Estimating Home Building Costs
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Chapter 1 
The Building Site

The building lot, or building site, as it will be referred to in this chapter, may or may not be a part of the house cost. Considerations of site selection are included in this book for speculative builders who buy land and build houses for sale. The cost of the building site is not a construction cost unless the house is built for sale. This chapter will serve as a guide to evaluating site costs, which include purchase price of the site, recording and legal fees, engineering fees for the survey, interest, taxes, liability insurance and other expenses incurred before the house and lot are sold.

All too often the builder is content to build the house without considering serious disadvantages of the site. A wise builder considers many conditions that add to the value of the finished home. When the house has been built and the property is appraised, the appraiser will look for the following:

1. The direction of growth
2. How the property fits into the growth pattern
3. Streets' condition
4. The demographic and economic indicator for the area, such as population, employment, vacancies, rate of growth or decline of area and the reason why
5. Accessibility to schools, churches, shopping centers, recreation areas and public transportation
6. Preservation of trees on the site (trees can add as much as 25% to the appraised land value)
7. Terrain
8. Adequacy of water supply
9. Adequacy of sewage disposal

The Move Back To The City

The move to distant suburbs slowed in the mid - 1970's because of higher transportation costs. Urban areas provide established neighborhoods, shopping variety, nearby medical facilities, and a full range of cultural opportunities lacking in distant suburban tracts. Urban construction means that sewer and water connections are usually cheaper, and streets, walks and utilities are already in.

Building in urban areas means the builder has fewer building sites and may have to build on scattered lots. He will have to look harder to find these sites and will probably have to reconsider land he once passed up: lots in older sections of town, and the neighbor's lot that has been used as a garden for many years. He will probably want to take another look at hillside sites that were not considered desirable. These lots can become valuable building sites, with proper planning.

When shopping for building sites in the city or suburbs, beware of overinflated prices such as those caused by rumors of new industry. Get the facts by checking the record of sale at the county recorders office. Selling prices are usually indicated by the taxes paid on the transfer. Take the legal description of the land to the agency where deeds are recorded. If the legal description and the name of the owner of the land are not known, inquire at the local taxation department. You'll need to know the names and addresses of the surrounding property owners. The agency responsible for property taxes will give you the name and address of the owner and the legal description of the property. For a nominal fee any citizen can check these records. The amount of tax paid indicates the value of the property transferred. The value of the stamps is related to the selling price of the property, and varies with each locality. The personnel in the office where these deeds are recorded will tell you how to compute the selling price of the land.

The selling price of adjacent building sites should not necessarily determine how much the builder pays for his building lots; it is only a guide. But note carefully that a building site with the lowest selling price may be the most expensive after it has been developed. This does not always hold true; sometimes reclaimed lots can be bought and developed into ideal building sites for less than the surrounding lots. Estimate your development costs and to see whether other more expensive sites may actually be more economical.

When looking for buildable lots in or near the city, check for the following:

1. One-family dwellings should not take up more than 40% of the lot. Be sure the lot is of a size and shape so the house planned will fit without violating any local building regulations.
2. The building site should be large enough so that at least one of the front, rear or side areas can be used for drying clothes, landscaping, a driveway and outdoor living.
3. There should be easy access to and circulation around the building. Can the house be maintained without trespassing on adjoining property?
4. There should be sufficient room on the property to assure a safe and sanitary installation for individual water supply and sewage disposal system if needed.

Zoning ordinances vary from community to community, but they are all written to protect the health and safety of the occupants and to ensure the structural soundness of the buildings. Listed on the two prior pages is the building code for one city showing the restrictions for two different zoned residential districts, the Residential Limited, District R-I and the Residential Limited, District R-2. The zoning requirements shown here are probably similar to the code where you build.

Check Before Buying The Building Site

When a builder buys a site to build on, he hopes to sell the house and lot with a minimum of delay. It is crucial that you consider carefully all the elements of the site before you buy.

When you look for building sites, have a general idea of the type and price range of the houses you want to build. If your houses are cheaper or more expensive than the average house in the neighborhood, you could have a sales problem. Few people want to live in the cheapest or the most expensive house on the block. A safe rule is to keep your house within 15 to 25 percent of the average price in the neighborhood.

Location is an important factor in the value of residential houses. The neighborhood affects the cost of the land which ultimately affects the cost of the house that is built on it. Buy in growing areas. Proximity to schools, shopping centers, public transportation, hospitals and recreation areas is very desirable. Check vacant houses in the neighborhood. If there are several vacant houses in the area, it may be caused by a breakdown in zoning regulations and deed restrictions.

Before purchasing the building site, it is always wise to check zoning regulations with the local planning commission. The regulations may not be enforced. Also check with them on any future plans they may know about that affect your decision to buy the land. A building moratorium may be in effect or may be planned in the near future. A no-growth area can be disastrous financially. Idle land is a 100% liability. Taxes, interest, liability insurance and maintenance are constant expenses that will have to be added to the cost of the building site. If there is a moratorium in the area, delay buying the land until you have assurance from the proper authority that the moratorium will be lifted in the near future. Take options on the land if necessary.

If you are buying for the future and not the present, you should have the answers to the following questions before buying:

1. Can you afford to pay the taxes, interest and other assessments on the land until a house is built and the property is sold?
2. Is the area growing in the direction where you want to buy? If so, is the growth residential, industrial or commercial?
3. Are any highways planned through this area? Check with the highway department for this information.
4. What are the present zoning regulations? What future plans does the local governing body have for the area? The local planning commission will have this information.

There are few areas where there are enough building sites available to select the lot of your choice and orient the house on the land to obtain maximum energy efficiency and maximum livability. Some of the following types of building lots may be worth taking a second look at:

Wooded areas are expensive to build on, but with the proper planning they can become beautiful building sites. They will have a much higher resale value when developed.

Bare land, or land with few trees is cheaper to develop and build on, but landscaping is much more expensive.

Hillside lots usually have a view that can never be taken away. It can be developed into beautiful sites. Some of the most expensive houses built today are built on these lots.

When you have found the land and decided to buy it:

1. Obtain a reputable attorney.
2. Check the courthouse records to verify if a clear deed can be obtained.
3. Check the present and future zoning regulations for the area.
4. Check with the highway department to see if there is a possibility of a highway being built in the foreseeable future on or near the property.
5. Check the present and projected tax rate.
6. Check with the utility companies for getting service lines to the property if they are not there.
7. Have a thorough knowledge of the building codes, deed restrictions, easement rights and any other building requirements for the land.

The cost estimate sheet for the building site is designed to tell the builder what the total cost of the land will be by the time he sells it. Costs other than the site are included in your land cost. Some of these additional costs are explained in the following paragraphs.

Recording and Legal Fees

In many states a lawyer is required in all real estate transactions. A deed must be prepared and recorded. The seller (grantor) normally pays for the cost of preparing the deed, but the buyer (grantee) bears the expense of transferring the property. The grantee will have to pay for the deed of trust (if there is one), the recording fee, his share of the transfer tax and the title check.

The title should be checked for any mortgages, mechanics liens, easements, or other encumbrances that may influence your decision to buy the land.

If the building site is on a private road, find out what assessments will be made for maintenance, snow removal, and utility lines. These expenses will have to be paid and they will add to the cost of the land. If the building site is on a private street, it should be protected by a permanent easement.

The attorney should check the present and projected tax rates, and can help you obtain a thorough knowledge of the zoning restrictions and other building requirements.

Engineering Fees

If the lot corners are missing, engage a registered land surveyor to survey the lot. Make sure the lot described in the deed is the lot you think you bought. There are many instances of people building on the incorrect lot. If this happens the building will have to be moved or the building site purchased at whatever price the owner demands.

The engineer can advise you on conditions on the lot that will pave a direct bearing on the construction costs. An example of such a condition would be topography of the land as it affects the grade of the driveway, walks and drainage. Plans for the outdoor living area may have to be revised because of the topography of the land. The building site must be free of hazards that may affect the health and safety of the occupants, or the structural soundness of the building. Such hazards include subsidence (excessive settlement from unstable soil, high ground water and springs), flood, and erosion. Underground springs cause hydrostatic pressure which results in leaks in basement floors. High ground water will cause the additional expense of waterproofing the basement, involving weeping tile, sump pumps, and waterproofing foundation walls. Springs and high ground water may require raising the elevation of the finished floor.

Run-off water may cause damage to the surrounding property. Many zoning regulations prohibit the construction or erection of any building or structure within the city unless there is in force an approved erosion and sedimentation plan. It may also be unlawful for any person to clear, grade, excavate, fill, remove topsoil from or change the contour of any land in the city unless there is an approved erosion and sedimentation plan. It may also make it unlawful to remove or destroy trees, shrubs, or other plant life without prior approval. Here again the engineer can advise you. One helpful note can save the builder some money: If storm sewers are required use the smallest size permissible. Any decrease in the size of the storm pipe is an increase in savings in development costs.

When an on-site sewage disposal system is required the lot must be large enough to meet the local sanitation requirements. The soil must be tested for water absorption (percolation tests), a job for the engineer.

When the engineer locates the corners of the lot he should use permanent markers rather than wooden stakes. This may cost a little extra money now but it may save the expense of relocating the corners later because the wooden stakes were knocked down and lost.

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