Anderson Homes, LLC

How much will it cost per square foot to build your home in Port Angeles or Sequim?

Are you planning to build a new home? You’ve probably read some of the articles allegedly written by experts who willingly share the secrets to saving a lot of money. Saving $30,000 to $120,000 is a pretty attractive concept. Who wouldn’t want to save money like that?

The first rule is don’t believe everything you read. Of course, I’m laughing, because you are reading this article. But if I am telling you the truth, you can benefit from what you read here. Research, read, analyze, and do your due diligence. Make fully informed decisions before you decide how and where to build your next home.

The second rule is that you need to dig into facts yourself to discover the truth. Today I want to dispel a few misrepresentations that are all over the Internet and even in some print media. Truth is like a flashlight that exposes the contents in the corners of a dark room. Once you have seen what is in the corners, you can never forget the truth. But until you know the truth, your beliefs may be clouded. So let’s shine the light into the four corners of a room right now. Let’s look at false or only partially true statements that hide in each of these corners.

Corner No. 1: Be your own contractor and on a $300,000 project save $60,000 to $120,000. I talked with a home builder who has over 25 years of building single family homes, and his response to this statement was, “That would be a 40% profit. That is out of the park. I’ve never even made a $60,000 profit on a $300,000 project. Gross maybe, but certainly not net.”

There is so much more to working with a good general contractor that is not explained in a bold and exaggerated claim that a home owner can save up to 40%. In other words, there are several expensive traps for the unwary home owner who decides to be their own general contractor. What are these traps?

1. An honest and good general contractor brings value engineering in both design and the selection of materials. I recently interviewed a retired couple who had an architect design their beautiful home, but the architect did not control costs in line with their budget. Their contractor made suggestions, both in design and in the materials used, that saved them tens of thousands of dollars. This alone paid for the general contractor.
2. He brings quality control over the subcontractors and his own employees. I learned it takes a “trained eye” to recognize potential problems during the construction of a home. The average home owner will not have that eye that takes decades of experience. There are a thousand things that can go wrong and might go unnoticed from the excavation and foundation to the finish work. A good contractor is constantly supervising and correcting as construction progresses. Problems avoided is money saved later.
3. He has buying power the home owner simply does not have. A medium sized or large home builder will have huge discounts from suppliers, and no home owner gets these volume discounts. This could also amount to tens of thousands of dollars on an average home.
4. A few contractors offer fixed or guaranteed contracts and eat any overage. Most builders do not offer their clients a fixed contract or a guaranteed contract price. Find one who does. If his costs exceed the contract, he eats the difference.

Corner No. 2: You can use the local building department to prevent costly mistakes during construction. This is simply not true. Building departments are tasked with enforcing building codes, NOT providing quality control or cost savings tips to home owners.

Corner No. 3: You can save by using licensed and bonded contractors. This argument was actually made by one author who was writing about how to save money when building a home. A good general contractor only uses licensed and bonded subs, and even more important, a general contractor gets better rates from his subs than a home owner will get. This could also amount to tens of thousands of dollars.

Corner No. 4: Purchase your own materials by watching for sales and buying dented items. First, most people don’t want damaged appliances or materials. Second, buying appliances on sale can be a good thing, but it certainly isn’t going to save a fortune on the construction of the home itself. In fact, a general contractor who does any volume will be able to purchase materials at much larger discounts as already explained.

If you’re planning to build your own home, seriously consider the possibility that hiring a good, trustworthy general contractor may actually save you more money than if you tried to build your own home.

Special Affordable Home Program Through Section 502 of the United States Dept. of Agriculture
Call to ask how you can qualify to purchase a brand new home for $225,150 with low low monthly payments.

Limited funds are available in Clallam County, which means only a small number of homes can be built under this special program.  Call for an appointment now, 360-452-4641 and ask for Chuck.

Anderson Homes is an approved builder and this plan is an approved home plan.

The home is 1,250 to 1,275 square feet, built by one of the most experienced custom home builders in all of Sequim and Port Angeles, and the total price is only $225,150.  This is an amazing price, and you can bet that the demand will exceed the supply, so don’t procrastinate if you have an interest in owning your own home and can qualify under the income limitations.  You can earn up to $49,450 and still qualify if you meet all the requirements of the program.

To see photos and a floor plan of available homes, see Affordable Homes.

Some large national homebuilders are reducing the size of homes they are building in an effort to reduce the cost and make them more affordable.  KB Homes, Warmington Homes, and John Laing Homes all have scaled down floor plans as the industry seeks to stem losses due to falling home prices, tighter mortgage lending standards and skittish buyers.

For these builders the trend in smaller homes is a reversal of more than two decades of expanding floor plans, during which median size single-family homes went from less than 1,600 square feet to more than 2,200 square feet.  This can help reduce some costs, but it is not so simple.  While these builders have talked about reducing the cost to buyers based on reducing the total square feet of the home, the reality is that square feet is just one component of cost.

The cost of the land, the well (or water connection fee), the septic (or sewer connection), and many other costs of preparation and construction are completely independent of the square feet of the home.  Other costs are related, but not major factors.

Rick Anderson of Anderson Homes in Port Angeles, Washington, points out that the quality of materials used throughout the home and the level of workmanship are the largest variables.  A craftsman style home can be smaller (1,800 square feet) and still cost as much as a larger (2,600 square foot) home.  Customer choices for materials and options can move the cost per square foot up or down substantially.

Another option to keep costs down for customers today is to have their builder leave the basement, upper floor, or garage unfinished.  When they can afford to, they can come back and finish those rooms.

To look at a variety of floor plans, take a look at Anderson Homes Floor Plans.  As Rick Anderson likes to say, “A custom home is just a home built the way you want it.”

Homes and Land are still selling, albeit at a slower pace.  The northwest region of the U.S. has been one of the strongest real estate markets nationwide.  In Pierce County, for example, the median price of homes appreciated from $151,900 in 2000 to $254,221 in 2008.  In 2008 those sames homes are worth only 8% less than they were in 2007.  This is pretty darn good, all things considered.

Home builders are hurting across the country right now as the demand for homes has decreased, and the devastated mortgage market has not helped.  But there is good news in the silver lining here for people who have been planning to build their next home.

The good news is that the cost of building materials are down, and subcontractors have been shaving their bids down, too.  On top of that, the price of lots has been dramatically effected by the slow down, more so than existing homes.  Interest rates are low, and combined with the low cost of land and building, there has not been a better time to build a home in many years.

Some builders are offering incentives.  For example, Rick Anderson of Anderson Homes in Port Angeles, Washington, is offering referral fees of up to $2,500 to those who send him business.  Builders are also very competitive with their bids and the services they offer.

So what are you waiting for?  The bottom?  By the time the bottom of the market is officially recognized, interest rates will already be climbing above where they are now, and builders will be getting orders, and material costs will find a new, higher, equilibrium.

We are in a buyer’s market in Sequim and Port Angeles for existing homes and land, and most people know this, but something many people do not realize is that we are also in a a great market for building a new home.  The cost of building a new home is lower than last year and the year before.

There are three major reasons the cost of building a new home is at such a low point right now:

1. The cost of building materials has dropped;
2. Land prices are lower; and
3. Subcontractors and General Contractors have lowered their profit margins.

Premier House Plans magazine cited new figures from the National Association of Home Builders:

Despite the gloom surrounding the housing landscape at the moment, there are appealing bright sides for saavy investors and homeowners who are considering construction of a new home from house plans.

First of all, the cost of key home construction materials has declined dramatically–and that rate of decline is slowing.  As of the first quarter of 2008, framing lumber is 65% cheaper than it was two years ago, and 15% cheaper than a year ago.  Drywall producers report a 36% decline in prices since last year, and a 5% decline since last quarter of 2007.

While sales of existing homes are down, sales of vacant lots are really down, and so if there ever was a buyer’s market for land, it is now.  The inventory is high, and buyers are few and far between.  While a developer is not likely to sell a lot for less than his own cost basis, he will shave profit to get some cash flow coming in the door. And with business so slow, of course, contractors are willing to shave profits to get business.

If there was ever a time to buy a lot and build a new home, that time is now.  It’s been said that once a company shows up on the cover of Forbes magazine, the time to buy its stock and profit from its success is long past.  The same will be true of building your home.  By the time everyone agrees that the market is going to recover, and the banking system gets its equilibrium back, and the mortgage and real estate markets get their legs back, interest rates will already be on the rise and lot prices and construction prices will be back to normal.  The opportunity is a small window in time, and that time is now.

How many new homes are being built so far in 2008? Has the slowing real estate market and the troubled economy hurt the building industry? No doubt it has, but the picture is brighter than I might have thought just by reading headlines and listening to the talking heads.

I’ve tracked building permits issued by Clallam County from 2005 through September of 2008, and here are the results:

I’ve included data for single family stick-built homes, manufactured homes, and duplexes. We see again proof that 2005 was a banner year in real estate with 359 permits issued for homes. Since then we have a steady decline, and for the first nine months of this year, we have 160 building permits. Annualizing this number would give us a rough equivalent to the number issued last year, but I suspect that the remainder of this year will see fewer permits with the year ending at about 190 building permits.

This is good news. You would have thought no one was planning to build a home, but in fact many are, an average of about 17 each month. That’s not a big number, but in little Clallam County, that’s a positive number in the worst real estate market in decades.

I’ve included data for manufactured homes to show they are still a factor for many retired couples moving here. I also included duplexes only to show that we have virtually no duplex market here at all. That may answer a few questions for investors who email me asking about duplexes.

[Source of Data: Olympic Listing Service]

How dangerous is mold and how important is indoor air quality in a home?  We all know it is important to eat right, drink plenty of water to keep the body hydrated, get regular exercise, and get enough sleep every night  But most people don’t do much to make sure the indoor air quality of their homes is safe to breath night and day.  The importance of the indoor air quality in our homes has been highlighted by stories of near death experiences by people living in homes with excessive mold, although for the vast majority of us, the symptoms are less dangerous.

I learned many years ago about the dangers of mold and how it effects all of us differently.  In a case I litigated involving seller misrepresentation because of dangerous levels of mold, my Seattle expert testified that each person’s body reacts differently to high levels of moisture and mold in a home.  Most do not notice, many do not have any symptoms, some have minor issues they never really connect with indoor air quality.  But the few have repeated health issues and problems.  Numerous visits to doctors, various prescriptions, and all kinds of guessing by doctors often produces little or no relief.  When there is a mold problem in a home and serious continuous health issues, very few people ever connect the dots.

Molds typically grow in homes that have excessively high moisture, which can come from a variety of sources.  Potential health problems including asthma, sinusitis, and infections. People sensitive to molds are particularly uncomfortable on cloudy, rainy, damp days. Molds may also play a major role in in many related illnesses. Allergic reactions can be caused by molds. The most reliable physical findings of mold allergy are dyshidrotic eczema, accompanied by tiny blisters on the palms of the hands. Other symptoms are nummular eczema that looks like ringworm.

Approximately 25 to 30 years ago, many homes were built boasting about how air tight they were, and how much money they would save owners on the heat bills or the air conditioning bills.  Shortly after these “good cents” homes were built around the country, it was discovered that they were so tight without proper indoor and outdoor air circulation that mold was growing inside the walls and throughout the houses, creating some of the most polluted air a person would breath in a 24 hour period.

Not all home builders give air quality the highest regard, which not only means paying attention to the home design and materials being used in a home, but also working with heating contractors to make sure that that there will be a good air exchange system that will operate automatically for the homeowner 24/7.  If you are having a home built, talk with your homebuilder about what he does to be sure that your home design and heating and circulation system will not only be efficient but healthy.  Don’t accept simple answers that any salesman could learn to give.  Dig deeper.  Do your due diligence.  It’s not just your money–it’s your health.

There are some obvious physical signs of excessive moisture that should be red flags for you.  Here are a few:

1. apparent mold build-up on windows, especially around the edges in the seams and wood;
2. water stains on the window sills;
3. moldly spots on sheetrock behind sofas, behind or around toilets, showers, and wash machines; and
4. in basement areas where the smells given off by molds are most apparent.

Just because you don’t have the obvious physical signs of mold does not mean you have good air quality.  If you are concerned about mold exposure, laboratory tests are available. A simple at-home test allows you to detect the presence of mold through an easy to use petri dish collection process, but this kind of complicated testing should be performed by a licensed and clinically certified laboratory.  One word of caution: air samplings may not indicate mold spores, especially those that are not airborne and molds that are dead - which are just as toxic as live molds.

Here are some great mold prevention tips Better Health USA:

Important: Always follow instructions of commercial cleaning products and wear an approved mask if you are sensitive to chemicals.

1. Use a dehumidifier in damp areas (above 50% humidity) of your home. Change the water frequently in the dehumidifier and disinfect to prevent mold from forming.
2. Peform diligent housekeeping, clean with a solution of hot soapy water and 20 Mule Team Borax or bleach (if the item is colorfast). Use gloves and wear a mask to limit your exposure to chemicals.
3. Dry and/or replace water damaged areas and items within 24-48 hours to prevent mold growth.
4. Look for mold or mildew in attics, basements, closets, bathrooms, dirty clothes, hampers, garbage cans and children’s soiled stuffed toys.
5. Check the insides of shoes for mold and scrub and dry thoroughly in the sun if possible.
6. Try to improve air circulation in the attic, basement, closets and bathroom.
7. Wipe down the refrigerator and freezer door seals. Clean the refigerator often throwing away left-overs and old produce.
8. Dry damp areas in the kitchen, laundry room, under the kitchen sink and under the lid of the washing machine.
9. Clean the lint filter after each load in the dryer.
10. Clean and/or replace air conditioner filters periodically.
11. Clean ceiling fans once per month.
12. If closets are damp, keep the light on to prevent the growth of mold and mildew.
13. Wash pillows and blankets often. Note: Feather pillows are not recommended for feather-allergic individuals! Hypo-allergenic pillows are available.
14. Outside, have fallen leaves, decaying plants and compost heaps removed.

More information on molds may be found at EPA’s website, Indoor Air - Molds

In Sequim and Port Angeles, your health conscious homebuilder (and green builder) is RickAndersonHomes.com.

When shopping for a new construction home, few potential buyers get into the important details that would help them make appropriate comparisons. One item that most buyers consider but don’t evaluate deeply enough are the standard items included in the price. Some builders are notorious for what they do or do not include. National builders, such as Toll Brothers, will include top of the line kitchen packages, efficiency packages, and floor plans that incorporate a lot of flair and distinction. At the other end of the spectrum, in most markets, KB Home will offer you next to nothing beyond the basics. Many buyers will be put off by KB and fall in love with the builder who offers more, even though the pricing per square foot is higher. I would strongly recommend that buyers evaluate the entire value of the home/property as a whole. This is very important. You want to compare apples to apples, not apples to oranges.

Here is my recommendation for evaluating and comparing new construction home in an apples-to-apples way. First, I would get a list of ALL the builder’s options with pricing included. Now this may seem easy, but when you’re trying to compare two or three homes you may be considering, it can be a little daunting. As a buyer (or as a Realtor trying to make comparisons between builders for clients), you will need to take into consideration kitchen sizes and floor plan layouts, and then estimate the savings or the advantages that each builder offers. The following is a simple example. In real world situations, usually over 2000 choices need to be made when purchasing a new home.

KB Home offers a 2500 square foot home with laminate countertops, vinyl flooring in wet areas, and 8-foot ceilings. Offered at $234,990.

Pulte Homes offers a 2100 square foot home with laminate counters, tile floors (13×13) in wet areas, and 9-foot ceilings. Offered at $239,900.

Pepper Viner offers a 2200 square foot home with granite slab counters, tile floors (20×20), 10-foot ceilings complete with 42-inch upper cabs, etc. Offered at $255,900.

So which house is the best overall deal (assuming you like them all equally)?

Evaluating the KB: the 9-foot ceiling upgrade package that makes the doors 8-feet tall (instead of 7ft) and increases the size of the upper cabinets in the kitchen runs $5500. To upgrade to nice 18×18 inch tile will increase the price by $3200. Granite slab counters increase the price by $2500. Total increase in price to get the home acceptable to you is now $246,190. In dollars per square foot, it’s now $98.48/per square foot. (246,190/2500=$98.48/square foot)

Evaluating the Pulte: upgrading the counters to granite slab runs $2200. (Pulte will usually cost less on upgrades because they don’t offer as many options, lowering costs.) 18×18 tile will cost $2750. Unlike KB, they already giving you credit for the basic 13×13. This brings the total price of the Pulte Home to $244,850, which is $116.59 dollars per square foot.

Evaluating the Pepper Viner: Everything is how you want it. The final price is $255,900, or $116.32 per square foot.

In this very simple example, we have found out that the KB is much cheaper per square foot — almost 20% cheaper. The Pulte seems to be the worst deal of all. Is the Pepper Viner worth 20% more? Assuming you can afford it, here’s how I break it down for my clientele. The KB is far and away the cheapest home. However, what was not mentioned is that the 2500 square foot model is the largest home they offer in the neighborhood, meaning that your home would be surrounded by smaller homes. In a perfect world, you would want the exact opposite. The Pepper Viner is the smallest model they build. Their homes start at 2200 square feet and they go up to 4100 square feet, meaning that you would be surrounded by larger, more expensive homes. This is very important to consider. In addition, the Pepper Viners will usually have higher-end buyers who put a lot of options in their homes. If you choose to take it with no upgrades, this means that again you have a smaller, less expensive home, surrounded by bigger and more expensive ones. Now this difference is worth a lot! There are other factors to consider as well. Are the Pepper Viner lots much larger then the KB’s? Is the Pepper Viner’s home in a gated community? What incentives are the two builders giving? It’s hard to attach a dollar amount to some of these. In my opinion, it could be worth 5% to buy a smaller home surrounded by larger, more expensive homes. If the community is gated, some appraisers will add on 10% to a home. Gated communities are far more in demand than ones that aren’t. So, like I have stated previously, just looking at a price and a model home will do little for you as a buyer. One must dig much deeper to truly evaluate the entire builder/property being offered. In my professional opinion, you would be doing yourself a favor to hire a Realtor who has a lot of knowledge in new construction to help you go through all the details when making comparisons.

When negotiating with the new homebuilders, also keep in mind that you can use these comparisons to argue for more incentives and a better deal. I know I would be using them to argue on a client’s behalf. Builders know what everyone is doing down to the cent, and when buyers are smart enough to also acquire this knowledge, they command a lot of negotiating power. They know a builder’s weaknesses. Builders LOVE to use the fact that they operate in a very complex industry that few understand completely. They use this knowledge to beat back consumers who think they know how to negotiate but don’t have any idea how to put together comparisons or know how much upgrades and incentives truly cost that builder. It goes without saying that these comparisons and builder knowledge offer buyers immense power that will save them thousands if not tens of thousands off the price of their brand new home.

[This article reprinted with the author's permission.  He is Michael Oliver.]

Since this is a buyer’s market, it’s not a great time to be selling your home, but if you own a lot, and you are planning to have your home built in the near future, this is a good time to start the process of selecting a builder and planning your home.

Most people plan to finance the construction and long term mortgage of their home, and this is why it is a good time to get started.  Interest rates are at historical lows, and most experts are saying that interest rates are headed upward in the months ahead.

At an interest rate just 1.0% above the current rate of 6.52% on a 30 year fixed, your mortgage payment on a $300,000 loan would increase by $200 per month.  You would pay $72,000 more in total interest on your loan than you would at today’s interest rate.  At an interest rate 2.0% above the current rate, your mortgage payment on a $300,000 loan would increase by $400 per month, and you would pay $168,000 more in total interest on your loan than you would at today’s interest rate.

Learn more about what we can do for you on our website at RickAndersonHomes.com.