I found 2 acres in south Arlington (Mansfield schools) and I am looking into the custom home building options. I am trying to organize my thoughts around what all I need to be doing and considering as part of this. Below is a rough outline, looking for suggestions to add to this list:

1. How to select a custom builder?
- using references and maybe a service like Angie's list (and Texags) to narrow things down
- should I start with an architect and come up with the home design and then have home builders bid on my project?

2. Cost, appraisal issues and resale issues
- tract homes in the area go for $95-110 per ft including the lot. Used homes tend to go for $75-95/ft. A custom home will be over $120 per ft. Given that I'm not paying cash, I'd certainly like for this thing to appraise for the cost... Anyone have suggestions here for things I can do ahead of time to get comfortable?
- as far as resale goes, I obviously have the same concern. Would hate to spend $130 a ft and then need to move in 3 years for work and take a huge haircut...how do I get comfortable that I can recover the $$$ in a resale? I will say this, a home just around the corner from this lot is on the market now for over $1MM so I am not talking about building in an area where the other homes are not nice...

3. Deed restrictions, utilities, etc
- one thought I have is splitting the 2 acres and selling 1-1.33 acres in 1 or 2 lots and keeping .66-1 acre for my lot. I need to get access to the documentation on deed restrictions to make sure this is allowed. There are several lots in the area that are about 0.7 acres so I would think this is possible.
- there is currently no road by this lot but it has an address for a future road. How do I figure out when that road is to be put in? Is that the city or a developer who typically does that?
- I am not sure yet if water, electric, sewer and gas are on site, selling realtor has not returned my call on that. There are 3 houses directly behind this property so it shouldn't be too expensive to get utilities over, right?

Just looking for comments and suggestions from those of you smarter on this topic than I am... Thanks

If you're worried about resale in such a short amount of time then a custom home is not for you right now. You will need to have significant cash on hand just to get the process started. You're most likely looking at a minimum of two sets of closing costs, probably three. Just like a standard mortgage, the bank will not allow you to exceed a certain LTV, most likely 80% though with a construction loan you could certainly be looking at 75%. And they want you to have a good chunk of change left over after you've paid up to bring the LTV to 80%. Our home is >this< close to complete and we've got 80% LTV but that only covers about 70% of the total cost of the project (land and construction; and it may be less than 70% but at this point I've stopped keeping track). And that doesn't include closing costs. We are over $120/ft for construction only, does not include architect or land or even landscaping.

Utilities could be very, very costly. You need to get that figured out before moving forward. Our cash outlay would be even higher if our land had not already had utilities present. Much like multiple closing costs, those costs will never be recouped. The home doesn't appraise for more because it has electricity and running water like it would for an outdoor kitchen. And even with those things on site, we still have to pay for bringing them to the house.

And then there's permits. No clue what that cost would be because we're in an unincorporated area.

You need to get your hands on comps to see what the finished project will be worth. That's the first thing I would figure out, whether or not it's financially feasible/smart for your current situation. Then worry about finding a builder and architect.

Had not realized about the double closing cost issue. Agree I need to get some comps, right now I'm just looking at listing prices to get a general idea. Even with comps though, I still need to know my cost to build to compare that against and I feel the only way to get that is to get bids. Only way to get comparable bids is to put together a somewhat detailed RFQ. Only way to do that is to work with an independent architect? Am I off there?

As for this land, I'm a huge huge fan of this location for several personal/unique reasons and if I can get comfortable with the value of this land being reasonable them my plan would be to buy and hold while I research this custom home issue...

a minimum of 2 closings is simply not true.

i've seen one time close construction loans for custom homes at a number of banks. i've seen and inquired about them at wells fargo, bbva compass, and legacy texas bank. i haven't looked into other mortgage companies, but i imagine there might be more. i don't know the exact requirements for these products and i don't know your financial situation, but i must say that a one time close is possible, even if you need the loan to purchase the land.

Yes it's possible, in fact we have a one time close loan. However, if you want to close just once you must have ALL of your ducks in a row. When you purchase the land you must have a final set of plans and an executed contract from your selected builder. A well designed home is built to suit the land it is to be built on (showcasing/hiding views, built within lot build lines, orientation to maximize energy efficiency). Designing the home and selecting a builder is not something you want to rush through. If the seller is willing to wait for you to get all those ducks in a row then more power to you but it sounds like you're only interested in doing this because of this particular piece of land. Would really suck to have someone else snatch it up. We purchased our land with a land loan, then designed the home and selected a builder, then closed a second time. Wouldn't have done it any other way even if it meant saving a few thousand. That's a drop in the bucket of building a custom home.

The down side of the one time close is you can't add a pool or outdoor kitchen or make other significant changes after the fact.

Oh, forgot to mention if you'd like I'd be more than happy to send you my spreadsheet with all our costs as well as details about the materials used and pictures. We are buikding north of Denton and actually a few suppliers have been from Fort Worth. Username1 at yahoo

[This message has been edited by Alphabean (edited 5/26/2014 8:39p).]

I suggest you look into John Houston Custom Homes.

I agree that cash is probably the biggest area to evaluate. We owned our lot, so that helped with equity issues, but there were quite a few items that I paid out of pocket up-front and throughout the process (utilities, house plans / architect fees, eng design / inspections, construction loan interest, etc). My builder, who was also a good friend, told me generally to avoid a custom build unless the plan is to stay in the home for quite awhile, however there are some markets where it might be ok.

Are there many custom homes in the neighborhood you are looking at – you definitely don’t want to build a house that prices out the rest of the neighborhood in the future?

As for appraisal and lending, I seem to recall an appraisal done based on the lot/plans for the interim loan. Magically, the final appraisal on the loan matched the appraisal on the interim loan exactly. Perhaps that is norm or maybe things were different in 2009.