I hesitated and re-hesitated about starting a blog about this project. I have already invested over a year's worth of effort into this project (starting with the home/land search), but it has been a very, very slow road full of turns and changes in direction. Now that I am somewhat confident that the project is focused and on track, the blog can proceed in earnest.
In a nutshell I am now just about to apply for a building permit to build a slight variation on the Greenbelt 2. However, I will attempt to briefly recap the road to here:
THE HAMPTONS
This is essentially the area east of the Shinnecock Canal on the South Fork of eastern Long Island, about 100 miles from Manhattan. For most people, the Hamptons is synonymous with money and is known as the summer playground of actors, musicians and writers. That is partially true, but the Hamptons is also an area of incredible beauty and serenity. And the East End towns, Southampton and East Hampton, have taken very deliberate measures to preserve the bucolic beauty of the area via strict zoning and building codes. The Hamptons is almost completely free of interstate highways, mega-malls, strip malls and fast food joints (with the exception of some parts of County Road 39, which is kind of the gateway). Accordingly the zoning favors village/hamlet development that is very modest in scale, thereby preserving the small-town/rural character. The waterfront megamansions excepted! The East End towns have been very actively purchasing large tracts of privately owned farmland to preserve as open space. Additionally, there are initiatives to upzone the size of existing vacant residential lots, as well as to impose building moratoriums and dwelling size restrictions. The net result of all of this is that buildable land is extremely difficult to find and extremely expensive.
THE HUNT
My original intention back in August 2003 was to find a modest second home. With a maximum budget of $400,000 I decided to try and see what was out there. My initial efforts to find something in this price range proved unfruitful. $400,000 would basically buy an 800 sq. ft. ranch in need of extensive renovation. My price range crept up to $450,000. Then $500,000. I found a couple of places that had potential, but ended up losing them in bidding wars. Ultimately my price range went up to $650,000, which for me is a lot of money for a second home. At this price I would have expected to get exactly what I wanted. Alas, there was nothing out there that I perceived to be worth this princely sum of money. So on the verge of giving up, I decided to look into possibly building a house from scratch.
Driving around the Hamptons, my realtor pointed out various houses that were modular. And by golly, they looked like it! Boxy, lacking in personality, employing faux colonial details, vinyl siding, etc. I was instantly turned off of the notion of modular construction. However, things started to change when I started doing research about modular construction online. I learned about the various advantages of modular construction- cost savings, time savings, build quality, etc., so I started making e-mail queries to various modular builders in the area. In the northeast, it seems that for some reason, most of the modular manufacturing facilities are located in Pennsylvania.
Before embarking on this building project, I did four things simultaneously: 1) Researched land prices, 2) Researched the local regulatory hurdles, 3) Researched financing options and 4) Researched builders. I discovered a local modular builder who advertised in the local Southampton paper. I went to their website and submitted a query form. The next day I was contacted by a builder who was very positive and encouraging. He was of the opinion that any house design can be modularized and he even started sending me examples of famous architect designs- Frank Lloyd Wright, Michael Graves, etc. This all seemed very exciting to me. However, every time I came back with proposed floorplans and ideas, he came back and said that it couldn't be done with modulars for one reason or another. I learned that, indeed, I could do anything I wanted with modulars... as long as it was a rectangular, boxy colonial, cape or ranch. It seemed that none of the local modular companies offered anything that could be considered "out of the box," no pun intended.
Even though I was disappointed by the lack of modular style options, I persevered, thinking that perhaps there would be a way to employ alternative finishes and materials to make a modular house less bland. As such, I set about searching for land with fierce determination. My requirements were pretty basic- minimum half acre within biking/walking distance of the open water, or a smaller lot within biking/walking distance of a village. In my price range, this was extremely tough to find, even in the less desirable areas. I did find lots, but some had restricted building envelopes due to wetlands. Some were right on major roads. Some were on unpaved roads deep within the forest. Some were high on bluffs that would have been impossible for a crane to get remotely close to.
Finally I found a small lot (0.29 acres) within an established development on a little peninsula between Sag Harbor Cove and Noyack Bay. It essentially met all of my criteria. However, as before, a slight bidding war ensued. Luckily, I dealt only with the listing agent who stopped the bidding war the second I placed a bid $1,000 over the asking price. This way she would get 100% of the commission, rather than having to split the commission with another broker delivering an even higher offer. I somehow felt there was something unethical about all of this; after all, she has a fiduciary responsibility to the seller to fetch the highest price. However, it was still within her legal right to stop the bidding action once the asking price was met. Anyway, the take home lesson in all of this is that you should always deal directly with the listing agent when you are in a highly competitive real estate situation. The listing agent will do whatever it takes to earn the full commission! Ideally one should be faithful and dedicated to a single, qualified real estate agent. However, I have learned my lesson after losing bidding war after bidding war this way.
FINANCING
Before any notion of building from scratch entered my mind, I had assumed that finding financing for a building project would be as simple as finding a conventional mortgage. Boy was I wrong! After searching through the internet, I found a handful of institutions that dealt with construction loans. However, the interest rates were generally a tad higher than conventional mortgages. I was a bit discouraged, but, as before, I persevered. My real estate broker's firm had an onsite broker who specialized in construction loans. Great, I thought. This should be a no-brainer. Things were going well until he broached the subject of closing costs. Having good credit and a decent cash downpayment, I was in no mood to pay points at closing. With this mortgage broker, I would have to pay, at the minimum, 1.5 points! This is a substantial sum. I immediately searched some more.
I came across a firm that does a lot of loans in the city- Manhattan Mortgage. I figured they probably didn't do many construction loans, since there is virtually no single home construction in the five boroughs of New York. Well, I was wrong! The broker who contacted me told me about a zero-point adjustable prime-based interest-only construction loan that automatically rolled over into a 15-year mortgage upon the delivery of a Certificate of Occupancy. This way there would be only one closing and one set of closing costs! I was skeptical... until he mentioned that the floating rate was prime minus one quarter point. At the time (early 2004), the rate was only 3.25%!!! I was sold. I figured that even though it was interest only, I would be able to kick in additional money every month to bring down the principle- all of my yearly bonuses or other windfalls would go toward this as well. And I figured that if I don't have the entire principle paid in 15 years, I can refinance or I can sell. Ultimately the bank that Manhattan Mortgage hooked me up with is Webster Bank, which is located in Connecticut. They asked for a lot of documents, but they were ultimately flexible and moved things along fairly quickly.
NEXT... SETTLEMENT AND PERMITS
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