Monday, October 26, 2009

In Limbo

I find myself using the phrase "in limbo" a lot lately. The term originated as a Roman Catholic phrase describing "the abode of unbaptized but innocent or righteous souls, as those of infants or virtuous individuals who lived before the coming of Christ." It has since evolved into a term that means "any intermediate place or state of neglect or confinement."
We seem to be "in limbo" with our current project---not that we are being neglected, but rather because we are seemingly stuck or "confined" at the particular point in the project. As the builder for this job, we are the party "between" the architect and the homeowner. There are several cosmetic design issues that the homeowners are having difficulty visualizing. One specific decision involves exterior stonework. Until the homeowners choose the type of stone they'd like to use, the architect cannot finalize the drawings. Until the drawings are finalized, the builder (we) cannot complete the final quotation and present the contract for signing. As you can see, we are "in limbo."
Fortunately, in this case, the three parties are all working together on this stone decision. On Saturday, Barry went with the homeowners to the stone supplier to help them get a better understanding of the material. Yesterday he drew diagrams to help them visualize the construction part of the stone work. He'll probably do a mockup of a small part of the stone wall to also help them make their decision.
The more time Barry devotes to helping the homeowners, the more I realize where the modern-day usage of the term "limbo" comes from. Maybe you've played the "Limbo" game where you bend over backwards and try to pass under the stick....Well, we'll BEND OVER BACKWARDS to help make decisions easier for our clients. We'll do the Limbo to help get things out of limbo!

Friday, October 16, 2009

Getting your Financial House in Order

It occurred to me that I had blogged about pre-construction activities that the architect and builder do, but I have neglected to write about what the buyer needs to do ahead of time. If you are planning to buy a house, your work begins six months to a year before you're ready to go house-hunting. Your most important task is to get your financial house in order first. Then you can start dreaming about that house.
The first thing you should do is to check your credit report. You can get a free credit report online. This report and the FICO score generated by the report are your keys to getting a mortgage. FICO scores are between 300-850...the higher the better. A score above 650 usually assures you of obtaining a good interest rate.
The biggest component of your credit report that determines your FICO score is the length of your credit history. You need to show the lenders that you are a good risk. You need to have a history of paying on time and using just a few credit cards. It can work against you to apply for every credit card you're offered. Limit your options, pay on time, and carry a low or zero balance.
Once you get your credit report, review it carefully and clear up any questions or discrepancies. This may take time so don't wait until you're ready to apply for your mortgage to fix any errors.
The house you can afford depends on your current income and your current debt. Check out an online mortgage calculator so see what price range fits your budget. It's possible to have a great salary, but lots of debt and the bank will reject you. The lender wants a complete picture of your financial situation.
Another major consideration as you get your financial house in order is to make sure you have easy access to your down payment. You'll probably need 20% of the appraised value of the house you want to buy. The lender won't want that in the form of a gift from a family member. They need to know that YOU have the money. Increase your saving program and make sure your money is where it needs to be.
You're almost ready to start house-hunting, but first you need to meet with a lender. This is a good time to get "pre-approved." The bank will take your information and run the numbers to give you a snapshot so that you know in what price range you can afford to shop. This is the time you'll need your financial paperwork in order. Find all of those statements and pay stubs in this early stage of the house-buying process, and you'll save yourself a lot of stress later on.
Here's a list of things the bank will probably need:
1. Bank statements from the last 3-6 months
2. Pay stubs from the last 2-3 months
3. Monthly loan statements for cars, other real estate, etc.
4. W-2's and tax statements
5. Property tax information
6. Transcripts if you're a recent graduate
7. Proof of current balances from utility companies
8. Other income information such as alimony, social security, child support
9. Driver's license, social security card
10. Car titles if you own the car 100%
11. Retirement, 401-K statements
12. Statements for stocks, mutual funds, IRAs
13. 1099 Forms if you received any
14. Your last 3 credit card statements--with low balances (I hope)
Don't get nervous if the bank wants more information. The current "credit crunch" has resulted in much closer scrutiny of lenders and their procedures. Many new regulations are in place to protect both the lender and the borrower so extra cooperation is required of all parties as you work your way toward finding your dream home and closing on the property.

Sunday, October 11, 2009

Pre-Construction Activities

So many things have to happen before actually breaking ground on a new house. Barry has been working with some potential clients for over a year, and we're getting ready to finalize the agreement. During the past year, there have been multiple meetings with the homeowners and architect. Barry has been involved in quite a few of those meetings and has met several times at the property to discuss site issues. Because the home will be built on the site of an existing farmhouse, there are several phases that must be completed prior to application for the actual building permit. In this case, the existing farmhouse will be demolished and the new house will be built on the site. The old house, however, contains small amounts of asbestos so an abatement contractor must remove the asbestos before demolition can take place. The new homeowners also want to salvage the hardwood flooring from the old house to reuse in their new home. Once that is completed, the demolition can begin.
In the meantime, the architect's plans are being distributed for final quotations from subcontractors. Barry installed a temporary electric pole that has been inspected. The electric company has installed a meter. An engineering firm will complete formal site plans and survey for permits. The homeowners are working with the lender to firm up the financing.
The excitement is building, but we're still weeks away from moving dirt. Nevertheless, it's fun to have a new project on the horizon.

Thursday, October 1, 2009

Standards of Trust

Several years ago we had a new home client that I would call "thorough." As we progressed from initial design to finalized contract, the questions multiplied. Mr. B. needed a detailed explanation of every specification and procedure before he felt comfortable. As much as we thought we were building a good relationship with Mr. B., I never really felt like he believed what we told him. After several months of negotiations and plan revisions, both parties were finally ready to sign the contract. Even though Mr. B. had studied the contract ahead of time, he continued to ask for explanations and clarifications as we reviewed each line. We were more than happy to oblige. The last thing we want is to enter into an agreement with someone who is not ready. Near the end of the closing, I remember Mr. B. specifically asking, "How do I know you will do these things that you're promising?" I answered, "That's where trust comes in."
You hope that throughout the negotiation process, you get closer and closer to meeting the other party in the middle. In spite of efforts from both sides, you may never actually meet. There may be a slight gap that can only be filled by trust.
For the last 21 years, we have been committed to the principals of the Better Business Bureau. Recently the BBB developed a unique, summarized set of eight business "Standards of Trust." The Better Business Bureau Standards are:
1. Build Trust
2. Advertise Honestly
3. Tell the Truth
4. Be Transparent
5. Honor Promises
6. Be Responsive
7. Safeguard Privacy
8. Embody Integrity
We do our best to uphold these standards so that folks like Mr. B. feel comfortable entering into an agreement to remodel or build a home with our company. By the way, Mr. B. ended up totally happy with his new home and remains one of our best references (and friends) to this day.