor out a percentage for life expenses and then subtract your monthly debt (loans, car payments) credit cards etc.  What ever is left for monthly dollars is what they calculate your maximum affordable loan amount.  Let say hypothetically it is $1200/mnth they then plug that in to a mortgage calculator for the 30 year mortgage at today’s interest rate and TA DA….your approved for $240,000 at 4.5% for 30 years.

What does this have to do with the county you are in??????…TAXES

Your monthly combined real estate taxes and school taxes actually come out of your approvable amount in that debt line I talked about above, as if it was a loan payment. So if you build a house worth $250,000 dollars in Washington county and the annual tax cost is $7000/year (or $583/mnth) the same house in Saratoga county might only have taxes of $4800/year (or $400/mnth) the $183/mnth difference in taxes comes out of your $1200/mnth loanable. which brings your approval down by $38,000 over 30 years.  While your monthly out of pocket expense stays the same (mortgage, plus taxes). In other words you bought your land for less but your total monthly expense for home and land could be higher for the same house.

This of course can change town by town in any given county the point is that this is important enough information to look at prior to your purchase.

Do you have 2×6 walls?………..My Favorite question

Do you have 2×6 walls? I would say that is a question I hear every day.  Clearly what the customer is trying to ask if, “are these quality homes” while at the same time making it clear that they know enough about construction to know that 2″x6″ walls studs are better then 2″x4″ so that I don’t try to pull the wool over their eyes. Sadly, this question fails to do either of these.  Every house built in our area has 2×6 walls, so the answer they are always going to get is yes.  It is the code minimum so you could not get a building permit to build with less that 2×6 so it is by no means a distinguishing characteristic.

That said, it is not for the reason everyone asks and there is a debate going on right now in the residential home construction industry about 2″x4″ walls actually being better.  You see everyone thinks we use 2×6 because they are stronger.  They are not, the crush strength of a 2×4 is exactly the same as the crush strength of a 2×10 in vertical load which is what walls support.  90% of all the 200+ year old houses in this world were built with 2×4’s and are still standing.  We changed to 2×6 not for strength but for a larger cavity for more insulation so we could improve energy efficiency.  That said every stud is a thermal break and a 2×4 wall with 2″ of foam on the outside plus R-13 in the cavity would actually be as strong and better insulation.

Could you imagine if my answer some day is, No!…. we use 2×4’s because they are better. Now that would throw some people off.