Are you thinking about having a home built on your land? One of your biggest concerns might be how to make sure you don't get taken advantage of. There are lots of variables, you have your family's financial future at stake, and you're worried your dream could evaporate in a cloud of over-budget mistakes or shady contractors. You can avoid the horror stories, armed with the right knowledge.
Home Building Nightmares: 2 Main Types
The root cause of the home building nightmares you've heard about fall into 2 buckets:
- 1. Missed expectations;
- 2. Plain ol' dishonesty.
We're going to walk through the causes of each and how you can avoid them.
This one is the most common. I don't actually think there are many truly dishonest builders out there, but it can seem that way when you're the one getting the short end of the stick when it comes to unmet expectations.
Think about the stories you've heard for a minute... here are a few topics to remind you:
- Budget: The house went 30% over budget.
- Mistakes: The builder put in the wrong counter tops / carpet / paint color / etc., or made _________ mistake, and it took forever to fix.
- Schedule: The house took 6 months longer to build than it should have.
Let's address each of these in more detail...
You have a limited budget, I have a limited budget, even Donald Trump has a limited budget (he only owns ONE airliner, after all). How does a custom home building project go over budget and how can you keep it from happening to you?
There are 3 main causes for going over budget:
- 1. Vague details specified up front for what kinds and quantities of materials will be used;
- 2. A poorly constructed budget;
- 3. Changes during construction.
Details, details, details...
There are lots and lots of pieces in a house. Literally thousands of pieces. Nails, different kinds of lumber, windows, tile, countertops, door hinges, shingles, towel bars, and the list goes on. Every single item costs money. How long do you think it would take to list out every piece, along with the cost? I can tell you, because I've done it: it takes hours. And it is painfully boring.
When you and your builder review the details of what you want in your house, you'll pretty much only hit the high spots. Those high spots are defined by what's important to you: maybe your thing is a certain type of faucet; maybe it's a farm-style kitchen sink; maybe it's wood-look tile. You'll literally spend hours thinking about and choosing those materials.
So what about the stuff you and your builder don't talk about? Here's where the horror story starts! You'll find out what those details are only AFTER they are installed. Here's what it sounds like:
Builder: "Oh, you didn't really want brass trip levers on your toilets? You should have said so!"
You: "Really? How much will it cost to change them?"
Builder: "Labor and materials, only about $200."
Only $200. In the great scheme of things, that's a small percentage of the overall cost, but that's the first drop in the bucket that ends up putting you $90,000 over budget on your $300,000 house. Two hundred bucks at a time. As my dad would say, "Two hundred here, two hundred there... pretty soon you're talking about money". Witty guy, my dad.
How to avoid this
Here's how you avoid it, and I'll warn you, the process is SIMPLE but not EASY. That's why most people (builders and clients both) don't do it:
You have to BUILD THE HOUSE ON PAPER
before building it in real life.
What does that mean? It means doing the grueling work of listing out, line by line, every piece that goes into the house, down to the color of the door hinges (unless you're using a builder who paints the hinges. Yes, seriously. I've seen it.). Now, you don't have to do that, your builder does. You just have to read it. It will be boring, so don't do it right before bed, but here's what will happen:
You'll discover, while it's still cheap to fix them, all the things you never thought about, but would be disappointed to find in your custom home.
- -Color of the toilet flush levers;
- -Color of the door stops;
- -Whether or not there will be drawer pulls and door handles on the cabinets;
- -How high the tile will go up the walls in the shower;
- -How high the shower heads are placed;
- -There's an attic access hatch in the laundry room (you really don't like it there);
- -The interior doors have a wood-grain texture and your mind's eye always expected them to be smooth;
- -Anything else that you expect but don't think to bring up, because you didn't envision there would be other options.
The vast majority of these things you won't care about. But it's that one pet peeve that's going to creep in that will taint the experience for you. Avoid it by getting, and reviewing, a comprehensive list of details from your builder.
Budget - Well-done vs. Slapped together
Most of the principles described in the above section about details applies here. This is where the builder assigns a cost to every item in the house, and to be perfectly honest, the vast majority of builders don't do it. The ones who do are generally the "production" builders, the ones who build from a portfolio of house plans and build the sames ones repeatedly.
Custom builders generally don't bother creating a detailed budget because it involves lots of man-hours, and since most custom builders are small shops, they simply don't have the manpower to do it. What they do have is lots of experience building similar features into their homes, so they have a pretty good feel for what stuff costs.
This is the reason many custom builders will happily quote you a price per square foot: they have in their minds what the house will look like, the houses that are familiar to them, and they know pretty much what the last one cost.
So, they skip the detailed budget step. They don't have the manpower, they think they know what you're going to want, so they make an educated guess. The result: you want a custom home, 100% yours, and you assume that's what the builder will do. Your builder, on the other hand, assumes he's going to build for you something similar to what he built for the last several clients, so you're really not on the same page, but nobody discovers it until...
You discover during the build a good-faith assumption the builder has made that doesn't fit your vision. That's what the builder calls a "Change Order", and it is very expensive.
Here's how you avoid it:
Just ask for a detailed budget, or a comprehensive list of details with a fixed total price. The builder might ask for a significant deposit up front to do that work, but that's OK, it is totally worth it. It requires lots of work, but that up-front work costs a small fraction of the cost of changing stuff after construction starts.
Changes During Construction
OK, assuming you got a complete list of details, a fixed price, and a detailed set of house plans, the only changes will be things you simply changed your mind about. Here's how to minimize (notice I didn't say eliminate) that:
Just shake hands with the fact that your custom home will NOT be perfect. You'll move in and see things you wish you'd done differently. That's just life and it's OK.
As the build progresses, you'll worry that the kids' bedrooms aren't big enough, that the living room doesn't have enough windows (or too many windows), or that the hallway light switch needs to move 6 inches to the right, whatever. That happens to EVERYONE. It happened to me when I built my first house (and my second). Don't let those fears rob you of the joy of building a custom home.
You won't think of everything, and you can't afford everything anyway. Find the joy in knowing you're building a custom home, just for you and your family, and not that many people ever get the chance to do it.
We all make mistakes. Funny thing about human nature: we want others to forgive our mistakes, because we know we made our mistakes in honest effort, but when others make them, especially those we are paying, we believe they made theirs out of laziness, sloppiness, or malice.
Remember what I said above about how many parts there are in a house? My Project Manager likes to say that building a custom home and expecting no mistakes is like expecting Boeing to build a prototype airliner, fill it full of paying passengers, and taking off hoping everything works. Yikes.
Your custom home is truly one-of-a-kind. The first one. The prototype. Nobody has seen it, nobody has ever built it, and since humans aren't perfect, the people building your house will absolutely, positively, make mistakes. Guaranteed. Here's the part where you look deep inside yourself and decide whether you can live with that simple truth, and if you really can't, that's OK. Just don't build a house. Buy one that's already standing.
On the other hand, if you're OK with the fact that the builder and his or her contractors will make mistakes, let's talk about the real issue, which is how the builder deals with them. That's what will make or break the experience for you.
How the builder will deal with the mistake
There are 2 basic approaches, and you'll see very quickly which one you want:
- 1. The builder doesn't really want the expense of fixing the mistake, so he comes up with all kinds of reasons why it's OK to leave it as-is;
- 2. The builder describes the process of fixing the mistake to you, makes sure you're OK with it, then proceeds, and doesn't blame you for it.
So how do you know which approach your builder will take before you commit? A few ways:
- -The creation of the list of details, along with a specific budget, demonstrates the builder owns his / her process and will likely have enough pride in the process and product that he / she wouldn't let the mistake go by whether the house is yours or his own.
- -Ask the builder point-blank: what happens when you make a mistake? How do you handle it? You'll be able to judge by the answer whether you can believe it or not. If the builder is up-front that there will be mistakes, and can describe how he fixes them without missing a beat, then that's probably an honest answer. Ask for examples of mistakes he's made in the past.
- -Ask the builder's past clients. They'll tell you in great detail.
I saved this one for last because all the stuff above affects this one. There are 2 types of schedule delays:
- 1. Unforeseen
- 2. Foreseen
How can there be "foreseen" delays? If you can foresee them, you can avoid them, right? What I'm really talking about is foreseen categories, things you KNOW are going to come up, you just don't know the particulars yet.
Here are some examples of Foreseen:
- -Weather. You know it's going to rain, you just don't know when or for how long.
- -Contractor excuses: You know the plumber's truck won't start, the painter's help will quit, and the concrete guy will forget to schedule the concrete delivery. You just don't know when it's coming.
- -Despite all the detailed planning you and your builder do, you will want to change SOMETHING. That change will cause a delay.
A good builder knows some combination of the above will happen, so he plans for it. It's built into the schedule. When he tells you the schedule, he's factored that stuff in.
Unforeseen is the really weird stuff. It doesn't happen on every job, but it does happen, and it doesn't mean that someone is out to get you.
Here are some examples of Unforeseen:
- -The city changes its inspection policy in the middle of the job, and it takes 2 weeks to get the go-ahead for a certain phase of construction. It happens.
- -The floor tile you fell in love with is discontinued, and the supplier doesn't have enough in stock to complete your job. Of course, nobody found out until the day after you left for your 2-week vacation, so everything is on hold until you get back.
- -There's a drywall shortage, and it takes 4 weeks longer than usual to get the material delivered.
These are all examples of things that have actually happened to our clients. Because we know a certain amount of foreseen delays will happen, we build those into the schedule, which actually leaves us time to deal with the unforeseen stuff and minimize the impact. It's the process of thinking through all the things that can trip you up in advance that leaves you prepared to deal with it when it happens. As Eisenhower said about planning for battle, once the fighting started, "plans are useless. The planning is indispensable."
Ask your builder what the plan is.
Plain ol' dishonesty
This section is short. It's hard to know up front whether the builder you're talking to is honest or not. Here are a few things to think about that might help you sort them out:
- -Talk to as many people in the builder's organization as you can. Ask detailed questions about how billing works, how they select suppliers and contractors, anything about the business that you can compare to what others have said and what sounds right. You're looking for inconsistencies that will point out the difference between what you're being told by the sales person and what's really going to happen.
- -Talk to some past clients (keeping in mind that some people are just angry and have nothing positive to say). --Ask about how mistakes were handled, how the process was explained vs. how it really happened, and ask how the warranty service has been.
- -If you can, ask business associates (suppliers, bankers, etc.) that surround the builder. They won't directly tell you whether the builder has a bad reputation, but you'll get the message.
My experience is that there are very few dishonest builders. Yes, I'm a builder, so of course I'm going to say that, but it makes sense that the builder population tracks similarly to the overall population. However, I talk to fellow builders on a weekly basis about issues affecting our businesses, and in candid conversations I find very, very few instances of dishonest behavior.
Building a custom home is a complex process. If you know that going in, and arm yourself accordingly, it will be very rewarding.
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