Throughout this column, we’ve discussed the various steps of the building process, from finding your contractor and building your team to the selection of your finish materials. As we wrap up this series, I want to list a few key elements of the process to help you avoid any surprises during the construction of your home.
Keep in mind: Some contractors and builders can help you with the design, while others want you to come in with plans. Each builder will have a different style or specialty, but just because some builders don’t design doesn’t mean they won’t deliver on the final product. However, you do want your contractor to be fully licensed, bonded and insured. If you have a chance to see examples of their finished projects, this can help you make a confident decision.
When making a plan with your builder and staying involved throughout the construction process, you can still expect surprises. Have you ever heard the phrase "expect the unexpected"? This phrase certainly applies to building a house. The best way to plan for the unexpected is to know the general ins and outs of the building process. Here is a list of considerations and potential areas for surprise.
If you apply for a construction loan, you’ll have to have copies of the floor plans and specs from your builder or architect so the mortgage lender can appraise the home to determine how much they will lend. It’s common to make a down payment, or a personal guarantee, and the sum can be significant. Also, keep in mind that the appraisal and credit checks will come with fees, as well as title insurance on the land and homeowner’s insurance.
The Budget Cushion
It’s always best to have a full budget in mind with plenty of cushion. This is especially true for those taking out a home construction loan. It’s not uncommon for projects to go over budget (this is why we recommend to have a contingency built in between 10% to 15%).
An experienced builder will factor in the budget allowances of design elements such as cabinetry, countertops, flooring, and fixtures. However, these allowances do not always account for homes with many custom and high-end features and add-ons. I recommend discussing with your construction team the level of finishes you expect so they can input the proper allowances for your taste. It would also be smart to provide examples of the quality of work and styles of finishes you’re expecting.
All builders are not of the same quality. Some lower-end builders will have lower allowances to make their bid seem more affordable. What you don’t want is for your builder to skimp on the important foundational and structural elements of your home, compromising the house’s integrity. This tends to happen more with less-experienced and less-reputable builders. This is why researching your team and seeing the quality of previous projects is vital.
The best way to stick to your budget is having a detailed set of plans to bid from. The more information on the plans the more accurate your bid will be. This will help the project to stay on budget with fewer surprises.
You generally pay for the work completed in a weekly or bi-weekly installments, based on the work completed to date. Be mindful of contractors who try to front load a project, and always ask for the backup documents.
Permits and Other Fees
You may be aware of some of the permit fees your project will require (most people are aware of building permits, for instance). However, there are separate permits for public improvements, work in the right of way, SDGE upgrades, swimming pools, etc. Also, it is worth researching each county or city’s ordinances because these could also cause delays and cost to a project.
Furthermore, if you are building on an empty lot, significant work might need to be done to make room for your new home. This may include clearing trees, grading, over excavation, retaining walls, site drainage, and bringing utilities to the property (electrical, gas, water, sewer). The cost of land prep can be costly and vary dramatically from project to project.
Getting Carried Away
Deviations from plans can quickly add up and throw your project out of budget. Always consult with your team and request a schedule of values to monitor your current budget.
It is difficult to plan for these, and most of us don’t plan for these extreme case scenarios. Geotechnical issues such as sink holes, ground water, poor soil, or acts of God such as floods, fires, and earthquakes are all things that can negatively affect your project. What you can do is have a contingency in place of 10% to 15%, as mentioned above.
Final Punch List
All the finishing touches have been put on, floors have been finished, bathroom mirrors and shower doors have been hung, and the basic landscaping is completed. At this point, it’s a good idea to make a final punch list with your builder. If any defects are detected during this inspection, a follow-up will be required once the defects have been fixed.
Building can be a tough and stressful process, but in the end the client is able to enjoy their beautiful high quality home.
If you’re ready to build, or you want to discuss your construction or remodel options with our experienced team, contact us at gdcconstruction.com, give us a call at 858-551-5222, or come see us at GDC Construction, 1031 Silverado Street, La Jolla, CA 92037.