New Home Construction Basics
Thinking of building a new custom home? Here are the top 6 things everyone considering building a new custom home should consider.
1. Hire or Be Your Own General Contractor
While the savings of the General Contractor's (GC) overhead may look appealing on paper, it's important to consider the full picture of what a GC can offer you. For us, moving to a new state, we did not know any of the local businesses that we would hire for work. We had no idea which subs are trustworthy, reliable, do good work, are up to code, charge fair prices - the list goes on and on. Even if you're well established in an area and know a few electricians and plumbers around town... if a sub has a choice between working for a GC where they will get jobs year after year - or with you, a one and done house, you can guess where the priorities will be. Good GC's will have an established relationship with their subcontractors, and likely be a priority visit from the local inspectors as well - keeping your construction timeline moving along efficiently. A General Contractor may look expensive on paper, but could end up saving you thousands over the construction timeline.
There are many ways to build a new house but the two main differences is who is putting the initial money in, and taking the risk. One option is for the builder to front the initial building costs, and take out the construction loan. With this option, you will purchase the house from the builder after construction is complete, just like a house thats already on the market. Because the builder is taking the loan and all of the risk (and you could walk away), they may be more reluctant to incorporate your specifics, and may want to make the home more appealing to a larger audience if you fall out. The other option is for the homeowner to take out the construction loan. This will require more cash from you up front, anywhere from 10-20% of the total cost of construction, but the house is yours from day 1, so everything you want to put in the house should be available, since you don't have to worry about it appealing to a larger audience.
We decided to take out the construction loan ourselves, and the next decision we were faced with was a Fixed Price Contract or a Cost-Plus Contract with our builder. In both circumstances, the General Contractor (GC) will take your build plans and general design inputs and solicit bids from subcontractors. This will give your GC a general idea of how much the total cost of construction will be. As we know, certainly over the last few years, there is a lot of variability in cost of construction materials, labor, and employment so the next decision is all about who you want to carry the risk. In a fixed price contract, the GC will provide you with a fixed price of construction. Fixed, meaning, no matter what - that number is what you pay. Since the builder is taking the risk of unexpected cost increases, expect their overhead percentage to be significantly higher than in a cost plus contract. If the build comes in cheaper, the GC will have more money in their pocket - but if it comes in more expensive, like what we have seen happen to lumber costs recently, those extra costs will come out of the GC's bottom line. In a Cost-Plus contract, you pay the price + overhead, so if your toilet costs $250 and my builders overhead is 10%, I pay $275 for the toilet. The cost plus contract also gives you, the homeowner, full transparency in the cost of your home - that was important to me and we chose to go this route. The details of transactions in a Fixed Price contract are not visible to the homeowner.
First thing - not every GC is going to be open to you jumping in and doing some work on your house during construction. If the GC took out the loan, you can safely assume the answer will likely be "no" when you ask to tile your own bathroom floors. If the house is yours from Day 1, you may have the ability to do some of you own work, but be transparent with your GC, get all of your materials way ahead of time, and work together to find the best time to do your project. For me, one thing I did was our brick laundry room floors. I had to sneak this in after drywall + paint, but before baseboards and cabinetry. This was a small window of time where I was at the house many days from 5-10PM, and all day on the weekends to avoid conflicting with other contractors. If this isn't an option for you then I suggest saving any DIY projects until after construction is complete - or put it in your GC scope.
5. Read All The Things
In addition to going over your contracts with a fine tooth comb (and a few extra sets of eyes) before signing, here are some other great resources. The National Association of Home Builders is the number one resource I can recommend. Get a builder who is a member, and will put the NAHB Residential Construction Performance Standards in their contract - and buy a copy of this book. Let this be your guide through the construction process to make sure your home is being built to standards. The NAHB also puts on an annual International Builders Show with is a fantastic resource to peruse on Instagram Stories for all the cool new trends, gadgets and gizmos in home construction.
6. Visit. Every. Day.
I saved the best for last - this is my absolute top tip. If you're not local to your build, make it clear to your GC that you expect them to be on site every single day, and that you will call them every single day for updates. Ever hear the phrase "the squeaky wheel gets the oil"? It's your house, and your money, and that is exactly what your GC is being paid to do.
I'm not exaggerating though, get to the job site every single day, and talk to your general contractor every single day. Ask "What is being done today, what is next, and what concerns do you have?" It's most beneficial to get to the job site during regular business hours, when the subcontractors are there. Every day decisions have to be made, and I always say "no one cares as much about your house as you do". If your shower head is too low, or if the lights over your island are just slightly off center - YOU have to live with it. Be the squeaky wheel. Visiting every day keeps your thumbscrew on the project timeline, and you can also help speed things along by being available to answer simple questions. Whats faster - the plumber asking you "how tall is your spouse, and how high do you want this shower head" or the plumber leaving a voicemail with your GC to call her, your GC calling the plumber to get the question, the GC calling you to ask the question, and the whole chain reversing to get the answer to the plumber. Worst yet, the plumber assumes, and now your 6'7" spouse has to duck down to wash their hair.
Visiting also gives you the best way to correct mistakes before the construction process moves to the next step and now a fix becomes a much bigger, costlier mistake. One example of this was the recess in our shower - the framers didn't frame it. I noticed immediately, but if I hadn't we could have been past framing and into cement board, waterproofing, or worst of all - tiling already. Each step past a mistake makes it more expensive, and more time consuming to correct.