How to Select a Home Builder, Part 3
▱ Part 3: An Effective Interview ▱
By Larry Gilland
▱ Interview Questions Continued from Part 2:
7. What size of home does the contractor build?
If the builder states that they build homes far smaller or larger than your needs, they may find it difficult working with extremely different proportions. A word here about the size of home you dream of...and it may be just a dream. Visions of owning and living in a 40,000 square foot castle will probably not become a reality. The majority of homeowners will find that their initial dream house plan will cost more than they expected when they receive the first bid(s). The next question will help you to determine the limits to your dream.
8. What is the cost-per-square-foot of the most recent homes the contractor has built?
The area of the country, the materials, the products used in the home, and the size and style of the house will determine its cost/square foot.
9. How does the builder calculate their salary / fee?
Basically, there are two ways a builder can calculate what their salary will be. 1) They can determine their salary as a percentage (cost plus) of the actual cost of the house or 2) a straight fee (lump sum or fixed price). The contractor who derives his salary as a percentage of the total cost really has no incentive to keep your costs down. In fact, the higher the cost of the house, the greater their salary. On the other hand, the contractor who is guaranteed a set fee can decrease the homeowner’s cost without risking their income.
Other fees may or may not show up until the final bids. Builder's fees or overhead fees may be included, which will cover such things as office and clerical costs, snow removal mileage, temporary service charges, etc. These charges can vary with each project and can only be estimated from experience. Real estate fees will be added if the builder must purchase property upon which to build your home.
You may be interested in offering a "budget incentive fee” to the builder for keeping the house costs below budget. However, it’s wise to not mention this before receiving the final bid for the cost of the house. An unscrupulous builder could jack-up the price of the house to ensure that they would appear to stay below the budgeted amount to receive the reward money.
The homeowner, finance company, and the contractor will agree upon the time of payment to the builder. Payment could be scheduled monthly or as a partial payment at the beginning of construction, with final payment occurring at completion of construction.
10. What is the builder's availability?
Will you be faced with a long waiting period to break ground? Don't hurry into choosing a builder because they’re "beginning to fill their calendar." If the builder tries to rush this decision, they'll likely press you for future decisions. You should be prepared to make timely decisions though so that construction isn't delayed while you think. Remember...time IS money. YOUR money!
11. What are the builder's warranty and guarantee policies?
Obtain a copy of their General Contractor’s Contract when you meet the contractor in person. It should contain the following:
1) The date of the agreement
2) The homeowner's name and address
3) The contractor's name and address
4) The location of the building site
5) The begin and end dates of construction
6) The cost of the construction (fixed or cost plus a percentage)
7) The payment method
8) A statement defining what services, labor, and materials are included in the price; tool/equipment rental, utilities during construction, landscaping, etc.
9) The name(s) of supervisors, etc.
10) A statement that the contractor is responsible for obtaining permits and certificates of approval
11) A statement making the contractor responsible for cleaning the site and house upon completion
12) A statement of liability in that the contractor will be held responsible for the safety of all persons at the building site
13) A statement that the contractor provide proof that they carry workman's compensation insurance
14) A statement which stipulates a monetary penalty for each day the building is delayed past the stated completion date. Failure by the contractor to complete the project should be covered along with the owner's right to hire another contractor in this event
15) Unforeseen situations which require additional funds should be covered along with the procedures of negotiation or payment
16) The American Arbitration Association should be named to settle any unresolved dispute or claims
17) The builder’s warranty and its conditions, as well as what services, materials, and problems it covers should be defined. The warranty should last no less than one year from the date of the certificate of occupancy
18) A statement that no liens may be filed against the homeowner's property or house by the contractor, subcontractors, or suppliers
Note: As always, it’s advised to have your attorney examine the document to ensure its legal efficacy and its ability to protect your rights.