A Guide to Hiring a Custom Home Builder

 

Building a new home is one of the largest investments a person will make. It is important to get it right the first time. Choosing the best custom home builder for your project is essential to its success. Remember, you will likely be working together for 6-12 months which means you need to have a builder you trust and clear, honest. Communication is a necessity.

A Guide to Hiring a Custom Home Builder

A good custom home builder serves as an advocate for the homeowner as well as an integral and collaborative member of the design team. They work with the homeowner and design team to develop a realistic budget for the project. They also monitor the cost and scope through the design and construction process. Custom home builder responsibilities include:

  • Involving and managing subcontractors during the design process so the design team can coordinate key building systems into the design of the home. A qualified custom home builder has advanced knowledge of all building systems. They are also responsible for making sure the subcontractors execute the work as outlined in the project specs and according to building codes.
  • Contracting with the owner for the construction price on the home and tracking all costs. They also take care of submitting payment requests to the bank and designer for approval, provide lien release waivers for all completed work, and prepare estimates. Additional tasks include collecting money for approved change orders and owner initiated changes as outlined in the contract.
  • Serving as the liaison between building inspectors, governing jurisdictions, and design teams after the designer have filed for and obtained the building permit.
  • Managing and obtaining all approvals, inspections, and the certificate of occupancy.
  • Ordering, checking, and accepting all building material and components prior to installation.
  • Working with subcontractors to resolve any issues upon completion of the project. The designer will review the project for any deficiencies. Once this is done, and the city has completed final inspections and issued the certificate of occupancy, the builder will deliver the project to the owner.
  • Educating the owner on the operation and maintenance of the house and service the warranty as required by the local jurisdiction.

When Do I Hire A Custom Builder?

It is best to hire your builder early in the design process so that they can help monitor and control the cost of the project. You need to negotiate how the builder will be compensated upfront and remember that you will rely on the builder’s expertise to solicit multiple bids from suppliers and subcontractors. A custom home requires that you work to a budget to get the full value out of it. Custom homes are one of a kind, so it is wise to have the builder and designer work on the project together as a team.

How Do I Find A Quality Custom Home Builder?

If you have already hired a designer, they are the best resource in the search for a custom builder. Your design professional will already have relationships with builders and first-hand experience with their construction quality, communication skills, and business practices. Other resources include:

  • Local lenders, who can provide valuable insight into builders and their history of finishing projects on time and on budget.
  • Reputable realtors, who have experience in the local custom home market and are an excellent source for home builder referrals.
  • Internet searches can help you identify builders in your area and their websites can give you an overview of the style and quality of projects they are accustomed to building.
  • Your Local chapter of the National Association of Home Builders can provide a list of qualified local builders.

What To Look for When Choosing a Custom Home Builder

A well-qualified home builder does not need to be a large flashy organization with a ton of trucks and a huge marketing budget. The builder you want will have the time, financial resources, interest, communication skills, organization skills, and experience to build your new home. A custom home builder’s primary focus should be on building custom homes. Their services will be tailored to your needs. When choosing a builder, consider reviewing these 8 important items:

  1. A current resume of projects.
  2. Track record with projects of similar scale and detail.
  3. Communication abilities.
  4. Organizational skills.
  5. Client references.
  6. Time management skills.
  7. Understanding and description of the workflow.
  8. Do they specialize in custom or speculative homes?

This initial review will leave you with a few reliable and solid options for builders. You need to reduce your list to a maximum of three builders and then set up interviews. Remember that you are the customer and it is important to not only listen to the achievements but also ask questions and observe whether the builder listens and clearly answers your questions. Is this someone you can work with? Does the process make sense? Be prepared to talk at length about the project and to answer any questions the builder may have. Typical builder questions include:

  • What stage of the process are you in?
  • Do you have a design?
  • Have you established a budget?
  • Do you have financing in place?

Be sure to answer their questions as openly as possible. The more viable your project is the more interest and expert advice you will receive from the builder. When it comes time for the interviews, we have some important questions you should include. The answers to these questions should illustrate the builder’s communication style, understanding of the project, and desire to be involved.

12 Sample Interview Questions

  • Are you willing to work with my designer during the design process to ensure we are creating a home that meets our budget?
  • What means and methods will you use to determine the exact cost of my home?
  • How are you compensated for your pre-construction services?
  • Are you comfortable building the style and quality of the home that we expect?
  • Who will supervise the construction of my home and how often will my project be under direct supervision?
  • May I meet the project manager or project superintendent who will be supervising my project on a daily basis?
  • How will questions and concerns be addressed during construction?
  • How do you qualify the competency of the subcontractors who will work on my project?
  • In the event that there are changes to the design or unforeseen conditions that result in extra cost, what process do you use to communicate these changes to the owner and designer?
  • How long do you anticipate the construction of this project will take?
  • How are you compensated for your work?
  • How do you service your warranty once the construction is complete?

You also want to make sure the builder you are interested in can provide you with the following documents in order to illustrate in detail their processes and methods:

  • A sample contract and the proposed method(s) of compensation.
  • A sample budget and explanation of how monthly billings are tracked, invoiced and paid.
  • A sample draw request to a lending intuition and description of the process.
  • A sample lien release and description of your rights under state and county law.
  • A sample construction schedule illustrating construction timeline, projected cash flow, milestones, and key decisions to
  • be made on a project.
  • A sample change order request and description of the process.
  • A sample warranty.
  • A sample operation and maintenance manual.
  • Any builder that cannot provide these is not considering to complete your custom project.

You also need to ask the builder to provide you with a referral list of three past clients and two current clients. Contact the clients and set a time to meet, hear their stories, and get answers to your applicable questions. If possible visit past clients’ houses or at least observe them from the outside to see the builder’s work up close. When speaking with the referrals, consider asking the following questions:

  • Were your original estimates accurate?
  • Was the project on time?
  • Was the project on budget?
  • Did the builder ask for decisions in a timely manner?
  • Were the finances clear and transparent?
  • How did the builder react in stressful situations?
  • Did the builder communicate the schedule clearly?
  • What role did the builder take once the project began?
  • Were there other key individuals that worked for the builder that you would request if you were building again?
  • How has the builder responded to callbacks?
  • Was the project clean and organized?
  • Were there subcontractors on the project that you would strongly recommend or avoid?

Seeking references should not stop with customers. In your research of potential home builders, you should also research the builder’s credentials and standing with the State
Contractors Board and the Better Business Bureau. Ask the builder if they hold or have held contractor licensees in any other states in the last ten years. If they answer yes, be sure to research their standing in those states. All builders are required to carry insurance and bonds so research the requirements set forth by the State Contractors Board and ask the contractor to provide proof of these before signing a contract. If there has been a claim or incident this does not mean this is a bad contractor but you do need to evaluate the nature of the claim and decide if you are willing to move forward. Trade and supplier references also offer a good way to find out about your builders standing in the profession. Call key suppliers and sub-contractors and ask about their payment history and what it is like to work with the builder. With home building, your lending institution will require your contractor’s financial information before approving him as an approved builder. Make sure your builder is financially solvent and check the credit rating agencies. Make sure you understand the lien laws in your state and verify that your lender is collecting the lien releases from the subcontractor as funds are being released. Have an attorney versed in construction law and contracts review the proposed agreement and edit the contract to meet your needs and protect your investment. Make sure you understand the contract and are comfortable with all sections. Remember that contracts are a two-way street, so don’t sign anything you are not 100% clear on or amenable to. If you are building your house from a cash or without a conventional construction loan, hire a private inspector to verify that the labor and materials being billed each month have been completed and are on site. During the course of construction there are products that are custom-built especially for your project and may require a substantial deposit. In this event make sure that the check is issued from the bank directly to the supplier or manufacture and references your project.

The following are some red flags to keep your eye out for when hiring a custom home builder. If any of these situations arise, they are worth looking into immediately:

  • The builder requires a large initial down payment or deposits prior to the commencement of work.
  • There is no written contract or a poorly written contract.
  • The stated price is too good to be true and is significantly lower than other received bids.
  • There is unclear work history.
  • The builder will not provide a complete estimate.
  • There is a heavy reliance on allowances for final bids.
  • High-pressure sales tactics are employed.
  • Multiple unresolved claims from the Contractor’s Board exist.
  • Lack of insurance.
  • The builder says your home will be used for marketing purposes so you will be given a special low rate.
  • No references are furnished or are unable to be verified.
  • The builder is unwilling to provide evidence of certificates of Insurance for General Liability or Workers Compensation.
  • The builder offers a lump sum or very general estimate lacking detail.

Conclusion

It can be a challenge and time-consuming to find the right custom home builder for your project but you are embarking the biggest purchase of your life so you need to be confident in your decision. Do your research and make sure you fully understand the process. This will ensure that you reap the rewards of a beautiful home that is perfectly designed to your specific style.

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