Options for Custom Home Buyers: Fixer-Upper, New Construction, Teardown, or Approved Plans?

Listing Links:

Zillow

Redfin

REALTOR.COM

Hi All,

The BV Team just listed an incredibly unique buying opportunity at 1433 Shasta Ave, a beautiful 2,853 SF Spanish-style home on a tree-lined street in the beautiful Shasta-Hanchett Park neighborhood of San Jose. The asking price is $2,100,000. 

The home is being sold, along with approved plans by the city of San Jose, for a major renovation. The renovation includes the primary and secondary bedrooms, the primary closet and bathroom, the kitchen, the basement, windows, floors, electric and plumbing upgrades, and more. 

The home could be move-in ready with new appliances and some personal touch-ups, but comparables for this home after a more substantial remodel would be $3M+. This gives a buyer the flexibility to do as much or as little as has been approved. 

For buyers who want a more custom home, they generally have three options:

1. Buy A ‘Fixer-Upper,’ and Spend 9-24 Months Remodeling - this is difficult because a 30-year mortgage (20% down payment) on a house at this price point (~$2.1M+) costs ~$10K/month, and you have to make the payment, while you are still living in your current home, or renting (plus insurance, property taxes, maintenance, etc.). It does give you the possibility to live in a home that is under construction, but that can come with its own challenges, and only works under the assumption that the house is currently livable (many fixer-uppers will not be). 

2. Buy a lot (or teardown) and spend 18-36 months building a new home - This option gives buyers the most custom home (location, design, layout, finishes), but is typically the most expensive option of the three. You may think it should be cheaper than buying new construction because you oversee

   
   
   
   

   the project. But in reality, it's substantially cheaper for a developer to build a home from scratch than it is for a builder to build a home to the exact specs of the homeowner. Developers can go from start to finish much faster on their own, versus being at the mercy of the homeowner and their speed of decision-making. It's also challenging to find homes on the market that fit this criteria, as most lot/teardown sales in desirable neighborhoods happen ‘off market’ to a network of developers and contractors. 

3. Buy new construction - paying new construction prices on ~2,853 SF in this neighborhood (street, lot, etc.) would likely cost $3M+, and there haven’t been many sold in this neighborhood. 

The fourth alternative, which is extremely unique, is to buy a great home with approved plans. As it does in this particular circumstance on Shasta Ave, this allows you a few options:

• Move in ASAP with small updates - buy new appliances, maybe remodel a bathroom or two in 4-8 weeks, and the home is ready to move in. 

• Start a larger remodel ASAP - Use the current plans, use our chosen end-to-end contractor, make some minor changes to the existing plans (use as much or as little as you would like), and begin construction as soon as possible. The seller will delay closing to January to allow for adjustments to the existing approved plans and to get a head start on choosing finish materials. 

  
  

If you are looking to design your dream home, but don’t want to pay for new construction, or pay for a mortgage for 12 months+ before you can move in, this home is a great fit.

Please reach out to The BV Team with any questions. We have the contractor, designer, and engineer on standby to answer questions as well. 

Best Regards,

Peter & Ben

The BV Team