Adding Value to the Custom Home-Building Process

Jon Mand


Greg: Welcome to this edition of the Louisville Luxury Homes Podcast Series, brought to you by Jon Mand with Lenihan Sotheby’s International Realty. Jon, as always, good to see you.

Jon: Great to see you, Greg.

Greg: I have a question. Last time we talked, we were discussing some of the market statistics for 2016, and towards the end you talked about new construction and how sometimes they didn’t really show up in statistics. I’m curious, what is your role, or what is a Realtor’s role in buying new construction? Is that something that people should consider? Because I know a lot of people go around a Realtor and they decide not to use a Realtor and sometimes they just buy a lot. What’s the best way, in your opinion, to put that whole process together?

Jon: Well, there’s a lot to unpack there.

Greg: I’m going to ask you a question for five minutes and then you can just go.

Jon: Yes, exactly. Yeah, you’re right. Oftentimes an individual decides on building a custom home and they’ll go out and find a lot, purchase the lot and then often just try to do it on their own. Depending on their experience with real estate agents, that may be the wisest decision for the typical agent. I don’t mean that to disparage other professionals in the industry, it’s just that new construction is a different animal than the existing single family home sales. Most real estate agents, they’re experts in values in a neighborhood and can comp out your property and do all this marketing, and everything, but when it comes to a new construction it’s just a very different process and one that a lot of people are not very familiar with. I think that’s why people often just do it themselves because there’s not necessarily a lot of value-add there. Obviously our office and experience in the new construction segments are very different, and I think there’s a tremendous amount of value that we bring to the table for people that are looking to build a new home.

Greg: We’re talking about the process where someone is starting from scratch, so not a home that’s halfway completed.

Jon: Exactly.

Greg: You’re talking about from the very beginning.

Jon: A custom build from start to finish.

Build or Buy an Existing Home?

Greg: Building a custom home. What’s the value add? What would Jon Mand bring to the table here? If I’m looking, what are you going to help me with?

​​​​​​​Jon: Well, let’s start at the beginning. Should you build a house or should you buy a house? There’s going to be a premium typically on new construction compared to the values that you can get on buying an existing single family home. What is that premium? Does it make sense to pay a little bit extra and get it exactly the way you want? That’s a good first start, is to get out there and look at the existing inventory and make sure that there’s nothing on the market that checks most of your boxes, that would suit your needs at a much lower price point before deciding to jump in and do new construction.

Greg: Have you found that a lot of people like the idea, that it sounds cool, and they say “I want to build a new house,” and you start asking a couple of questions, and it turns out they can actually find what is already available, and they don’t realize how difficult it can be? Not every new construction job is tough, but sometimes it’s a little harder than they might think.

Jon: Yeah, oftentimes I found that when people say they want to build, they typically end up building. That’s different than when people often come to me and say, “Hey, I want to buy a house and I’m okay tackling a project, a renovation project.” Usually they’re not okay with tackling a renovation project when we get into the process, but when they come to me and they say, “Yes, we’ve decided we want to build,” it’s more just confirming that, yes, this is right course for their situation. We go through that and just deciding if it makes sense to build, and understanding what that cost is going to be versus buying existing and pulling the trigger on that first step is very important.

Where Should You Build?

Then at the point you’ve decided you want to build, where should you build? There’s a lot that goes into that. What kind of lifestyle are you looking for in the new home? What kind of value are you looking for, the all in costs on the new property? Making sure that we select a neighborhood that’s going to support that value long-term, that you’re not going to be the big house in the neighborhood, or out of place where you buy into a neighborhood only to find the prices reset around you in a year or so down the road, and everybody ends up building houses that are half the size of yours. Making sure that you’re protecting that long term investment is a critical component too.
Greg: How do you go about doing the homework ahead of time to know what some of these neighborhoods are? How do you accumulate that knowledge to protect me from, like you said, a subdivision revaluing their builds, or something along those lines.

​​​​​​​Jon: Well, it’s going to be based on our experience in the market, obviously. If we go into a neighborhood that, an untested model, or that we don’t think the markets there, being able to share that with a customer, that “Look, what they’re saying is going to happen sounds great, but that has not been our experience, and you might want to sit on the sidelines a little while and just watch this play out.” The strength of the developer; making sure that you’ve got a reputable developer for the neighborhood, that has a history of doing what they say they’re going to do, protecting the home values, protecting the architectural integrity of the neighborhood, those are huge considerations as well.

Finding The Right Lot For Your New Home

Greg: Okay, when someone nails down an area, and you help them, maybe even down to the neighborhood, subdivision level, what then?

Jon: Then we’ve got to find a lot for them to build on. Depending again on the style of house that they’re looking for, that’s going to be one of the easier components. Do they want a walk-out lot or do they want a flat lot. Being able to evaluate these things, filter them for the clients and know that what I’m sending them is going to be relevant. It’s going to fit the house, it’s going to have enough frontage to do the size of the house that they want to do to have the streetscape that they want to have, and then also have the floor plan work with the lay of the land. You can certainly rack up some costs pretty quickly in site work if you buy a lot that’s not necessarily suited to what you’re intending to build.

Greg: Where does a builder come into play? Do people typically already have a builder in mind? Are you bridging that information gap because you have a relationship with so many different builders? How does that work?

Jon: We’re often involved in that process. Even if somebody comes in and they’ve got a builder in mind, they often look to us because we obviously sell more vacant land for residential building than any other brokerage in the entire community. We’ve got great relationships with all the high-end custom home builders, and we know the good ones, quite frankly. People often bounce their ideas off of us. We’re always happy to make suggestions as well and refer those builders that we’ve had good experiences with.

In terms of getting the builder involved, that’s a great time. At that point we’ve decided to build, and we’ve also decided general areas of town that we’re interested in. During this part of the process we’re pulling the builder into the conversation to start looking. As we get into identifying lots.. obviously, I’m not a builder, I don’t purport to be one. So it’s great to have a builder involved at this point to help give some ideas, their input on the lot. When we’re deciding what looks like a great home site for somebody, that’s certainly a value-add.

Incorporating Resale Considerations into Your Design Process

Then as you get into the design of the house, with a builder or with an architect, having your real estate agent involved at that point can be very helpful. Everybody builds these homes and says, “This is my forever house,” but I can’t tell you how many listing appointments I go on and people say, “Well we built this as our forever house two years ago, but now we’re moving.” These things happen. Life happens. Having an agent involved on the front end to say, “Okay, this is exactly what we want. What do you think of it?” I have clients do that, they send me their plans all the time. I’m happy to look at it and say, “This look awesome. Exactly the way you guys want it, but if you ever had to sell it you may want to think about this, that or the other.”

Greg: You’re saying the best use of you as a professional is to hire you all the way through the process, not to help with find a lot and not talk to you again.

Jon: Yes, exactly. I mean, there’s a lot of steps along the way. Again, we’re in this market every day, dealing with all the builders in town. We know new construction. If something just doesn’t seem right, doesn’t feel right, having us as a resource to be able to reach out and say, “Hey, this is what I’m being told by XYZ sub-contractor,” or “This is a problem that somebody mentioned to me. Does that make sense to you?” Just being a sounding board for people in those situations is helpful. Again, the design considerations is huge. We’ve had clients that downsize, and wanted to build a one bedroom ranch for $800,000, which worked for them. They didn’t entertain, the kids came in just from college occasionally, and they had bedrooms in the lower level, but you may want to … If that’s what you want to do, great but-

Greg: That really does need to be your forever home doesn’t it?

Jon: Exactly. Selling an $800,000 one-bedroom house might be a little bit of a challenge, so you may want to design into that house flex spaces that could be converted back to bedrooms down the road if somebody needed to do that. That’s just the kind of thing … You don’t have to build it a way that doesn’t work for you, but you may want try to design it in a way that it could easily be modified into something that’s more marketable.

Greg: Then, let’s say we’re moving down that path where someone’s hired a builder, who do you talk to the most? If you’re the agent and you’re helping the client, the buyer, does everything go through you then to the builder, and then the builder to you to the client, or is this an equal co-sharing, the three of you, the three parties get together and talk and make sure everyone’s on the same page and move forward that way?

Jon: It’s very much an open dialogue with all the parties talking. We are not the conduit through the builders, nor do I want to be the one filtering that because at the point the house gets built and something is not right, or it starts to get built and it’s not according to what … I don’t want to be the reason that the communication got garbled between the builder and the client. The builders and the clients, we’re not trying to get in the middle of that relationship at all. We’re just trying to be supplemental to that relationship. We can get pulled into the conversation by the builder, or by the client, to help and make sure that the process moves smoothly and make sure that … Ultimately, the goal here is to make sure that our clients end up with a great house, at a great value, and that the long-term investment is going to be secure.

Greg: You’ve talked about this before. Your whole approach is to think of real estate as an asset right? You’re helping protect, it sounds like, your clients assets. It might be great if they enjoy it for a few years, but you protect that into the future they have something they can do something with.

​​​​​​​Jon: Yeah, that’s what I don’t want to have them do is call me and say, “We said this was our forever house two years ago, but now we need to sell it, and by the way, we built something that is unsaleable.” That’s what we’re just trying to … Again, we certainly don’t want to dissuade anybody from doing what they want to do, but at least help them make all their decisions as fully informed as possible. Understand that to get it the way you want it is perfectly fine, but at the point you go to sell it, not everybody will necessarily want it that way. That’s the value-add. Throughout the process being able to be that sounding board for the clients, and being a resource for both clients and the builders as we work through that.

Greg: One more question. If there’s a house already being built. Obviously the builder is in place, the lot is in place. Would you still suggest that someone contact you or a Realtor as opposed to just knocking on the door and saying, “Is the builder here? Can I buy this house?”

Jon: Absolutely. Again, it just goes back to the fact that we’re being pulled into those situations based on our experience and market knowledge. You can knock on the door, and talk to them and go that route, but the average consumer has got a pretty limited experience. The average real estate agent has limited experience with new construction, let alone the average consumer. Making sure, does the pricing seem realistic for the level of finish that’s in there? All the other considerations that I just talked though, and then working through, depending on what point of construction the house is under, you’ve still got to get it finished. There is still a lot of those same design considerations and other things to talk about. Yes, I think it is absolutely worthwhile to pull an experienced professional into those situations, that can add some input and some value to that decision.

Greg: If someone’s listening or reading, and they want to talk to you, the experienced professional, what’s the best way to reach Jon Mand?

Jon: That is the best place to find me. I’ve got a blog on that site I regularly update with topics like this, and of course all my contact information.

Greg: Perfect. See you on the next podcast.

​​​​​​​Jon: Great. Thanks.

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