This New House
By Daniel Akst
Money Magazine, Nov. 1999
Building a house is about a lot of things--personal taste, the state of your marriage, even the requirements of the local building code. But unless you're Bill Gates, what it's really about is money. That's why I began to get very nervous last winter as our new house was taking shape. In September 1998, my family and I had left Los Angeles for New York's Hudson Valley, hoping for a simpler life. But we found that the houses available in Tivoli, the village we settled on, were either overpriced wrecks or characterless boxes. So we decided to see if we could build a really cool, architect-designed house for the price of the banal suburban sprawlers that most middle-class people end up living in. (Part 1 of this series ran in January, part 2 in June. Back issues can be ordered at 800-633-9970, and the articles can be accessed at www.money.com/archive.)
People told us we were crazy: That way lies bankruptcy, divorce or both, they said; and during the project, I sometimes thought they might be right. We had moved across the country without regular jobs, only to find that in addition to our construction project, our young twins and the need to make a living, we would also have to deal with a medical crisis. Louise, my wife, discovered in November of last year that she had breast cancer. Fortunately, thanks to early detection, the malignancy was small, isolated and relatively easy to treat. Our medical insurance would be more than adequate, but deductibles, co-payments and out-of-network fees were still creating a pile of medical bills.
Given all of these challenges, it began to seem wise to get a sizable mortgage, and when we discussed this with lenders, it sounded like a slam dunk. We were creditworthy, after all, and good at filling out forms. The problem was we needed a construction loan, which provides financing for a new house as it's being built. Once the place is built, the loan metamorphoses into a conventional mortgage.
But despite months of trying, we never did get a construction loan. Oh, we could have. But we discovered that such a loan not only carries higher interest charges than a conventional mortgage but would also cost us $10,000 in fees--$3,000 initially plus another $7,000 when the house is finished and the loan turns into a permanent mortgage. "Ten grand for what?!" I ranted to Louise.
Equally annoying was the bank's campaign of torture by documentation. Months into the project, I had already provided copies of tax returns, proof of payments received, explanations for movements of money, bank and investment account statements--everything short of a urinalysis and a cat scan. Yet the bank always needed just a few more things. And then the bank's appraiser added to our troubles: Flummoxed by our home's unusual design, he came up with a lowball valuation for our house. As a result, I discovered when I read the fine print, the bank demanded that we buy costly mortgage insurance. I decided to take action.
"You canceled the loan?" Louise asked.
"Who needs them?" I replied. "We can finance this thing ourselves, at least far enough to get the place built and then get a regular mortgage."
But I wasn't as confident as I was trying to sound. By now it was February, and our savings were dwindling. We were building the house on a "time and materials" basis, meaning we had no fixed price, so who knew whether construction would really cost the $250,000 we had planned? Besides, I was loath to use up our financial cushion. An economic downturn or another family emergency might leave us unable to cope.
I decided to do what any red-blooded American would do--charge it. We had noticed that while getting a construction loan was tough, getting unsecured credit seemed hilariously easy. We knew this because banks from all over the country were bombarding us with credit-card offers featuring 3.9% cash advances. What the heck? I started accepting. Before long, I ran up $50,000 in credit-card debt at the ridiculously low annual rate of 3.9%. I kept track of when our introductory rates would end and set to work lining up additional cards to activate when the rates on our existing cards soared.
Clearly, we were building a house of cards. But it was our house nonetheless, and thanks to the banking industry's desperate attempt to get us hooked on debt, the project was going forward. Indeed, as a muddy-footed spring descended on the Hudson Valley, our house looked finished enough that people ducking down our little private drive to steal a peek could form an opinion.
All of them, it seemed, promptly did so. And many of them, like the bank's appraiser, were put off by the design. A woman in a vegetarian restaurant, for example, said it looked like a medical building. A municipal official (who also sells modular homes) branded it "a piece of crap." The guy who works on our cars gazed at our home's twin trailers, inverted roof and corrugated steel siding and, with exquisite delicacy, pronounced it "different."
What I wanted to say to these people was, "Wait till you see the grain bin." Our architects, a couple of city slickers named Walter Chatham and Evans Simpson, had the idea that my office should be situated in what they were calling a silo, but I soon discovered that those tall, thin concrete structures are comfortable only if you happen to be a retired intercontinental ballistic missile. What Chatham and Simpson really had in mind, it emerged, was a round, corrugated steel structure known as a grain bin.
And why not? I needed a place to work, and we knew by now that the architects, though they drove us crazy at times, were almost always right about matters of design. In this case they argued that such a structure would be in keeping with the rural character of the area, and I discovered in my research that we wouldn't be the first to make one habitable. A pair of big ones in rural Illinois have even been turned into a restaurant. Besides, ours is an arty little village, a freethinking sort of place where one house on our street has giant sculpted metal bugs crawling up its face.
What you get with a grain bin is a lot of building for the money. The one I wanted--18 feet in diameter, with walls 18 feet high and a conical roof--was less than $4,000, including tax and shipping. Until it arrived, however, our builders had a hard time estimating what it would cost to erect the thing and make it livable. When they finally guessed $32,625, I blanched--this was much more than I'd hoped, and it was too late to send it back.
Then the builders threw it up in about three days. A few more and they had the whole thing framed out for two stories: a guest space on one level, my office on the other. The estimate, in other words, was too high by 25%.
Still, our expenses were mounting and our savings disappearing. Worse, the credit-card merry-go-round was slowing to a halt. We were having trouble getting additional cards with rock-bottom rates, perhaps because we already had so much debt. Once again, I started to scramble.
Around this time, I noticed that a local bank was offering a special deal on a five-year, fixed-rate home-equity loan with no fees whatsoever. When I asked about this, I learned that even though our unfinished house contained plenty of equity, we couldn't get such a loan until we were granted a certificate of occupancy indicating that the place was more or less done.
Figuring the house was close enough, I applied for the loan. I also began investigating other sources of cash, including margin lending and borrowing from our retirement accounts. None of those sources seemed very attractive, though, so I adopted a strategy of hoping really hard we would pass inspection for the certificate of occupancy before the special offer from our bank expired.
All along, I had been determined to keep our construction costs on budget; and as time passed, it became clear the house was actually costing us less than planned. In our euphoria, we let the architects talk us into some additional expenses: the grain bin, tiled bathrooms and a few other improvements. These additions turned out to be grand, but they pumped up costs significantly. Now, with our financing still unresolved and the house nearing completion, a kind of bargain-hunting mania took hold of me.
Perhaps the best example of my obsession was our kitchen. We wanted all the undercounter storage to be in the form of drawers, but building drawers is labor-intensive and costly. So we bought easy-to-assemble cabinets off the shelf at Home Depot. What we didn't buy were the mostly traditional facings that are sold separately. Instead, we had our builders create facings from a single piece of plywood for a sleek, contiguous look.
The crowning glory of my bargain hunting was a heat-proof, epoxy-resin laboratory countertop. The first thing you see when you enter the house is our big kitchen island, so we wanted to top it with something nicer than the usual laminate. But stone, concrete and Corian were too expensive. Plus, I didn't want any maintenance headaches.
I had read about an architect somewhere who used a lab top in his house, and so I set to work via the Internet (see the box on page 141). I discovered that epoxy-resin tops are impervious to hot pans and just about everything else, and that a tony home design store in Chicago wanted $2,000 for one in our size. Fortunately, however, laboratory-supply firms charge less than half of that. I even found one that makes them in colors other than the standard black and gray. They sent us samples, and we picked blue. The price: $930.
We continued our cost cutting throughout the kitchen. For upper cabinets, we decided on open plywood shelving. Instead of the Sub-Zero refrigerator that is de rigueur in architect-designed homes these days, we got a well-designed Amana for $1,000--and a trim kit to replace its ugly handles and mask its orange-peel complexion. I got a high-end stainless-steel kitchen sink and sleek pullout faucet, both by Kohler, for all of $19 at a secondhand store. The two dishwashers--I've forsworn dish washing by hand--were both half-price floor models at Home Depot.
Some of my best finds came from Home Depot and Lowe's. Our builders and their subcontractors maintained a strange antipathy toward these places, but I am here to report that on most items, aside from lumber, nobody has a better selection or lower prices. Also, both stores will take back almost anything with a smile. That's important because projects of this magnitude always have mistakes. (Ours seemed to involve bathroom fixtures. An expensive shower enclosure and a small stainless-steel sink, both ordered from a catalogue, turned out to be the wrong style for our house and couldn't be returned.)
That's not to say smaller suppliers have no place, especially if you need service. Most of the lumber in our house came from a local yard that carried a large selection at reasonable prices. It also delivered (and if necessary, picked up) with a phone call, saving us precious time. Similarly, a local paint store freely opened cans to daub a little paint or stain onto a piece of wood and laboriously tinted and retinted until we got just the right shade. The store charged more than the home centers, but it was worth every penny.
At this point we were watching every penny. Not only does building a house involve harrowing levels of expenditure, but for about six months it badly suppressed my earnings. I was so absorbed by the task that I had little time left to earn the money needed to pay for it. As expenses drained our assets, we cut back wherever we could.
In June, just as this was becoming painful, we got great news. The bank came through with the five-year, fixed-rate home-equity loan at 7.5%--with no fees. The only hitch was that the bank's appraiser, who visited when the place was a few weeks from completion, claimed it was worth $135,000--far less than the appraisal from the bank we'd fired, less even than some decrepit homes have sold for nearby, and a fraction of the $375,000 that construction, land and architect's fees were costing us. I reacted as if both my sons, manifestly geniuses, were being shunted off to vocational school by some autocratic guidance counselor.
No matter. Our loan application was for just $75,000, meaning our $135,000 house still provided an ample margin of equity to keep the bank happy. The loan gave us just enough to pay off the credit cards and finish construction.
On June 2--eight months after we broke ground--we moved into a construction site. Our new home had no kitchen countertops and unfinished living room floors. There was lumber and equipment everywhere. Only one toilet worked.
Nevertheless, we did it. By the time the place was really done, active construction had gone on for a year (from October to October), but the house was only 10% over budget, and none of the terrible things we feared had come to pass. The roof doesn't leak, our marriage is intact, and despite the advice of a good friend--who suggested at the outset that we consult a psychiatrist instead of an architect--no psychotropic medications have been necessary, unless you count bourbon.
Best of all, we love our house. We still get comments from strangers--"This isn't a house, is it?" asked the garbageman--but who cares what other people think? You can't see the place from the street anyway, and we're the ones who have to live in it. We're also the ones who find ourselves smiling just looking at it, or noting how cool it stayed during hot summer days--even without using the air conditioning, thanks to careful siting, design and construction. We're tickled by the remarkable privacy of the bedrooms and the everyday convenience of the kitchen and laundry facilities. Here and there we see something we might have done differently, but this is like spotting a flaw in your child--it doesn't change how you feel.
One reason we're so enamored of the place is that we worked so hard on it. Short of wielding a hammer, Louise and I were fanatically involved in almost every aspect--especially the parts that show. For months, the project consumed us. But we accomplished something our builders and architects consider extraordinary: We built a 2,350-square-foot house and a 500-square-foot outbuilding for about $300,000, or $105 a square foot, excluding land and architect's fees.
Nor did this feat come at the expense of comfort, livability or aesthetics. The main house has four bedrooms, three bathrooms, central air, high ceilings, a two-sided fireplace, an oversize Jacuzzi, a built-in sound system, ample closets and a pantry. It is all on one level and includes a playroom off the kitchen and a 200-square-foot screened porch. The grain bin contains an office and a guest apartment with full bathroom.
Of course, we also gave up some things. Instead of a basement, we got a crawl space. There's no garage, although a carport accommodates a single car, and we plan a parking shed to shelter two others. While the public spaces have expensive maple flooring, in the bedrooms we used fir plywood cut into giant squares and laid parquet-style. We think it looks great.
Remember, though, that building a nonstandard house without a trust fund is a struggle. The entire home-building industry, even at the cottage level, is geared toward a depressing sameness. One of our builders, John Harrison Jr., put it succinctly: "If you were building a regular house and it came time to do moldings, I'd say, 'Dan, colonial or clamshell?' Simple as that." In our house, by contrast, there are no moldings. Our door frames disappear, which means that drywall work and other details have to be just so. Instead of conventional baseboards, we used thin strips of lauan plywood, which leave little room for error where the walls and floors meet. In a modern house, the devil really is in these details, which must be crisp to avoid looking dinky.
We knew from the first night we spent in the house that we loved it, but you don't fully appreciate a new house until you've lived in it for a while. For me, I think the big moment came when the builders finally installed the mirror in our bathroom. We had lived for about a month without any mirrors at all, so when this thing went in, it was almost shocking. For the first time, we could really see ourselves in our new house. It was obvious that we belonged.