Important Note About Pricing: This article discuses the cost of building, which, for the past few years, has wildly fluctuated. If you're planning on building a custom home, please do not use the figures stated here for your calculations. Simply contact us, and we will provide you with more accurate numbers.
Have you ever been driving around in a neighborhood that was built 20 or 30 years ago, when you notice a bare lot sitting all by itself with a “for sale” sign on it? That’s called an infill lot. We are sometimes asked by potential clients if we can build a home on a lot like this. The answer is that we can, but it only makes sense in certain situations.
You might think, “It’s the best of both worlds! All the other homes are built, and we can move into a brand-new home in this existing neighborhood that already has tall trees and streets and infrastructure.” While that may be true, consider this: there’s a reason why every lot in the neighborhood has a home on it except that one.
Here’s a little background on how building on an infill lot can make sense, but you need to consider the pros and cons.
Cons of Building On Infill Lots
#1: You’ll want to check to find out what it is about that specific lot that prevented people from building on it decades before. For example, does it have expansive soils issues? Is it in a flood zone or landslide zone? Before you buy the lot, you’ll want to make sure building on it won’t be prohibitively expensive for reasons that aren’t immediately obvious.
#02: Many times, an infill lot has been used as a dumping ground for the original builder(s) and neighbors. It’s rare that we see a soils report on an infill lot that is positive. You can pretty much count on having to do an over-excavation (also called an “over dig”) not just due to the condition of the native soils (as mentioned above), but also due the amount of leftover soils discarded from previous builds, as well as trash that has been dumped on the lot over the past few decades.
#03: The physical constraints of an infill lot can be challenging. Usually during excavation, the excavated dirt need to be trucked off site, and the backfill material needs to be trucked back in. What’s known in the building industry as “laydown” (space to store and stockpile building materials), is either minimal or non-existent, all of which can add to the cost of the build.
#04: An in-fill lot does not have the space that a typical custom lot does. You can expect to be relatively close to your neighbors, which is often not what the custom home buyer is looking for.
Pros of Building On Infill Lots
#01: With an in-fill lot, you can easily tell the feel of the neighborhood and surrounding community. The schools have been established for quite some time, the infrastructure is already in place, and community life has found its rhythm. Often, but not always, custom lots are in newly developing areas where schools, infrastructure, and the overall community is still being built, and the overall feel of the community is a bit more dynamic and undetermined.
#02: A “typical” in-fill lot is usually priced significantly less than a “typical” custom lot. Here in the El Paso County area (Colorado Springs, Woodland Park, Monument, etc), you can, with rare exception, safely assume that you’ll spend around $200K – $300K for a 2.5 or 5-acre custom lot. In Teller County (Woodland Park, Cascade, etc), you can expect to be in the $100K – $150K range for a custom lot. An in-fill lot can be as low as $25K and usually top out around $75K.
#03: Most custom lots in El Paso County are at the far north end of the county, on the outskirts of city limits. Custom lots in the middle of the county are few and far between at this point. For some folks, that’s not a problem, but a fair amount of folks don’t want to be as far north as where the bulk of the inventory actually is. In-fill lots are usually in the middle of the county, and that can be an important factor for people.
So, should you build on an infill lot? Only you can determine that for sure based on your budget and your particular needs and desires.
A Final Note About Infill Lots
The financials of a custom home on an in-fill lot can be challenging; an existing neighborhood will have fairly well established “comps” (market valuation via the MLS or equivalent). Since the buyer of the in-fill lot is almost certainly paying a good bit more for the individual lot than the neighborhood builder did, who bought in bulk, and since the home is being built as a custom as opposed to a production home, (again, think bulk), there’s an inherent cost discrepancies in terms of both land cost and build cost.
This, in turn, creates a challenge when it comes to the comp; how does the cost of the neighbor’s home compare to the cost of THIS home when the neighbor’s home was produced “in bulk” 20 years ago, as opposed to THIS that is being produced today at today’s prices and in a non-production manner? Additionally, the standards that the industry builds at today is significantly higher than what it was a decade or two earlier. Time and brevity prevent a detailed look at this topic, but it’s safe to say that the home that we build today is head and shoulders (at a bare minimum) above what was being built a decade or two prior.
Since a bank only wants to lend on an appraised value, any discrepancy between the cost of the build and the appraised value will need to be covered by the Owner in additional cash. Depending on the situation, this can be a significant number.
Thanks for reading. Please don’t hesitate to contact me if you have any questions.
Paramount Homes is a Colorado custom home building contractor that builds new homes across the Pikes Peak region, including Colorado Springs, Monument, Castle Rock, Woodland Park, and more. With over 30 years of experience, we have built and remodeled over $40 million worth of projects. Call us at (719) 331-4116 or contact us online for a quote or more information on building your dream home.