Buying To Build
Vacant land ranging from small lots zoned for a single home to large parcels for the development of luxury estates or multiple dwellings is available at various times in neighborhoods throughout Oahu. Buyers whose goal is to build a custom home, whether budget or up-scale, have several options to get started with their project. If they do not already own property, the first step is generally to contact a Realtor to find out about current listings in preferred neighborhoods in their price range. If the project is to be financed, they will also need to contact a lender that offers construction loans.
Once a prospect is located, a builder should be brought into the process to determine whether the size, zoning and orientation of the property will support the proposed home building project.
“An assessment by a general contractor is a critical phase of the planning process,” said Kim Green, project coordinator with Homeworks Construction Inc. “An unrealistic assessment of what it will cost to complete the home can result in insufficient funding since the amount of the loan is based on documentation supplied by the general contractor.
“Choosing an experienced, licensed, bonded contractor, preferably one with good references from clients, is the most important step because the loan will be based on the working drawings, specifications and contract. A low bid is just as unfair to the client as one that’s too high because if the project is underfunded it may not be completed and result in expensive litigation.
“When we first meet with a prospective client, we review our completed projects so they will understand what can be achieved in various price ranges. If the family is on a budget, we obviously will not focus on our luxury homes in Kahala or Portlock. We have numerous moderately priced homes we can show them to determine if the style of home they have in mind is comparable to one we’ve already built. If not, we ask them to describe their needs and give us a wish list. If their vision exceeds their budget, we can start working backwards to find ways to build them a new home for what they can afford.
“Design/build firms like ours are able to supply virtually all necessary services, so everything is covered in the specifications and the price is all inclusive,” Green continued. “Once a contract between the builder and the client is finalized, the lender assumes the key role in moving the project forward. Financial institutions that offer loans for new home construction have specialists on their staffs who focus on funding such projects. They have the experience necessary to determine whether the contractor’s cost estimate is realistic and what the ultimate value of the new home will be. The lender will call for an appraisal based on the contractor’s plans and specifications before finalizing the loan.”
Green noted that he works with a number of local lenders on construction financing for his projects. “Recently, Mike Lampmann from Central Pacific Bank worked with a Homeworks client to provide a construction permanent loan … a one time close that transitions to the permanent financing. Several real estate companies have contacted us regarding assisting clients planning to ‘buy to build.’ We have even conducted seminars at several Oahu brokerages to educate the agents on how a Realtor, builder and lender all work together as a team,” Green said.