Interested in getting some feedback on this considering this is our first home build and obviously times are crazy right now.

We own a lot outright and have since 2019. We just received a proposal back on a full custom home that comes out to $269/sf. If we were to move forward and with what we paid for the lot, we'd be all-in at essentially $300/sf.

I pulled listings of four other homes in this neighborhood last night and there are four homes currently for sale that range from $199/sf to $217/sf - the lower is an under construction home that looks like it's being built by a volume builder while the higher was a full custom job completed in 2018 by a reputable builder.

I have to assume if we pull the trigger on our build, the recent sales comps are going to drive the overall appraisal of our land/improvements down significantly less than our cost. Even with us planning to be in this home "forever", this seems like a bad situation to be in mainly if we had an opportunity to refinance in the coming years if rates were to drop back down to what we've seen in the past few years.

Any thoughts on this?

Where is this? Are there other custom homes of similar size, quality and design in your neighborhood or nearby competing neighborhoods?

I'm building too. We paid for lot outright and are currently about halfway through construction. We got a construction loan through the same bank I plan on using for the mortgage.

This is our first time building so I'm learning as we go. The bank did an appraisal for the construction loan based on the lot and the plans . They approved it at the estimate to build. I assume the bank will appraise the house appropriately for the mortgage since they're already involved and on the hook so to speak

Now, how things will appraise in a few years if we want to refinance is a different issue . But with all these new houses going in, and the cost to build them, I imagine that will raise the value of all the homes, new or old

King Oaks - Iola, TX.

Lots of custom homes with build dates going back to 2010 and there have been probably 20 new homes built in the past 12-24 months. Based on recent lot sales I would say the raw land value has increased by almost 40% since we purchased our lot.

Is your house typical for the neighborhood or above the norm? Have there been any similar houses sell? I know where KO is but don't know much about it or the activity. That's in Iola ISD isn't it? If so the appraiser might not consider similar houses on the SE side of CS but within the CSISD.

Overall, yes - the homes out there are a pretty good mix. There's been quite a few budget builds go in the last two years and there's been several very large custom homes built, as well. The reason ours is so much is specifically due to labor/materials pricing right now.

Hopefully some of the higher end houses have sold and this works out as you hope.

Would the "comps" allow you to pay taxes on your house at 66% of actual value? And does that tax savings negate the savings you would achieve by refinancing at a lower rate? In a forever house, I don't think you should care at all what anyone else's house is going for unless it's time to protest your taxes.

The concern is building a home and not knowing when or how long it's going to take for the market/appraised value to appreciate to the actual cost of the build. And with current rates, if we ended up with a 5.00%+ rate by the time construction is done and have the opportunity to refi with a lower rate in a few years, would that appraisal value vs. the actual cost basis/loan amount cause issues with the overall LTV that a lender would be really interested in for a refi.

And with lenders now really pushing the ideas of ARM's due to rate increases, seems like this is going to spell out disaster for a lot of short-sighted folks.

One would hope but that would be a 37% increase in value based upon what they're selling for right now in a red hot housing market - Iola area is not quite as crazy as BCS but still seeing high listing prices and hearing about offer wars.

You're doing a two time close it sounds like. If you do a one time close the rate is locked before you begin construction.

Your builder will probably do as much as they possibly can to help you meet appraisal. I would ask them to send you what they expect to use as comps. Lots of people have been pretty lucky on new builds.