Buying Unfinished Homes Maybe a Solution for Jumpstarting the Housing Market

In the past I purchased two homes that were unfinished. The first was a builder spec home where the upstairs was left unfinished. This type of new spec home was fairly common in the New Hampshire area back in the 1980s. Many builders offered this type of starter home to consumers. For me, it was a way to enter into an otherwise overpriced housing market without having to go the route of a condo.

It was an alternative that allowed me to buy the framework of a big home at a reduced price, and most importantly it allowed me a growth path to a bigger home as my income and family grew. The second unfinished home I purchased I actually negotiated with a builder who was building a development to not complete the upstairs. Though unfinished homes by definition are unfinished, they did qualify for occupancy permits and banks offered mortgages for them. Typically in an unfinished home the downstairs is completely finished and there is a bedroom.

The upstairs is shut off via a door at the top of the stairwell. Insulation is either installed in the upstairs exterior walls or in-between the first and second floors. Additionally, depending upon what you negotiate with the builder the upstairs can be partially finished. For example, internal wall framing can be completed, and/or rough electrical wiring and plumbing can be installed.

From a builder’s perspective there are a couple of major advantages of building an unfinished home for a wanting homebuyer. First, he has a committed homebuyer. Second, his construction costs are reduced, thus reducing his borrowing requirements. These are two extremely important facts when you are working in a down housing market and a banking climate that is adverse to extending credit. Consequently, today’s housing market is ideal for approaching a builder on the construction of an unfinished home. However be forewarned, some builders may still be hesitant to build an unfinished home for a couple of reasons. First, buildable land is becoming increasingly scarce. Second because the buildable land is scarce the cost of it is high, and they may have paid a premium on the land back a few years ago.

Consequently you may find builders who are hesitant to build an unfinished home because they want to maximize the amount of money they can make on a piece of property. However, with the state of the current housing market you may find builders now more willing to accept an offer to build an unfinished home.

It also includes a detailed cost breakdown table and spreadsheet for estimating your own new home construction building costs.