The US housing market is on fire, with home sales hitting their highest level in 15 years. But, while inventory will improve in 2022, the price of new construction homes is almost 19% higher than a year ago.
If you’ve been thinking about buying or building a new home, but are worried about sky-high prices, then you need to consider turnkey construction.
Keep reading to learn everything you need to know about this process.
Whether you know it or not, you’re probably familiar with this type of home construction building. Design-build is relatively standard in the home building industry.
Those who already own the plot of land where they want to build a house often consider this option.
Design-build construction type is when custom home builders manage the designing and building of your project. But, as the owner, you dictate the process by telling the construction firm:
- What you want
- When you want it
- How you want it done
Design-build construction gives you complete control over your project. This includes budgeting and scheduling since you are financially responsible for the project.
However, these projects often go over schedule and run over budget because the owner is in charge, not the builder.
Design-build construction can be hectic and stressful for those not familiar with the construction industry.
Turnkey construction is a contract that allows a home construction firm to complete a project according to a pre-arranged set of criteria, including a fixed price.
It’s similar to the design-build construction process when building a new home. You still meet with the home builder, who is in charge of the following:
- Project management
But with a turnkey contract, the builder is financially and legally responsible for the design and construction work, not the buyer. This is because the builder dictates the budget and schedule.
The buyer only buys the finished product. They can “turn the key” into their new home.
With turnkey construction, you lose some autonomy. Some home builders allow buyers to have complete design input at the beginning. But this isn’t true for everyone.
Other builders only allow buyers to have input on specific aspects of the house, like paint color or tiles.
If you decide to go for turnkey construction, be very upfront about your expectations to ensure you work with the proper construction firm for your wants and needs.
Benefits of Turnkey Construction
There are several reasons home buyers opt for turnkey construction rather than design-build construction or buying an existing home. Let’s look at a few.
Building a custom home is a considerable investment that can seem scary with many moving parts. If you want to go with design-build construction, you’re in charge of financing (owner financing).
This means you need a construction loan.
Construction loans are hard to get and have higher interest rates than other home financing loans. Your lender will use the land as collateral when applying for the loan.
The lender will release “draws” of the construction loan as the project progresses. These are pre-set amounts agreed on by the buyer, builder, and banker.
After the construction is complete, you need to convert the construction loan to a traditional mortgage.
At no point can your builder cannot get financing on your lot.
The best thing about turnkey construction is you don’t need a construction loan. Turnkey financing is the same as getting a typical mortgage when buying an existing home.
This saves you time and money, which means you can get a better mortgage rate. It also means you don’t need to make monthly payments throughout the project’s construction.
If you have a strict budget, turnkey construction is a better option for you.
Less Overall Costs
As mentioned previously, design-build projects tend to run over budget (for multiple reasons). However, this is not the case with turnkey projects.
Because the home builder is responsible for the budget and schedule, there are far fewer financial unknowns and less risk for the buyer.
Even if the project does run over budget, the buyer only pays the agreed-upon price. Should the cost of materials rise, the contractor will have to pay the difference unless otherwise noted in the contract signed.
Short Project Timeline
Turnkey construction projects take less than time design-build construction projects. Several stages can overlap since a single contractor is working on an already approved design.
Besides, builders are motivated to stick to deadlines since they control the schedule. Going over schedule also means going over budget, which they are responsible for.
Turnkey projects allow the builder and buyer to work together on the final product. They share interests and can work more collaboratively.
In contrast, owners often find themselves disagreeing with their contractors during design-build construction, especially over budgeting and scheduling. Sometimes design-build owners want a structure that isn’t possible for their lot.
The collaborative approach to turnkey construction makes the home building process much less stressful since you’re on the same team.
When you work with a reputable turnkey contractor, you know you will get high-quality construction. You can see their history of successful projects and speak to existing customers.
If you decide on design-build construction, you need to find a contractor. While great contractors are available, you’ll also find thousands of stories of people who’ve been ripped off or scammed. Unfortunately, contractor scams are more common than you think.
Consider a Turnkey Project for Your Next Home
Turnkey construction has become a popular option for homebuyers looking for design flexibility with lower costs. So if you’re looking for a new home, think about a turnkey project to get the home of your dreams.
To learn more about our turkey properties, contact us at Coral Isle Builders. Our team offers high-quality construction at affordable prices for all.