Frequently asked questions and answers.
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NO!! just like you wouldn’t attempt to build your own car, it’s a really bad idea to attempt to build your own custom home, unless you have significant expertise and experience in building custom homes we highly recommend hiring Rutter Homes instead, and that one friend or relative that attempted it and said they saved money is LYING!! And we know your mind set, you’ll just ride by our jobs and see the signs/advertisements of the guys we use, and then you will call them up and get a price, remember this: they aren’t charging you the same as their custom contractors!!, and why would they? Your one house every ten years won’t compare to the 100 homes they do a year with their custom contractors! But just in case you’re still planning on attempting it keep these following tidbits of information in mind:
Time Constraints - Be prepared to spend at least 35 hours a week for probably 8 -10 months working on the project, this is the calculated average for a 2000 sqft. of (Living) home. Does your current employer allow enough flexibility to spend this amount away from your job?
Selecting and scheduling the best subcontractors – Remember these subcontractors have other jobs in progress besides yours. Their loyalty may be with those builders that give them multiple jobs/work during the year (remember you build a house every 10 years on average, some builders build 10 homes a year) Will they be available to you at the proper time? For example do you have the toilet installed before or after the flooring is installed? One sub cannot do their work until another has completed theirs. Delays are costly, frequent and frustrating, keep in mind interest payments don’t wait for subcontractors to show up!
Bidding Expertise – Do you really know how to properly analyze a cost breakdown? Are you able to distinguish high bids from low bids and work quality? Are you allowing for all the materials you’ll need? Many times materials suppliers will have wrong quantities costing potentially thousands in cost overruns, many materials and commodities and cost fluctuate from week to week no material supplier can guaranty prices (if you find one let me know) and almost all material suppliers will have a disclaimer on the back of their quotes informing you that they are not responsible for cost fluctuations ** A mortgage lender will require that your cost breakdown be documented and if you don’t project cost accurately and run short of funds the loan amount can’t be adjusted after its approved ( generally speaking in 99% of cases). How do you know if subcontractors are charging you the correct rate? Just because you get three different prices for one trade and think the cheapest is the best, how do you know if the cheapest price isn’t higher than the going rate?
Technical Expertise – As the general contractor of the home, it will be your responsibility, to hire qualified, licensed, and insured subcontractors. Do you have the technical expertise to oversee if the work is done properly? If, after inspection, the work is rejected by Codes Enforcement who will absorb the cost to redo the work? While this work is being redone, time will be lost, and other subs may have to be rescheduled
OSHA (Occupational & Safety Health Administration) – As the general contractor of your home you can be held responsible for all sub-contractors who do not adhere to the construction site OSHA safety requirement. Specifics such as regulations involving stairways and ladders have been a major source of injuries among construction workers. OSHA has set out about 17 detailed rules that govern stairway and ladder use. Other OSHA standards for a job site include postings of emergency numbers and instructions in the event of an injury. If your job site became the target of an OSHA inspection, penalties for any infractions could be very costly, For example one jobsite home under construction resulted in over 20,000$ worth of citations.
Warranty Responsibilities – The New Home Warranty Act, effective August 30, 1986, requires builders of new homes to provide certain warranties that extend over periods of one, two or ten years depending on the nature of the defect. If you build your own home and sell it to another party, you will be responsible for claims brought on by subsequent owners of the home, if you are thinking of buying a home, DO NOT!!, buy a home from an individual that built their own home, make sure they can provide proper documentation proving a contractor built their home.
Licensing – A homeowner may build his own home one time per year, but remember you must actually occupy the home upon completion. Other than this exception, any person or firm who is the general contractor on any residential construction must be licensed when the total cost exceeds $50,000
Lien Laws – In the event any of your subcontractors fail to pay their suppliers or laborers, a lien can be filed against your property. A lien is a claim against a piece of property. These suppliers and laborers, if not paid, can file a lien against your property, even if you have paid the sub-contractors
Permits – Building permits and periodic inspections are required even if you are self-contracting. It can be a tedious and frustrating experience if you’re not familiar with the system and all of the “red tape” requirements which must be complied with before commencing work. Mistakes here can be costly and time-consuming
So if you’re still thinking of building your own just remember the A B C’s of building your own home:
A, Arranging Financing – Arranging and applying for a home loan can be quite involved and should be one of the first orders of business. Even if you feel you have enough cash to do the job, applying for a home loan to allow for inevitable overruns due to increased material and labor costs or upgrades is always advised. Most mortgage companies will not lend money to cover the unanticipated costs of a home on which construction has already begun. As a self-contractor, some lenders will not lend you more than 80% of the projected cost of your home. House plans, specifications and an itemized list of documented costs and bids must be provided to the lender. In calculating costs, do not allow for “sweat equity” as most lenders do not recognize this as a legitimate cost.
B, Bookkeeping Responsibilities – IRS: the IRS requires that you send any sub who earns $600.00 or more a 1099 form at the end of the year. In the event you are audited, be prepared to prove that the sub is an independent contractor – that is, you did not have to supervise his work and you did not dictate what time he reported to the job Tracking material purchases: It is very important to be on the site or have someone you can trust to document delivery slips. Returns must be accounted for since inaccurate billing can run up costs. You will need to check all invoices and account for all materials. Waste can add hundreds if not thousands of dollars to the cost of a home
C, Construction Management – Do not take this area for granted!! There is much more to building a home than meets the eye. Be realistic about your skill level and the amount of time you can spend on the jobsite. Base your decision to put “sweat equity” into your home on your experience, skills, available time and the amount of stress you and your spouse are able to manage. Your ability to handle long-term disruption of schedules is just as important as your ability to swing a hammer Also keep in mind: Deposits – Deposits will be required by all utilities before construction can begin. Make deposits early as some may take weeks to get their services connected Insurance – Do you know why builder carry builders risk, General Liability, and Workman’s compensation insurance on all of their building projects? Because they know what their liabilities are and you, as a self-contractor, will have to assume the same liabilities