Tips for Finding & Working with your Custom Home Builder.  Common Problems & Solution. 

Step 1: Research and Look for Recommendations

The first step in finding a custom home builder is to do your research. Have a plan for how you will do it.  

An hour spent wisely researching can save you many hours of headache and heartache by selecting a better builder.

One issue homeowners face is that builders spend less time on a home owner sends the builder one project; as compared with a major client who sends the builder a few projects per year. The solution maybe looking for builders in places where the builders have a personal connection; multiple projects; or simply have other problem / pain for the builder than purely contractual problems, if the builder fails to deliver.

For example: 

• Look for builders with recommendations from friends and family who have used the builder before. 

• Attend to local business networking (BNI) groups. 

• Attend to local churches or religious groups. 

• You may also ask your architect for recommendations. Ask the architect for builders that they have worked with on multiple projects in the past. 

Additional Information:

In March 2023, after this blog was shared with readers, we received a question as

follows:

"I've spoken with a number of builders, and they want to charge between $1,800 and $4,200 to provide a quote. I've already paid two builders, but their quotes are either incomplete or very expensive. How would you solve this? (Paraphrased)"  

Here's our recommendation.  Please obtain your own expert advise before implementing this idea:

Step A – Obtain a Cost Plan from a trusted quantity surveyor. The end result will be a Bill of Quantity (listing how many of each building item you need), the building item rate, and the estimated total construction cost.

Step B – Create a new Excel spreadsheet. Retain only the Bill of Quantity in the spreadsheet. Remove the building item rate and the estimated total construction cost.

Step C – Prepare a set of documents for builders to express their interest in the project. The document should include only the Architectural Drawing and the Bill of Quantity.

The Architectural Drawing will enable builders to estimate complexity and location costs. The Bill of Quantity saves the builders' time by eliminating the need to do 'take-offs' using the plans.

Step D – Speak with multiple different builders. Send the document from Step C. Ask the builder to insert their building item rate into the Bill of Quantity, and then add profits, margin, complexity cost, and location cost.

Request the builder to provide the lump sum only. The builder's item rate and other costs

should be treated as confidential, and they don't need to disclose that to you.

Experienced builders should have their own building item rates. This process should take experienced builders around 2 – 4 hours, which means you might be charged around $300 – 600 each. You should select 1-2 builders to discuss in detail.

Step 2: Check Credentials

Once you have a list of potential builders, it's important to check their credentials. Make sure they are licensed and insured, and ask for track record of building custom homes. Look for builders in your area and read online reviews to get an idea of their reputation and the quality of their work. Spend time visiting every builder's operating sites and speak with the owner if possible. 

When visiting a building site, look for a sign displaying the name of the designer and Building Surveyor. This sign is required by the builder to be on display. If you find the sign, reach out to these consultants and ask for a reference. If the sign is not present, the builder has not followed the proper regulations and should be considered with less preference.

Ask the builder for previous completed projects. It's difficult to find out how the relationship between client, consultant, and builder went about past projects, as there is a confidential nature to this. The focus here is to check Google Earth historical aerial photos (or other software with accurate aerial photos) to find out how long it took the builder to build from beginning to completion.

Step 3: Know the Builder in person 

Once you've narrowed down your potential builders, schedule meetings to discuss your project in more detail and get a feel for their communication style and level of expertise. During these meetings, ask about any challenges the builder sees with your project and the likely solutions they have. 

If you're not sure what questions to ask, you can follow the building stages, such as site preparation, foundation, framing, lockup, fixing and fit-off, and completion. For example, you could ask, "What challenges do you see with the site preparation?"

Step 4: Get a Detailed Contract

Once you've selected a builder, make sure to get a detailed contract in writing. This should include a detailed scope of work, a schedule of payments, and a clear timeline for the completion of the project. Minimise the Prime Cost Sum (PC) or Provisional Sum (PS) in the contract because these can alter the contract price.

For example, if floor tile is listed under Prime Cost allowance of $5,000; the builder will ask you to pay an extra $1,000 plus the builder's margoin, if the builder pays $6,000 for tile. 

Some may say that this goes both ways - that the builder has to reduce the contract price if the tile price decreases. However, it can be very time-consuming for the homeowner to find out the actual price of a specific building product or tradie charges from a specific supplier at a specific date of purchase.

Cost Overruns

One of the most common problems homeowners encounter when building a custom home is cost overruns. To avoid this, it is important to check the contract in detail and stick to it as closely as possible. Avoid Prime Cost Sum or Provisional Sum in the contract. Request the actual architectural and engineering drawings to form part of the contract if the builder has not put those in.

Delays

Another common problem is delays. To avoid delays, make sure to have a clear schedule in place and keep in close communication with your builder. If you do encounter delays, try to be understanding and work with your builder to find a solution.

Over the years, working as a consultant, we have learned a few common arguments from builders when the project is late.

1. The first one is the TIMING the builder notifies the owner about an event causing delay. We had builders submit for Extension of Time claim six months AFTER the delay event.

2. Another common issue that can arise is when a builder's delay causes further delays. For example, if your builder is running behind schedule by two months and a rare storm occurs on the day of pouring your concrete foundation, causing the concretor to be unable to work on the site for another two months. 

If the builder had been on time, this storm event would not have impacted your building schedule.

3. The third common issue that may arise is the format of claims for an extension of time. An "Extension of Time" is when a builder claims an event that is out of their control and the owner is responsible for providing the builder with additional time. 

Claiming this should refer to the specific "Extension of Time" contract clause. However, many builders submit a general email saying "there is XX days delay on the project due to XXX." This statement only means that the builder has delayed the project and it is Builder's responsibility to catch up on time. 

A general email does not allow the owner to query the event at that time.  But builders use this to claim that a formal notification was in place and they should be granted an Extension of Time when calculating the final payment. 

You may need to consider these situations and work out a fair and reasonable, trackable process that both you and the builder agree on.  Add these agreement into the building contract.

Problem: Quality Issues

If you encounter quality issues, it is important to address them right away. Talk to your builder and ask for a resolution. If the builder is unwilling to fix the problem, you may need to get help from your consultants such as your Project Manager, Architect or the Building Surveyor.

Don't be shy. Resolving a problem early is the fastest and cheapest solution for the builder.