Costing of Home Building is totaly misunderstood

June 17th, 2010 Posted in Uncategorized

As a Builder part of our responsibility is to educate the client. This is the most challenging part of the job. The client has perceptions that have come about from many reasons. Most of which have not been from personal experience. Many of my clients have never built a custom home. Most have only bought a new home in a development or a current neighborhood. In both cases, after living in these homes they learn that the home does not fit all of their needs or settled for less when they bought. 

Now comes the perception issue that creates possible loss of a relationship with a very good builder. So what is the perception? Simply the “cost to build” is always less by someone who has built before and got all these great deals. The truth is just the opposite, at least when you work with a honest, trustworthy Builder. BUT, the doubt has now entered when you see the first cost estimate. It is higher than you expected. You immediately look at the Builder you thought was the one, but he is too high. This becomes the challenge on each and every home I build.

I know you have heard the comment,”perceptions become reality”. How many times do you find after calming down and see the trees in the forest, that you had your eyes opened to the truth. Imagine if that truth was there in the first place. Would you have the same perception? Would you then have the same reaction?   Perhaps the Builder is the great person who you thought and what a great relationship you had with him or her.

Everyone you know always got the best deal, that deal you can’t seem to get. Everything about their house is great and your home will cost more because of how great their negotiations went with the Builder and yours won’t.

Money is a very stressful thing to give away not knowing how the outcome will be for several years after. Trust can help with this stress and misunderstanding. How can this trust occur with a Builder? It is how the Builder presents his costing estimate to you. Is it a “Cost Plus” or “Fixed Cost”. What does this mean? Cost Plus is where the builder shows all the proposals for the estimate, and at monthly each filing you receive all the billing statements for the month. There is nothing “HIDDEN”. Fixed Cost is just that, here is what your total cost of the home is and there is no proof of actual billing statements for you to review at each monthly filing. Then comes the changes orders from the Fixed Cost because the Fixed Cost was based on the plans dated on such date. However, the Buider claims that the change order filed for what was not clear in the plans and this portion of the home cost more. These Fixed Cost programs are always coming from the lowest bid Builder. Of course you want to save money and you think the Cost Plus Builder is over charging you. In the long run your home costs you more with the Fix Cost Builder almost everytime.

When you see one price that is 10% higher, you need to see that that Builder is showing the actual product and his cost to purchase that product and the sevices it provides. In most cases with these Cost Plus Builders their costs will be in line at the completion of the home. But we don’t get the chance to prove this because you chose the Fixed Cost Builder due o the perception he was lower in cost to build your home. However at the end of the project he is 10% or more higher than that Cost Plus Builder and the quality of building is not there. Those change orders due to the comment “not on the plan”, or “you upgraded your choices”. I have heard plenty more excuses and the phone calls from lost clients who called me to take over their project due to the current Builders cost are way out of line from the original proposal.

Cost Plus Builders do a more accurate bidding process with written contracts not estimates. We clarify with you before the final pricing is presented that the products you wanted are the ones we have priced. Not a lower end choice that has a mark up you don’t see that is higher and is not the same. In a Fix Cost Contract you are not required to show any billing statements. Catch22. But you see the bottom line and your first reaction is to go that direction. When don’t get what you wanted and paid more for a lower end product that does not perform, the warranty is no longer in effect, you eat all the costs, another set up from the Builder.

A Cost Plus Builder you will find is more personal. A Fix Cost Builder you will find talks a lot and wants to close the contract. Promises will made that you want to hear. A Cost Plus Builder lets the quality of workmanship  speak for him. But you need to hire that Builder to find that out.

As A Builder, I have numerous homes you can tour not just for the referral, but come back and look at design ideas and talk with the home owner. With relationships like that, is so much proof that all of the concerns you need to be clarified are done by my home owners. All of my home owners are Cost Plus. We work to get the truly best pricing and the quality falls in line with the product and workmanship. But you have to get past the ‘Lowest Bidder Builder”  and all of his jargon. Our promises is what we build and can show to you from present to past homes. You can see how the home as weathered during the years and see that there are no calls backs or issues.

But “perception is reality”. It is unfortunate when I look back at homes I lost due to the lowest bidder. I have contemplated to change my means of how I build and making promises I can’t make happen without a change order to get the job. But then I will never have any bridges that I can cross and only have a very limited if any homes to show at any given time. You make the choice. Buyer beware.

 You really do get what you pay for and remember “your perception will be your real reality in the end”. Not what you thought. Lot’s to think about. I hope to hear from you.