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Reading House Plans-Cost to Build House vs. Appraised Value
Just a few steps remain in your decision-making process of whether to "build or not build".
Prepare an estimate of the approximate cost to build your house.
Estimating the approximate cost to build the house you have selected, is discussed thoroughly on my Cost Estimating pages and a Cost to Build Calculator on my Getting Started page make the task of obtaining an approximate cost to build easy.
Note: You do NOT have to actually buy a set of house plans to use the Cost to Build Calculator. You just need the size and design of a particular house.
The next step in your decision to build or not build involves getting an appraisal of the final value, or market value, of your house. As I said in chapter 1 in my book(s), you can obtain a written appraisal of what your dream home will be worth after it is built on the land you have selected (or own). This is called a "Subject to Completion", or an STC appraisal.
You will be getting such an appraisal ordered by your construction lender, but you can order one yourself as soon as you have selected land, plans, and basic specifications. Look in the Yellow Pages under Appraisers or ask a Realtor or Mortgage Loan Officer to recommend one.
It is not expensive to order an appraisal and it is folly not to have at least a "Market Analysis" of what the house will be worth on a particular lot from a Realtor.
Now you can move on. Decision time! Based on total cost of land, labor, and material, vs. the appraised market value of the house when the house is completed, is building this particular house worth it? With the appraisal in hand, you will be able to make your decision intelligently by reviewing the following factors.
1. Are you saving any money?
2. Is the house over, or under, priced for the neighborhood? (Under is better!)
3. Can you revise your cost estimate if there is less than 25% savings? (Probably, see construction loan page)
Once you decide to move ahead with your dream house and have obtained construction loan and permanent financing (Home Mortgage), you can start on the fun part of seeing the work actually begin.
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