By Kate Stephenson and Mel Baiser
Thinking about building a new home? Based on our experience working with dozens of homeowners, builders and architects, we wanted to share a few helpful tips to prepare you for what to expect.
The Emotional Rollercoaster
Every project starts out in a state of excitement—you’ve been dreaming of your new home for years, you’re thrilled by the design process and all of the options. Then reality hits when you realize how much it’s all going to cost—probably more than you expected, for sure. But once you’re over that hump the excitement continues during the framing phase—it feels like it is coming together so quickly! Then you realize how much more there is still to be done, and things slow down. You might hit a few snags or surprises you weren’t expecting. Then as completion nears the excitement builds again until the final point when you move in. Knowing what to expect and understanding the different phases of a project can help you anticipate what’s next. We try to minimize the stress, conflict and unpredictability and set up the project for success from the beginning.
Whether you choose to work with a licensed architect, a designer, a design-build firm, or design the project yourself, someone needs to be in charge of the design of your home. While you may think you’re saving money by working from a minimal design, often you can end up spending more in the end, with a lot of headaches in between, if the details have not been worked out. The designer’s role is to help you think through what you want and need in your home, and create a product that fits your budget, your “program” and your aesthetic taste.
Building an Integrated Team
We encourage an integrated delivery process that brings together the whole team at the beginning of the project. At minimum we’d usually have the architect/designer and the general contractor, but often the team might also include a landscape designer, interior designer, mechanical engineer, or other subcontractors. An experienced builder can add a lot of value to your design process, whether it’s providing feedback on design and constructability, helping find more affordable methods to build or more relevant materials, or providing preliminary & detailed cost estimates.
Sometimes you pick the designer first, and can get suggestions from them on builders they have worked with before. Sometimes it’s the other way around and you will find a builder you want to work with and ask them to make recommendations on a designer. If two firms have worked together before, communication is likely to go smoother than if you assemble a team from scratch.
Rather than a competitive bid process, narrow your selection down to 3-5 builders, then interview them on the phone, check their references, meet them in person, and go see some of their recent projects. Pick your builder based on trust, communication, process and quality of work—not solely on price. The competitive bidding process costs you money and time. The lowest bidder is often the one who is the least skilled at estimating, the most desperate for work, and the least likely to stay in business. It is not uncommon for homeowners to pick the lowest bid only to arrive at the end with a project that costs the same as the highest bid.
Construction is Expensive
The days of building for $100 per square foot are over. Some might argue the days of building anything under $200 per SF are over. Don’t fixate on costs per SF or anything you find by typing in how much does it cost to build a house on Google. A qualified builder should be able to give you locally relevant preliminary costs based on the size, complexity, performance goals and finish levels of your home early on in the design phase. Keep in mind that costs per SF do not typically include soft costs (design fees, engineering, consulting, etc.) or site infrastructure costs (clearing, driveway, well, septic, etc.). Depending on where you are planning to build, these costs could range from $50,000 to $150,000. Begin by defining the costs that you have no control over, then work backwards to determine what you have left to spend on your home. Unless you have endless amounts of money, you will likely be designing to your budget.
Asking a builder to give you a fixed price for a home that has not been fully designed is asking for trouble. A builder’s estimate is only as good as the information they are given to base their price from. The better the plans and specs, the more accurate the price. Compensate your builder for her or his services just as you would compensate any other professional. Builders will often devote 40, 60, or 80 hours into providing a homeowner a detailed cost estimate, alternative options, value engineering choices only to have the project fall through. We encourage all our builders to negotiate a pre-construction agreement which enables them to give you the best service and most accurate cost planning during the design and planning phase.
As you move forward with your team, make sure you have a contract that you understand and that it’s accompanied by a detailed estimate, scope and specifications. You should understand the contract type (fixed price, time and materials, or cost plus guaranteed max are fairly common), the method by which the builder will invoice you, and how they handle change orders and allowances. Always carry an owner’s contingency—we recommend 10-20% depending on the complexity of the project.
Make sure you’ve met with a lender early on if you are financing your project. Often, we see challenges where the bank’s appraisal comes in much lower than the estimated project cost. Even if the client qualifies for a larger mortgage, the bank won’t lend enough to cover the full cost. If you are building a high performance home, it may be considered a “Specialized Property Type and a Complex Appraisal Assignment” meaning you can request an appraiser who has experience and certification in appraising energy efficient homes. These appraisers understand the value of a highly insulated and air tight home which will require less operating expense over time, be more resilient, and provide better air quality.
So many clients are anxious to get a foundation in the ground, and they rush through the design process. For a new home, plan on spending 6-12 months in the design phase. Usually it takes just as long to design the house as it does to build it. This is one of the largest investments you will probably make in your lifetime. Invest in the planning and design phase and it will save a lot of headaches down the road. Besides, it’s always best to get pricing for your project in the fall/winter than at the start of the busy construction season.
So Many Choices!
A big part of the role of your project team is to help walk you through the hundreds—maybe thousands—of choices you will make in the process of designing and building a house. The designer’s job is to help you select materials and fixtures that are in line with your budget, and your builder is responsible for putting together a construction schedule and letting you know when those decisions need to be made. Your job as the client is to make those decisions in a timely fashion. Make your selections as early as possible—you don’t want to hold up the construction schedule because they are waiting for your specialty toilet to be delivered. Clients’ inability to make decisions is one of the primary reasons for projects taking longer to complete than planned and time is money. Make sure you have a clear system for communicating all the selections to everyone on the team as they are finalized.
Leave it to the Professionals
Unless you are a professional in the trades, avoid trying to supply materials or self-perform parts of the work. Often it doesn’t end up saving you any money, you won’t have the right parts or quantities on hand, and it will not be covered under the contractor’s warranty. Contractors add mark ups to subcontractors, materials and labor because they are operating a business. Businesses need to cover their overhead expenses and make a profit to be sustainable. If you have hired a professional contractor, they should be working legally with employees who are covered by workers’ compensation insurance. They must also carry liability insurance. Insurance is unfortunately a necessary evil and one of the primary reasons that contractors have to charge what they charge. That said, most contractors receive a discount on materials that homeowners cannot get. Thinking you are saving yourself money by avoiding a contractor markup and supplying materials yourself is often not the case.
Wrap it up
Before you sign a contract, make sure you have established a process for the punch list phase. Ask your builder if they will provide a Homeowner’s Manual with warranties, product information, and maintenance details. Make sure your expectations for timeline are realistic and do-able. Some of the worst mistakes happen when builders are rushing things because the client “had to be in by Thanksgiving”.
Building or renovating a home is a big project, and hopefully these tips will help you better understand the process. Good luck!