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By Melissa Sprouse Browne, Real Estate School of South Carolina
Building a house can be wonderful and exciting! After all, you and your family hope to live in your new house for a long time to come. So, it's important to choose a builder with whom you can create a good relationship.
Once you have chosen the type of house you want to build (traditional brick ranch, arts and crafts style with vinyl siding, contemporary with stucco, etc.), seek out neighborhoods with similar homes and research the name of the builder(s) who built a home (or homes) you like. If possible, interview the homeowners about their experience.
A good resource for locating a reputable local builder is the National Association of Home Builders. In central South Carolina, the local chapter is called the Home Builders Association of Greater Columbia. (www.columbiabuilders.com) The HBAGC offers a comprehensive list of builder members, as well as related contractors through their Affiliate Member and Remodelors Council membership guide.
Once you have determined which builders are available that have experience in constructing the type of house you desire, create a list of three to five candidates. You will want to meet with each firm individually and ask the same questions at each meeting. Pertinent questions should include:
How many homes does your firm build per year?
What is the typical construction time from permit to completion?
Will there be a dedicated construction site manager for my job?
How often will draws be required?
What type of communication can we expect during the process - will we meet on a regular basis to review progress, may we call or email you at any time?
Do you use the same set of sub-contractors for every job, or do you bid out the subs based on the job specifications?
Will you create a construction timeline so that we know what to expect and when to expect it?
What do you charge for change orders?
Does your firm carry Builders Risk Insurance during the construction period, or are we required to secure this coverage?
What type of warranty will you provide on the finished home?
Asking about the number of homes your builder candidate builds in a given year is a good indicator of how busy the builder will be. If the firm is currently working on 10 other houses at the time you expect your construction project to begin, it may be difficult for the builder to meet your deadlines as promised, simply because he is so busy with other projects. Of course, if his or her firm is adequately staffed, it may not be an issue. Certainly be aware of their level of organization and professionalism, since it will directly impact the quality and timeliness of completion for your new home.
When you sign the construction contract, there should be a definitive timeframe for the construction process. Depending on the complexity of your home, it could range from six months to more than a year. If you find during the interview process that the builder does not seem to be meeting his deadlines on other projects, you may either consider not using that company, or inserting a penalty clause in your contract for completion beyond your desired date. In most cases, the builder will want a bit of leeway in the timeline. (Weather and natural disasters in other areas can affect your job by making construction materials unavailable or late in delivery. Bad weather can adversely affect your construction time simply because there are parts of the process that cannot be conducted in rain or very cold temperatures.)
Having a dedicated site manager for your project is essential, especially if your builder's firm is medium to large in size. There is significant value in having one person in charge of your job. He or she will know exactly what has been done and what's next in the process. Without a site manager, something could be constructed incorrectly and without proper oversight, it may go undetected until it is impossible to go back and correct the error. Also, it is helpful to develop a good rapport with your site manager. By keeping the lines of communication open, you will be able to work through questions and possible changes without much hassle.
The question of "draws" on your construction job is vital not only to you, but also to your lender. A "draw" is when your builder needs payment for what has been constructed to date. Traditional builders may request three to four draws over the life of your job. At the time of the first draw, the builder will provide you and your bank with a detailed invoice, showing the cost of labor and materials for the portion completed so far. The lender will send out an inspector to make sure that the work has actually been completed and then write a check to the builder. This process is then repeated until the house is finished.
A non-traditional draw system could require biweekly draws. In this system, you will receive invoices detailing labor and materials for the past two weeks. Again, the lender will send out an inspector. However, instead of sending a lump sum payment to the builder, the lender will deposit the full amount in the account of your choice and then you are responsible for paying the individual sub-contractors and the builder by writing checks for each one. This process gives you more control over the payments. Example: A sub-contractor hasn't performed to your satisfaction. You may consider withholding payment until the issue has been resolved.
Communication is key throughout the building activity. Make sure you raise any concerns immediately, as the steps required to make corrections could be very costly if you wait too long!
Views on using the same sub-contractors for every job vary from positive to negative. It could be a positive sign that the builder has such a good relationship with his or her set of subs that this group is used time and again. Or, it could be indicative of complacency and mean that the builder is either not sharp enough or too lazy to shop around for better workmanship and pricing.
Having a timeline for completion is helpful for a number of reasons. First, it can help you budget for big expenses ahead of time. Second, you may use the timeline to determine how often you need to visit the construction site. (It is recommended that you visit the site every day, if possible. If you miss a day, you might miss something important!) Third, the timeline will show you if the builder is on target to finish in the allotted number of months.
At one of the early meetings, you will have decided with your builder what home plan to use. Any modifications to the original plan should have been made at that point, prior to the commencement of construction. A change order is considered to be any deviation from the original contracted plan. Most builders will charge a premium for a change order. As an example: In the bonus room over the garage, you decide to add a bathroom. This change would have to be decided early in the framing phase, so that the walls could be framed, plumbing and lighting added, etc. Or, a change order could be something fairly simple, such as deciding that you want to have hardwood floors instead of carpet in a room.
Builders Risk Insurance handles the coverage of your home while it is under construction. Should any peril occur, you would be covered under the policy. In some cases, the builder will provide this coverage. In others, you are required to obtain the policy. Be aware that not every insurance company will write this type of specialty policy.
Finally, be clear on what type of warranty is provided for your finished home. Most builders will cover repairs for up to one year after construction. You may also have rights as a consumer from the state Home Builders Commission. As added protection, you may wish to purchase a home warranty to cover repairs from a company such as American Home Shield or 2-10 Homebuyer's Warranty.
The task of building a new home is daunting, to be sure. However, the reward is great when you finally move into the home of your dreams!