When Buying, Consider a Custom-Built Home

If you are considering buying a home, you may be surprised to discover that having a custom home built is a realistic possibility. A custom-built home opens up an entirely new range of possibilities for you because you have so much control over the location, the design, the amenities, plus with careful planning you may end up with valuable equity after the home is completed.

We have been fortunate to sit down with luxury custom home builder Denis Littrell, CEO of the Louisville Building Company to discuss the process of having a custom home built. Denis has been in the custom home building business for over eight years, with a five year stint prior to that with one of the largest commercial design firms in the South. Denis’ specialty is his ability to do all of the custom design of the home in-house, plus supervise the building process through completion.

What is the difference between a custom home builder and a production builder?

A true custom home builder defines multiple completely original features in the home. In addition, a true custom home builder is multi-disciplined meaning they are able to incorporate the process of designing and building the home together in full cooperation with the client. A very beneficial difference is the ability to manage the budget to the client’s advantage because the custom home builder has intimate knowledge of the complete design and materials required.

What are the general steps in having a custom home built?

For me, the first step involves asking a potential client to fill out a detailed questionnaire to help define exactly what they want in a new home. From this questionnaire I am able to get a clear understanding of their wants and needs. The next step involves programming where we make a determination of the client’s budget and decide what features are going to be prioritized in terms of money. Next, we discuss design theory and I ask that the clients bring in magazine clippings, photos, and books that show features they find appealing. From this point we begin to sketch the design, first on paper, and then on the computer, from there adding detail to the design as my clients begin to see their new home come to life.

What are some ways to finance a custom-built home?

This really depends on whether or not the client has already purchased a lot for the new home. If there is a lot available, then that property can be used as collateral for a construction loan. Construction loans are different from a typical mortgage loan because the funds are always dispersed through a number of draws. Each phase of construction is defined in an agreement between the buyer, the builder, and the loan provider, and a certain amount of money will be provided for each phase. At the completion of each phase, the lender will inspect the work and determine if it has been completed as agreed upon. If the lender is satisfied, then they will release funds for the next phase of construction and the process continues. Depending on the specific terms of the loan, the construction loan may mature into permanent financing at the completion of the project.

If the client has not purchased a lot prior to initially contacting me, I can help them locate property that fits within their general design criteria, plus we will be able to look at all available financing options together to find the best fit for their investment needs. It is always an option for my clients to do owner financing if that is the best choice for their individual needs.

What terms are typically found in the contract you use when commissioning a custom-built home?

I use an industry standard construction agreement with additional provisions that identify all specific details of the project. The terms have been revised continually over the years and it is fairly well balanced between my needs and the buyer’s needs. The contract is similar to a normal real estate purchase contract except for a few key sections. The first is the warranty section. You should expect to receive a warranty for any home you have custom built, and you will typically find builders give a one-year warranty. For my homes I do provide a two-year warranty and will spell out the exact terms in writing.

Also, there will be a schedule of events in the contract that not only specifies an estimated completion date, but also details the buyer’s role in selecting and purchasing fixtures at certain times. Though we will have discussed in detail things like paint colors, cabinet styles, light fixtures, trim, faucets, door handles, etc., the buyer must make their final decisions and purchases by certain dates so we can maintain our agreed upon schedule. These items are called allowances and are important to not only the schedule and styling of the home, but to the budget, as well.

How does the design process work?

Using the initial questionnaire, extensive discussion, and the written contract, I begin to make hand sketches that are used to get the basic design into the computer. I use the computer for quite a few beneficial reasons such as time and cost savings, ease of design changes, plus the ability to email my clients any updates or changes to the design.

All adjustments to the design are made according to the contractual agreement. Anytime the design is modified, it requires a change order, plus any cost adjustments are calculated and agreed upon. The original drawings will be red-lined to show all changes, plus all parties involved will initial the updated design. This record keeping is necessary for effective communication, plus to precisely manage the budget.

How long does it take to build a custom home?

You can expect the initial specification phase to take roughly two weeks, with the design phase taking one or more months, depending on the complexity. The actual building process will take anywhere from six to eight months, or more, depending on the size of the home, the intricacy of the build, and the weather. It is also possible that certain materials for custom designs may take extra time to acquire. All of this will be explained in the schedule, and any delays will be noted and accounted for to keep the build on track.

What should the buyer be doing during the construction phase of the new home?

The buyer should be shopping for allowances. This will include all of the finishes in the home, such as paint, flooring, cabinets, fixtures, plumbing, appliances, and landscaping. The buyers will have a detailed schedule that they will need to follow to keep pace with the construction of the home. In addition, the buyers should be paying attention to the build-out and asking questions if they do not understand what is happening, or if they see something that is not to their satisfaction. It is much better to have open, effective communication and resolve any conflicts immediately to prevent scheduling and budget issues.

Denis Littrell is the CEO and principal designer of the Louisville Building Company. Examples of his work are at the link provided, and he can be contacted directly at 502.645.7991.

Posted in Contractor / Remodeling | 1 Comment

Current Market Statistics for Louisville, KY

Here is a look at the current Louisville, KY real estate market statistics, plus a comparison to the same time-frame last year. I used the month of April because most of the pending home sales from April should have posted to the system. It is possible that a number of homes are still pending and will not post for some time.

Looking at the numbers, the pace of selling has slowed slightly, but the average sales price has risen overall. This is not a major market fluctuation. Our challenges in the Louisville market remain an unusually high inventory of unsold homes, plus lenders have tightened underwriting requirements removing a significant amount of capital available to purchase a home.

I recommend all persons interested in buying a home take advantage of this market. Improve your credit score, get professional financial guidance, and save your money. There are numerous viable loan options still on the table for a majority of buyers.

April 2008

Number of Houses Sold This Month……………..1006
Average Selling Price This Month…………………$170,244
Average Days on the Market This Month……….89
Median Selling Price This Month………………….$132,000

April 2007

Number of Houses Sold This Month……………..1320
Average Selling Price This Month…………………$168,673
Average Days on the Market This Month……….85
Median Selling Price This Month………………….$135,600

Number of Houses on the Market this Month (As of 5/20/2008 12:10:44 AM) 10438

Contact me so I can help you make plans to take advantage of this buyer’s market, or if you would like any expert buying guidance. You can search the Louisville MLS for free to find your new home.

All statistics are based on information from the Greater Louisville Association of REALTORSĀ® and from Metro Search, Inc., and are current for the date of this post.

Posted in Market Stats | Comments Off on Current Market Statistics for Louisville, KY

Homeowners Insurance in Louisville, KY

Homeowners insurance is a critical component in any residential real estate transaction. Certain amounts of coverage are going to be specified by your lender, by regulation, and you will have the option of selecting additional insurance coverage depending on your personal needs.

For this topic we are joined by Mr. Chris Mackey, the Agency Manager for the Gardiner Lane office of the Kentucky Farm Bureau Insurance Company. Mr. Mackey has been involved with the business of insurance for over 13 years, in various roles from claims adjuster, to agent, to his current position as agency manager. We sat down with him for a question and answer session designed to help you learn all about homeowners insurance.

In general, what are the basic types of homeowners insurance policies available to the consumer?

One of the best policies on the market is referred to as “all-risk“. In this policy, your home is covered for a number of possible losses, unless a particular loss is specifically excluded in the policy. Make sure you review this in detail with your insurance agent. Another type of insurance policy is called “named peril“. This type of insurance covers you from loss due to specific occurrences.

What policy minimums are typically required by a lender?

Most of the time, the lender requires you to maintain coverage at least equal to the value of the loan. When you close on your home you will see in the mortgage contract that the lender requires hazard insurance. Sometimes, an escrow account is used to ensure that adequate funds are available to pay the annual insurance premiums.

A lender may also specify a maximum deductible that you may carry on your policy, plus you may be required by policy or regulation to carry separate flood insurance on your home.

What additional coverages do you frequently see requested for insurance?

Due to the recent rumblings from the Wabash Valley Fault Line we have seen a dramatic increase in requests for earthquake insurance! It is something we don’t usually think about in this area, but there are major fault systems nearby that are capable of damaging your house.

Other types of additional coverage can include protection if your sump pump overflows, or if there is a water backup through the drainage system in the basement. There are numerous important exclusions that usually come with water backup coverage, so be sure to ask questions and thoroughly read your policy. Also, some homeowners opt for coverage for jewelry, silverware, or other valuables in case of loss.

How does the style of the home affect insurance rates?

A few types of homes are going to incur higher premiums due to the materials used in construction. A frame home where the majority is not brick will have a slightly higher premium than an all-brick home. More expensive materials will require a higher coverage amount on the home which will result in a higher insurance premium. Newer homes are relatively less expensive to insure since they should all be up to current code with current materials.

How is a condominium insurance policy different from one for a detached single-family home?

Condominium complexes are covered by a master insurance policy that insures the actual structure, the roof, and the exterior walls. Homeowners must insure the interior of the condo, and you will typically hear this referred to as “the drywall in”, literally meaning that the insurance coverage begins at the drywall and continues into the interior of the condo. You must review your specific policy to fully understand exactly what is covered for you. Some policies may only cover the “paint in” so touch base with your insurance agent on how this pertains to you.

What information do you need to know to give an accurate insurance quote?

Some items that the agent will review when you call for a quote are the address, the purchase price, the style of construction, the year built, plus any known liabilities such as a pool or vicious dogs (some companies will not cover you for liability if you have a dog that is classified as ‘vicious’). Without getting into a great bit of detail, these give you a rough idea of what types of questions will be asked.

Also, if you intend to request additional coverages for personal property, earthquake coverage, additional water backup, or any other coverage requirement, it is a good time to ask that these be included in the quote.

How can I save money when getting homeowners insurance?

One of the best ways to get a better rate is to make some inexpensive changes to your home. Install deadbolts, have a fire extinguisher on hand, get smoke detectors, and consider having a security system installed that is wired through the phone lines to a call center. In addition, you will be eligible for discounts for getting all of your insurance from one carrier as a package, including home, auto, life, etc.

Mr. Chris Mackey can be contacted through the Kentucky Farm Bureau website, or by calling 502-459-4507 during business hours. It would be his pleasure to help you with all of your insurance needs.

Posted in Insurance | 1 Comment

A Guide to Home Inspections in Louisville, KY

A home inspection is an important part of any residential real estate transaction. While not required by law or regulation, having a home inspection prior to closing on your new home can reveal potential defects, mechanical and structural problems, plus help provide you with additional negotiating points and peace-of-mind.

In this installment of our interview series we are joined by Mark Hunter of K&I Inspections in Louisville, KY. K&I Inspections was founded by Mark’s father, Charlie, and has been a staple of the local home inspection business for over six years. K&I Inspections has performed over 1500 inspections for local customers and the company follows the American Society of Home Inspectors (ASHI) Standards of Practice.

What is the purpose of a home inspection?

The primary purpose of a home inspection is to locate any defects that might exist in a property. The defects could be structural, such as foundation issues, or mechanical, such as plumbing or electrical. In addition, we strive to protect our client’s investment by giving them an objective opinion regarding the property they are contemplating purchasing.

How are the standards and guidelines for a home inspection determined?

In Kentucky, a home inspector must be licensed through the state, and complete continuing education requirements. Kentucky gives home inspectors the option as to which standard of practice they wish to follow, and their education centers around that specific standard of practice. At K&I, we follow the American Society of Home Inspectors (ASHI) Standards of Practice because we believe they provide us with the most comprehensive guidance for inspecting your home.

What are the basic steps in a home inspection?

The first step for us is to meet our client at the property and review the Pre-Inspection Agreement. This Agreement details exactly what we will be inspecting and what we do not inspect. The best way to describe our inspection is a “non-invasive inspection of readily accessible areas“. This means we do not move anything to perform our inspection, and we are not able to inspect anything that is inside the walls, floor, or ceiling. Our inspection only covers areas of the home that are visible and exposed. That being said, we also look for visible evidence that may indicate a defect or problem hidden behind a wall, in the floor, or the ceiling.

After explaining our services to our client, we fully inspect the exterior of the home, including the roof, gutters, and flashing. We inspect the interior of the home, including the visible plumbing, facets, shut-offs, and drains. We verify that there are no observable issues with the electrical system, and look for features such as ground-fault-interrupt (GFI) plugs near water sources. We also inspect the furnace, AC unit, and water heater for signs of abnormal wear and we will let you know if any unit is beyond it’s useful life according to ASHI standards.

Will a home inspection reveal if the home has all of the necessary building and electrical permits?

No. It is not within the scope of the inspection to verify the home is up to the current local codes. We may point out that inspection stickers are missing, but we are not equipped to inspect the home for code violations. If you suspect there is an issue with building or electrical codes you must contact the local government office that issues permits and follow their instructions.

Do you inspect attics and crawl spaces?

Yes, as long as the space is readily accessible. We will not move furniture, boxes, or anything else that blocks the entrance to these spaces except for the normal coverings. It is very important that the homeowner clear their belongings from these access points before the inspection, but we are willing to return at a later date to inspect a blocked area if that is necessary.

Also, a home that as been winterized with the water shut off will not be able to be completely inspected. If either the electrical or gas is shut off, we will not be able to verify those systems. We will explain these limitations to our clients as the situation arises.

How do you report to your clients the results of the inspection?

Our clients receive a detailed written report that covers every inspected system. Also, we include a summary page that highlights any issues or defects we found during the inspection. We go over this report with both our clients and their Realtor to ensure they fully understand our findings. We prefer that our clients be present for the inspection so we can show them any issues in person and try to answer any questions they may have in the presence of the defect.

Keep in mind that the report will recommend that certain items need to be addressed and repaired, but we do not suggest who should make the repair, or how it should be made. We also do not make any repairs ourselves as it would be a conflict of interest. However, we do strongly recommend that you only use certified professionals when making any repairs to the home so you have receipts, warranties, and can be assured the repairs are made according to the current codes.

The ASHI website includes a frequently asked questions section that has additional information for buyers.

Mark Hunter is a licensed home inspector with K&I Inspections in Louisville, KY. He can be contact through K&I’s website, or by calling (502) 744-1967.Ā  K&I Inspections has four staff inspectors available seven days a week to fit any schedule.

Posted in Home Inspection | Comments Off on A Guide to Home Inspections in Louisville, KY

Buyers Letting the Perfect Market Pass Them By

Okay, so the title is a little mis-leading… In a perfect market they would be giving homes away, but if you look at it practically this is as close to an ideal buyer’s market as we are going to get. If you would have told me a year ago that I would one day be thinking that buyers were flat missing the most perfect real estate market in the memorable past, I would have just laughed. Who could possibly imagine?

Think about it… Basic supply and demand principals say prices will need to be adjusted in favor of the buyer for quite a number of homes due to the significant inventory of homes for sale. And this is actually happening. As always, the homes that have been correctly updated, in desirable locations, and priced fairly are going to hold value, but this is not the norm in our current market. It is more likely that you are going to find a home that needs some basic updating, and you can use that as a negotiating point.

Unfortunately, we have been inundated by media resources that seem to think promoting doom and gloom is the way to report a story. The story that is not being told is the fact all real estate markets are isolated and local. Louisville, KY is very, very different from San Diego, CA. There is little comparison. We have endured several market setbacks, including a high foreclosure rate, a significant increase in homes for sale, changing mortgage rules that make it harder to get money, and a few local economic issues, but for the most part we are still far from the negativity portrayed in the media.

My professional opinion is that we are going to see a few more years of a “soft” real estate market as we emerge from the mortgage lending debacle that hurt so many homeowners. During this time, buyers are going to be afforded very favorable conditions for committing to joining the ranks of homeownership. At some point in time our market is going to begin to appreciate at a much faster rate. Unless new mortgage products become available to allow buyers to keep pace with the market, it will be a challenge to exercise the same purchasing power now available.

What does all of this mean? Simple… If you have had any inkling of a thought of buying a home in the Louisville, KY area it is time to act. You need to get your finances in order, and give serious consideration to speaking with a professional financial adviser, especially if you are a first time home buyer. The cost is nothing compared to the confidence, knowledge, and peace of mind you will have when starting the process of buying a home. Here are a few more tips for buyers in this market.

You need to speak with a mortgage professional who can guide you through the murky waters of the current lending industry. No matter what you have heard, there are still a huge variety of mortgage products that can fit all manners of incomes and credit scores. In addition, there are down payment assistance programs and other alternative financing options that can sweeten the deal for the buyer.

You need to find yourself a competent, professional, Realtor (okay, I’ll volunteer for the job ;). You need a quarterback who can guide you through the transaction, protect your interests, introduce you to real estate vendors that can help you with all of the various facets of the transaction, and educate you completely about this market.

But most of all you need to, as Nike says, just do it! You need to take action now because you may need to save money for a down payment, work on your credit scores, or pay down other debts. In the meantime, you can visit this link to begin to view all Louisville, KY homes for sale, and then give me a call so we can begin to make plans for you to take advantage of this perfect market!

Posted in Buying a Home | 6 Comments