Budget Cuts

The project cost has escalated and is now more than twice what I originally told Richard, my architect, what I wanted to pay. I do have a finite ceiling, and since I brought Jeffrey on board, he’s been working at trying to get an accurate cost estimate. Our meeting last Thursday left me with an estimate of $62,000 more than the max I can pay. About $25,000 of that is a built in cost overrun. Even if we don’t run over cost at all, we still need to come up with $37K in cuts. We discussed a number of options to cut costs. We could put on a conventional, asphalt-shingled roof, which would save at least $5,000 over a metal one. I’ve already cut out the back porch and pergola. Cutting the skylights and interior windows into the stairwell, and building a more conventional roof, would cut another $5K. Cutting the solar radiant in-floor heating system would probably save at least $20,000. It would have cost far less to build a traditional wood frame home, well-insulated, but I’ve already bought the Faswall ICFs and they are sitting on the property.

Our estimate on the interior and exterior trim was very high, close to $30,000. I can do nearly all of the interior trim myself, and a lot of the outdoor trim also. So we should save some money there. I also decided to pursue buying a used kitchen cabinet set from the ReUse Center. Most I’ve seen leave a lot to be desired, but when I stopped over there last week, a really nice one had come in.

One of the most fun things has been planning the kitchen. I cook and bake everything from scratch, and spend a lot of time in the kitchen. It’s been very satisfying to put everything exactly where I want it. Kitchens, though, are very expensive, and my kitchen had been running about $30K. I had already scaled it back considerably, but it was still a good hunk of money.

After our meeting, I headed over to the ReUse Center to see what they had, and if the one I had seen was still available. Not only was it still there, but it was marked 40% off. It was a large set, and they were kind of overwhelmed with kitchen sets and wanted to move them. So I bought it. I would guess that the set was around $20-$25,000 new, and is still in excellent shape. I got the whole ball of wax for $1,560 plus another $100 to have it delivered to my garage for storage.

Here's how the set looked at the ReUse Center. There are a LOT of cabinets there!

Here's a close-up view. You can see the cabinetts are in pretty good shape. The wood looks lighter in this picture that it really is. The picture above shows the true color.

Here's the truck that delivered the cabinets. I was able to haul the other cabinets in the pickup truck, but these ones were way to big and heavy.

The cabinets packed into the garage.

Here are the cabinets I bought earlier for the basement kitchette. The corner unit is to the right, and tilted.

The three in the middle are brand new upper cabinets. You can kind of see three 3-drawer vanities stacked on top of each other. They are brand new also, and I'll use those in the bathroom.

These were moved to the back of the garage to make room for the cabinets above.

So I have a garage full of kitchen cabinets and it has saved me a bundle.

Getting a construction loan and mortgage

Most banks only market conventional loans. Since the mortgage meltdown, things have gotten really tight. I thought with a substantial down payment and an excellent credit rating, I'd be okay. NOT!

The first hurdle I ran into was that banks did not like me being my own general contractor. I understand why now, months later. Everything I read said, don't be your own general contractor, and I should have listened. My architect, Richard Venberg, told me I could save a lot of money being my own general contractor, and he would help me. Back in February, March, and April 2007,I had tried to find a builder who would build green, and dozens of builders and general contractors turned me down. I was convinced that if I wanted to really go green, I would have to manage the project myself. I just didn't look far enough, because there were a small handful of green builders and general contractors in the Twin Cities area. I had obtained the property in December 2006, and I was anxious to get going and get the house started in the summer of 2007. I took on the responsibilities of general contractor without pursuing other options to the maximum extent, and I really regret it. I have not saved money doing it myself, because I've had to hire a licensed general contractor to help bail me out. It turns out Richard, though he was good at design, really didn't know that much about the execution phase. If you're thinking about building your own house, hire an experienced general contractor.

I've learned an enormous amount over the past year. If I ever decided to build another house, I would know a lot. But I still would hire an experienced general contractor. I hate to think what kind of a house and project I would have ended up with without Jeffrey Swainhart. It's all in the details. An experienced general contractor knows how to take a blueprint and do all the things it takes to turn it into a real building.

So a couple of banks sent me packing because I was acting as my own general contractor. I found a few banks specializing in construction to mortgage loans. Everything seemed fine, at first. I had a great FICO score, the banks were willing to lend me as much money as I needed, and I qualified for a good interest rate. The last phase in the process, though, was getting an appraiser to appraise the construction plans.

Building green has more up-front costs. The house will not cost more in the long run, as building green will create huge savings in energy costs and longevity. A metal roof has a 50 year guarantee, while asphalt shingles come with a 20 year guarantee. A metal roof may cost 30-40% more, but it saves money in the long run. Solar powered radiant in-floor heating costs 2 to 3 times as much as forced-air heat, but the energy savings will make up for the increased costs in 7 to 10 years. Using green building materials is good for the planet and my health. None of these translate into a higher appraisal. Business does not care if you build green. If I build a $250,000 house that would have cost $190,000 with conventional materials, the house will be appraised at $190,000, and my mortgage will be based on $190,000, not the $250,000 it cost to build. I've lost $60,000 in equity before I even move into my new home.

Here in Minneapolis, the Star Tribune has weekly articles about how great it is to go green. I agree. But the building and banking industries still have their heads in the sand. There are no special allowances for residential homes when they are built "green". Because of the neighborhood I'm in, and the uncompensated costs of building green, the bank told me my house would be appraised at 1/3 to 1/2 of what it cost to build. Where is the logic in that?

I'm now scrambling to come up with a larger down payment to compensate. I did some research on the internet, and even spoke to some appraisers who hold office in one of the national appraiser's professional organizations. The bottom line I found everywhere was that the banking and appraisal industries are way, way behind when it comes to building green. Hopefully, as more people go green, and there is more of a demand for LEED certified homes, this will change.