New House Building: Money Saving, Convenience and Healthy House Tips
Choosing the Best Building Approach For You.
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1. Approaches to Building
There are basically three different approaches to building a new home. They are: 1) Hiring a custom builder to build the home that you want.; 2) Buying a home from a production or tract builder who will build the home for you; and, 3) Hiring yourself as the builder (GC) and managing the process yourself. Each of these approaches has its advantages and disadvantages. This newsletter will examine all three.
2. What is a Builder?
Before we delve into each of these three approaches let’s examine for a moment what a builder is and what a builder does. A builder is someone you hire to build your house, correct? Well, yes and no. It has been said that when you hire a builder you are really hiring four people: the builder, the builder’s crews, the builder’s subcontractors, and the builder’s suppliers. What this means is that most builders do not build houses by themselves, but hire outside subcontractors to do part of the work-plumbers and electricians are good examples.
Except for a few very large builders who have the requisite staff and tradesmen on their payroll to build a house from start to finish, most builders are not only builders, but also general contractors, or GC’s as they are known in the trade. That is, they hire and schedule other specialized subcontractors to work for them in the building of your house. Builder hires subs, manages their work and performs the essential function of QC.
There is nothing wrong with this practice; we are simply calling it to your attention so you have a clear understanding of it. Many of the ways (discussed later on in this guide) for saving money on your home building project build upon the understanding of this practice. With a firm grasp of this trade practice, let’s move on to the considerations for choosing a builder.
3. Hiring a custom builder
The single biggest reason for hiring a custom home builder is because you have you own idea of what your house should look like. Custom builders by definition build the house you ask them to build. Big or small, single story of three story, brick or vinyl – it doesn’t matter. The idea here is that a custom builder will build a house the way you want it. Period. (as long as you can pay for it and it meets code requirements).
Because custom builders, never build the same plan twice, some of the efficiencies that often come with building the same or similar plan many times, which is what tract or production builder do, are not realized. Consequently custom homes are often more expensive, than similar sized production homes. However this cost differential is also due to the fact the custom home often, also, utilize more expensive materials and have incorporated into them more expensive features.
Custom home builders also have the reputation of doing better or higher quality work – a reputation not always deserved. While custom home builders are often smaller companies where employees are people not just numbers, these builders tend to be more flexible, more responsive to customers, and they tend to take greater pride in their work. Conversely, unlike large companies that may have a site supervisor to supervise and will also have a quality control department, custom home builders often times have neither.
The last type of builder is a customized builder. They specialize in building homes from scratch or a blank sheet of paper. These builders are accustomed to creating unique, one of-a-kind homes. They are typically smaller builders and produce fewer homes per year.
- Unlimited ability to customize
- Buyers typically bring their own blue prints/floor plans
- Offer more personalized service
- Homes have a unique look, not cookie-cutter
- Development of cost estimate takes time
- Building timetable is also drawn out
- No experience in building your exact home
- Cost is higher – no economies of scale in buying materials or building homes en mass.
If your plans are to build a custom home, we suggest you consider buying the House Building Guide. This Guide will help save you money, provides important convenience and healthy house building tips and contains many important resources and tools, such as a sample building contract, sample specifications, building timeline and much more.
Click here to learn more.
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4. Production or Tract Builders
Most people will recognize this group of builders much more quickly if the phrase “model home” is used. Whenever visit a model home, you are dealing with a production or tract builder of one form or another.
A production builder is organized for high-volume production. They have standardized floor plans and a limited list of choices for floors, cabinets, counter tops, fixtures, etc. A common characteristic of production builders is the presence of a model home for prospective customers to tour. If this describes your situation, be aware of the model house trap. This is the situation that occurs when you tour a model home and fall into the misperception that what you see in this model home is what you will get when you buy the same model from the builder. These model homes are often decorated extensively and contain many upgrades. To actually get the home as presented could cost you tens of thousands of dollars in extras. If this is the type of home you are buying, I strongly suggest that you buy a book entitled Home Building Pitfalls. This e-book is written by a person who used to work for such a builder. The book goes into great detail about the do and don’ts of purchasing such homes.
Here are the advantages of such builders:
Here are the disadvantages:
- Since these builders build in volume, cost should be lower
- Time to build should be less
- Pricing can be done quickly (because options and selections are limited)
- Since models have been built hundreds of times any problems with the design should have been worked out and resolved
- Generally have the reputation of being lower quality
- Ability to customize is greatly limited
- Significant changes, if allowed at all, will be very expensive
- Generally use cheaper, lower grade materials
- Developments have a cookie-cutter look
- Standard contracts that may be inflexible
If you are visiting model homes – you need to take a look at Home Building Pitfalls. It is loaded with valuable information which will help you make an informed decision and avoid the many pitfalls in this process.
5. Owner Builder Approach
The third way to build a house is to use the owner builder approach. This approach is not for everyone. In fact, I would say it is NOT for most people. But, for the people that have the time and willingness to go down this path it will save them some serious money. And that is its big draw and why there is a growing trend in the country for these types of projects. Most custom builders mark up a project 15% or more, and in some markets a lot more. However if you just use the 15% number on a $300,000 home, you will save at least $45,000.
What exactly does the owner builder do? At minimum, the owner builder is required to be the GC and hire all of the required tradesman that will build the house. This alone results in the 15% or more savings. Many owner builders to more than this, they paint, they do inside finish work, they install flooring, - some who have a fair amount of construction literally build their entire home. The bottom line, is you can do as little or as much building as you want, but at minimum you must hire and manage sub.
The biggest obstacle historically has been financing, and today continues to be so. financing. Once you have decided you would like to be an owner builder, it is no simple task to find a bank to finance it. Why? Because banks believe that have a GC or builder involved ensures that the project is done correctly and therefore reduces their risk on these projects. A homeowner with little or no experience approaches, wanting to undertake an owner builder project, is a risky proposition from the bank’s viewpoint.
After years of shying away from suggesting this build approach to homeowners, we no longer do so. The reason? There are several companies that now provide, not only the financing but also, ongoing construction support to help you through the process.
If you think the owner builder approach is for you and would like to speak with someone about it – complete the form on the following page for a no-obligation evaluation.
6. Choosing a Builder
The best way to evaluate a builder is, as you might expect, to talk to other people he has built for and to look at houses he has built. Builders, like most businesses, will have ready lists of references to provide you. Obviously, a builder isn’t going to give you the name of someone who has had a bad experience with him.
Consequently, the value of these references is limited. It is much more valuable to ask for a list of all the houses the builder has built in the last two years, and/or a list of houses he currently has under construction and contact these people as your references.
In addition, if you know of a subdivision or development that a builder has recently built, drive by and talk to the residents you see and get some unrehearsed, on-the-spot opinions and comments.
These opinions are much more valuable. Don’t just talk to one or two people – talk to 5 or even 10. I know most of us are used to dealing with the standard list of three references, but on this most important decision, don’t take a chance. Talk to as many people as is reasonable until you are confident you know with which kind of a builder you are dealing.
When you meet with a builder, you should be prepared to interview him or ask him a list of questions. The following list of questions had been taken from the House Building Guide. It is available in a spreadsheet or checklist format entitled the Builder’s Questionnaire and Interview Checklist.
- How long have you been in business?
- Have you or your partners built houses under any other names?
- How many homes do you build per year?
- How many homes do you build concurrently?
- How much time do you spend supervising the building process?
- Do you do the supervising yourself or do you have a foreman or site supervisor?
- What work will you do with your own crews – what work is subbed?
- Do you have contracts with your subcontractors? Can I see a copy?
- Can you provide us with a list of all of your subcontractors, including name, address and phone number?
- How long has each sub worked for you?
- Can you provide us with a bank reference?
- Can you provide us with a copy of your insurance certificate?
- Have you had any suits brought against you by any homeowners for whom you built?
- If yes, why, and what was the outcome of the suit?
- How many change orders would you consider “average” in the process of building a home?
- Are there charges or fees for initiating change orders (other than the obvious costs for the change – some builders charge a flat fee of say $50, plus the construction charges)?
- Can change orders be initiated by the builder?
- If a mistake is made during the building process, who pays to fix the mistake?
- What kind of warranty do you provide? (some states may mandate warranties)
- Do you do the warranty work on your houses or is it done by a third party?
There are a number of other important ways to evaluate a builder. They include
Auditing or inspecting a home under construction.
Interviewing the Builder’s subcontractors
Interviewing the Builder’s Material suppliers
Do your research. Contact BBB, HADD and other consumer protection websites.
The following two consumer protection websites provide valuable information about builders.
As you’re building your new home, the last thing you want to imagine is termites destroying what you’ve worked so hard to achieve. That’s why it’s important to take preventative measures to keep these pests from ever occurring in or around your home. Many pest control companies offer safe and effective termite pre-treatment services designed specifically for homes under construction. A few of the available treatments offered include borate wood treatment and baiting system pretreatment.
7. Quote of the Day
Those who bring sunshine to the lives of others cannot keep it from themselves.
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