Building a home can be a high stress project for you and your family. And often, the choice you make in a contractor can make – or break – your project. Finding the right contractor helps determine the quality of the work, the time line of the project, and the emotional/financial stress you’ll have to deal with.
Everyone has heard the horror stories of contractors and service providers. But in reality, there are plenty of reputable contractors out there who will give you the results you are looking for. But, there are some steps you need to take to make sure you find the right one for you.
Start with a plan. When you provide your bidding contractors with a plan, it enables them to give you a more detailed estimate. The more specific you get, the more accurate your estimate will be.
Get recommendations. You should ask your friends and neighbors, and perhaps even your mortgage lender for any experiences they’ve had with a local contractor. Another good source for recommendations is your local lumber yard or building materials supplier. These are going to be people who deal regularly with contractors. They know which builders buy quality materials, which ones pay their bills on time, and which ones are good at communicating. You may also consider a local building inspector. Whichever route you choose, you should always speak with others who’ve dealt first-hand with local contractors you are considering.
Perform some preliminary interviews. Start with a phone call to ask some simple questions. The answers to these initial questions can reveal a tremendous amount of information regarding the company’s availability, reliability, and how much attention they give each of their projects.
Consider these questions when conducting your phone interviews:
- What size project do they typically handle?
- Will they provide you with financial references from banks or suppliers?
- Is it possible to get a list of previous clients that you can contact?
- How many projects are they typically running simultaneously?
- Which subcontractors do they typically use, and how long have they worked with them?
- What kind of payment schedule do you typically expect?
Get the facts. If your phone conversations resulted in references, you should begin by calling up former clients to see how the project went. You should also feel free to visit a current job site. The appearance and efficiency of a job site can speak volumes about the work a contractor will provide you.
Meet with several contractors. Based upon your phone conversations and research, you can narrow your list down to three or four possibilities to meet with face-to-face. Pay attention to the ease with which you can communicate to each contractor. Provide each with a set of plans from which they can provide you an estimate. You should ask for an itemized bid. Many contractors prefer to provide you with a single, bottom-line price. But, you need to know how the bid breaks down so you can later determine if and where you need to cut back.
Elements you should consider in an itemized bid:
- Framing and finish carpentry
- Electrical work
- Light fixtures
- Drywall and painting
This isn’t an exhaustive list, but you get the idea. When you have an itemized bid, you can easily compare different contractors’ prices. You can also see where you need to trim and where you have room. A good contractor will be willing to take the time to get to know you and the type of house you are interested in building – high-end finishes or mid-range. All of this information factors into an accurate bid. Generally 40% of the total cost covers materials, while the rest covers overhead. A typical profit margin on a home is 15 to 20%.
It’s about more than price. The lowest bid always sounds good to our wallets. However, you should toss the low-ball bids. Typically the lowest bid is either low due to poor quality of materials, desperation for work (not a good sign in a strong economy), or you’ll find that their estimate didn’t include a lot of things you’ll end up paying for in the end anyway.
More important than the bottom line is choosing a contractor that you can communicate with easily and effectively. In the end, you’ll be living in your home for a long time. It’s better to pay a little more to ensure satisfaction than cut corners and regret it for the next 30 years.
Make your selection and prepare for your loan. Once you’ve accepted a bid, you are ready to move forward with a detailed contract. Check with your mortgage loan office to find out what needs to be included in your contract to secure the loan.
Also, be sure to give your contractor the construction draw schedule your bank will follow for disbursements. Your mortgage loan officer will provide you with a construction draw schedule.
When you're ready, reach out to a mortgage loan officer to schedule a meeting.
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