- Be Realistic About What You Can Afford The prospect of owning land is exciting for everyone, but prospective owners should be cautious when determining how much they’re willing to spend on a piece of property. When you begin the process, it’s important to have a budget, and to stick to it. First-time buyers should set realistic goals, including finding a loan that offers comfortable monthly payments. A mortgage affordability calculator is a valuable tool to know your price range and to better understand a figure that makes the most sense for you
- Check Your Credit Reports Take a look at your credit reports and make sure there are no errors that may need correcting. Different mortgage lenders have different requirements, but banks and financial institutions will look at your credit score closely to determine whether you even qualify for a loan. It’s important to review your scores for accuracy, and it’s easy to do so by requesting a free credit report each year from the three main credit reporting bureaus. Consumers have the opportunity to dispute errors found and potentially fix the problems that may be preventing them from securing a mortgage loan.
- Find the Right Source for Funding Fortunately for buyers, there are several funding options for purchasing land. From a conventional bank or credit union to seller financing, prospective landowners have a number of options to make their dream a reality. While credit scores may determine whether or not you qualify for a mortgage loan, don’t assume this traditional style of lending is your only opportunity for buying land. When you look into as many options as possible to find the best funding sources to meet your needs, you’ll avoid locking yourself into a financial commitment that may not benefit you in the long term.
- Inspect a Property Ahead of Buying Land Have the property you’re interested in professionally inspected. Never purchase land before knowing what you’re going to get and look closely at the features that will determine how you intend to use the land. Before you buy, important factors to keep in mind should include: access to the property, the area’s topography, neighbors’ use of land, and whether the land is in a flood plain. Hire a surveyor to show you the property lines to avoid inaccuracies that can ultimately cost you money.
- Find the Right Agent When Buying Land Not all real estate agents come with the same level of experience when it comes to land transactions. Buying land is different from buying a home and you’ll need someone who has prior experience working in land transactions when you decide to move forward. Finding a qualified land professional is easy if you use helpful resources including an agent listed with the Accredited Land Consultant (ALC) Designation.
- Ensure You Sign Up for the Correct Insurance Policies Once you decide to purchase land, protect your investment with the right insurance policies. A land consultant will help you determine the best policies for your needs, and may help you understand which additional policies may best suit your situation. Common types of policies for landowners include:
- Title insurance
- General liability insurance
- Property insurance
- Crop insurance
Cost Plus Contracts
How We Charge
A cost-plus contract is a tool that the contractor uses to get paid for almost every expense related to the construction job. But the contractor must justify and present evidence for the costs related to the job. Furthermore, the contractor could be denied recovery of associated costs if a negligent act or other relevant error is attributable to the contractor. Some cost-plus contracts can be drafted to restrain the contractor with a "not to exceed" amount for construction costs. There are three main components of a cost-plus contract:
- Direct costs: Labor, materials, supplies, equipment, and professional consultants being used by the general contractor
- Overhead costs (or indirect costs): Business-related expenses that are necessary to perform the contract; typically, a percentage of labor costs and can include office rent, insurance, office supply, communication expenses, mileage, and printing or reproduction of construction drawings.
- Fee (or profit): Typically, a fixed percentage based on the labor costs directly associated with the work estimates. Nearly all cost-plus work comes with an estimate of costs. As with a fixed-price bid, the estimate should contain detailed plans and scope of work, and material specifications, along with an itemized breakdown of costs. An exception would be an emergency repair (CHANGE ORDER), where there is no time for a detailed estimate, so a ballpark estimate will have to do. However, it should be made clear that all cost-plus “estimates,” are a best guess, not a fixed bid. The greater the unknowns, the less precise the estimate will be.
Defining job costs.
For this approach to work, it’s essential that the contractor make clear to the owner which costs will be considered direct job costs – and therefore reimbursable. The obvious costs are subcontractors, materials and supplies used on the job, such as lumber and nails, along with consumables such as plastic sheeting, bits, and blades used up on the job. For labor, the reimbursable rate typically includes “labor burden” of employee taxes, benefits, and insurance. Incidental costs like dumpster fees, permit fees, and equipment rental are typically included. Other costs are subject to negotiation: rental/usage fees for equipment owned by the contractor, vehicle expenses, insurance costs. As an owner, I would expect these to be covered by the contractor’s overhead, but either way, it should be clear what you will be billed for as a job cost.
A related issue is the contractor’s time spent on job supervision. Generally, this is reimbursable if he is on the job site overseeing subs or his own crew (or swinging a hammer himself). Management time off-site is generally not reimbursable unless specific tasks are listed as billable, such as making owner-requested plan revisions.