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Home Builder Manage
- The owner will contract with a builder to oversee
the entire construction plan. The builder will subcontract
projects and work with suppliers to provide the materials
- Consider your level of involvement with the builder.
Most owners rely on the builder's judgment and experience
in selecting subcontractors and buying materials.
- A high level of participation will include your
approval of subcontractors (particularly in reviewing
references) and periodic review of the project plan
as outlined in the construction plan and schedule.
- A minimum level of participation will include an
independent inspection after each sub-contract work;
i.e., framing, plumbing, electrical, etc.
Never approve or make payment until the inspection
has been satisfied as outlined in the construction
- The owner and builder will jointly oversee and manage
the financial aspect of the project. This includes
managing the construction line, paying subcontractors
and suppliers, obtaining all lien releases, converting
the construction line over to a mortgage loan, and
finalizing settlement and closing.
See Financing Management below
- Some owners may choose to become their own "contractor",
or in other words, function as the project manager
by scheduling home construction projects, hiring subcontractors,
buying materials and supplies, and overseeing the
entire project from land excavation to landscaping.
- Some owners who have other job commitments may opt
as a part-time contractor by hiring a supervisor or
other builder on a hourly basis. This way they can
tap into their network of subcontractors.
- As an owner contractor, you will need experience
in project management and scheduling. And it wouldn't
hurt to learn the terms used among contractors. You
need to appear professional to avoid mistakes and
being taken advantage.
- There are a number of construction books that outline
steps in Owner Construction Management. See
Some key issues to
consider as a self-contractor:
- Remind them who is
You need to get people to perform the work, at
the time you need the work completed, and at a fair
price with quality workmanship.
You need to fair, but tough. Always maintain an alternative
backup if the work is not being performed as needed.
- Act like a builder:
Dress, talk, and socialize like a builder. Get to
know your subcontractors. Speak on their terms. Remind
them that you are the builder who "pays"
- Keep good records:
Keeping good records is your most important task.
You need a system that tracks purchase orders, invoices,
paid receipts and checks, scheduling plans, contracts
from subcontractors, worker's compensation records,
and the like.
Have ready access to information whenever a dispute
arises. And most importantly, protect yourself against
liens and any injury liabilities.
- Keep yourself insured:
What happens if a subcontractor falls and injures
themselves? Or more likely, some neighborhood child
gets injured while jumping between the rafters some
Make sure you carry liability insurance for workers
and non-workers alike who have permission and non-permission
to work or walk on the premises.
- Provide a workers
Workers like to work in pleasing environments. Schedule
your project so that inside work can be completed
with heating and AC provided on days that are cold
Provide bathroom facilities, a makeshift picnic table,
and every so often show up with some cold drinks and
snacks. They will thank you for it.
- Prepare for frustrations:
Construction Rule #1: nothing will go as schedule.
Bad weather, delivery delays, material shortages,
labor disputes, inspection failures, and one of the
most common mishaps, conflict in subcontractor scheduling,
can all add to delays and cost overruns.
Good builders learn how to manage change. Your best
strategy is to have alternative plans. If a subcontractor
fails to show, have a backup subcontractor. If a supplier
fails to meet schedule, find a second supplier.
Note that cash talks. Having incentives for prompt
deliveries or project completion can minimize unexpected
- Know your priorities:
Certain projects in the construction plan take priority
over others as it relates to quality workmanship and
The foundation must be right the first time. The framing
is going to be more important than a squeaky door.
Getting the plumbing inspected and working is critical
before putting up the drywall.
Take the time to oversee key projects. Be there when
they lay the foundation, get a sign off from an independent
inspector regardless of schedule, and double check
key areas. It will save you time and money down the
- Manage change:
Learn how to manage changes. You could become your
worst enemy. Working on the project day-in day-out
is tempting to revise the original specifications.
This could become expensive over time and delay your
See our Change Management discussion
- Keep things moving:
It's important to keep your construction close to
schedule as possible. Delay after delay can push the
construction beyond the financing draw period, prompting
the bank to take action if necessary.
Important time components to remember:
- schedule the construction so that inside work
can be completed during the cold months
- get commitments from suppliers on delivery dates
and have them inform you days in advance if they
- promptly schedule subcontractors far enough
apart so that you can inspect and repair work
if needed, make-up for days lost, and give you
some extra room in the event the project is falling
- add some variance in your original construction
plan for unforeseen delays due to weather, labor,
and delivery problems
- keep a tight control on costs one of
the biggest delays is when money runs out
- Inspect before you
For more information about contracting your own home,
Book Recommendation list
Your most powerful tool is the cash you hold in your
hand. Always have an independent inspector review
the subcontractor's work before making payment. Once
the money leaves your hand, your negotiating strength
See our notes
- Changes are part of every construction. Most of
them are minor, such as adding additional wiring to
a certain area of the home. Others can be expensive,
like knocking out a wall.
- It's critical that you manage changes within budget.
Also note that structural changes may impact other
parts of the house such as frame if you decide to
remove a wall.
Recommendation for Effective
Get the construction plan as finalized as you can.
Take time to review our Home
Renovation Center by room for product specifications
and ideas. Getting the construction plan done right
will minimize expensive changes and delays.
There are three types of changes to the construction
plan. Set a tolerance level of each type:
- Plan Changes
This is where you make changes to the construction
plan prior to subcontracting the work and ordering
supplies. This is the least expensive change you can
make. You simply revise the construction plan and
pay the extra cost for the upgrade.
Note: review the construction plan in detail. Take
time to review product ideas and designs. It is a
lot cheaper to revise the plan for an upgrade than
to having something revised later on. See
- Changes Prior to Installation
This is where materials have arrived and you decide
that you want to upgrade. Your cost will include the
return of the original item undamaged and re-ordering
the upgrade item.
Note: your subcontractor may charge you additional
costs for the upgrade, particularly if it involves
extra work. Also note that reordering may impact the
construction schedule especially if your reorder takes
time and the upgrade is an important piece in the
- Changes After Installation:
This is the most expensive change. The material item
has been installed and you decide to take it down
and replace it with an upgrade.
Note: this is the mostly costly change you can make.
And you have placed yourself at the mercy of the subcontractor,
who may charge a hefty change price. You can either
eat the cost, make the change yourself, or forget
Common problems you may encounter during construction:
- Sub-contractors are
late or don't show:
- get time commitments from sub-contractors
- call them 1-2 days before schedule
- have other subs ready to go
- Incorrect work or
- review the construction plan with sub-contractor
and other expert
- give the sub-contractor detailed specifications
- inform sub-contractors that their work must
- carry a cell phone where sub-contractors can
contact you if questions
- Material delivery
- order materials well in-advance of schedule
- confirm delivery dates with suppliers
- have suppliers notify you days in advance of
- call for confirmation the day before delivery
- provide delivery instructions
- Wrong materials:
- double check material ordering
- use detailed description and part numbers
- have the supplier review the order with you
- become familiar with the supplier's exchange
- have materials arrive days in advance so that
they can be exchanged if necessary
- Payment disputes:
- put payment amount and work description in writing
- make sure that any changes to the plan is in
- pay with checks so that you have an official
- keep all invoices
- use lien waivers with each payment
- Bad weather:
- schedule construction during good weather months
- enclose the house quickly
- lay a cusher run (pebble rock) from the road
to the house
- buy plastic covering for materials
- Theft and vandalism:
- enclose the house quickly with locks on doors/windows
- carry theft insurance
- visit the site regularly and at different times
- inform the local police for drive-by surveillance
- don't keep materials laying around loosely
- place "No Trespassing" signs on house
- have liability insurance in the event of intruder
A good cost estimate home construction should be within
2-3% of the actual cost. But unexpected costs and upgrades
can creep in putting the estimate 10-15% below actual.
You need a plan where you can cut corners if necessary
when cost overruns begin to jeopardize your project.
Some suggestions include:
- Save money before construction:
- design your construction plan within budget
don't add special frills that you can't
- add a financial variance don't plan
your construction plan using 100% of your budget,
set aside a portion of your budget for variance
- shop prices aggressively get several
bids from contractors and shop materials among
1-2 suppliers that offer discount incentives
- plan your home to minimize waste materials
come in certain dimensions, plan your rooms so
that you maximize all of the material without
having to cut it in half
- Perform the work yourself:
There are construction jobs that you may take on yourself
to reduce costs:
- light fixtures
- some landscaping
- clean up
- Get the extras later:
- microwave, crown moldings, alarm system, swimming
pool, finished bonus room, etc., are all "want-to-have's"
but are not needed to occupy your home
- you can cut these items from construction plan
to save money and then add them later once you
have settled in the home
- use regular windows instead of designer windows
- install straight-up stairways instead of oriental
- lay vinyl flooring instead of tile
- others: make a list of acceptable downgrades
Construction cost breakdown:
- Builders will prepare a cost breakdown of the project
that has four cost components:
- Fixed Costs: basically the startup costs such
as the land purchase, building fees, architectural
fees and the like.
- Bids: portions of your home costs that are from
subcontractors and suppliers for plumbing, roofing,
foundation, etc. These players will provide estimated
cost bids based upon the projected plans and specifications.
- Estimates: this includes the builder's estimates
for materials and services to build your home.
Such items include lumber, concrete, site excavation,
trash removal, etc.
- Allowances: includes the finishing touches of
the home such as cabinetry, flooring, lighting,
landscaping, etc. The builder will estimate a
dollar figure for these items. Anything in excess
or desired upgrades is the financial
responsibility of the buyer.
a sample residential construction contract and
schedule from www.b4ubuild.com
your residential construction agreement protect
- Lenders require a cost breakdown to approve the
amount of construction funding. A good estimate will
be within 1-2% of the actual costs. A poor estimate
can be off as much as 5-10%.
Builders generally tack on a fee as a percentage of
the total cost or some fixed amount. You will need
to negotiate with the builder on fixed price guarantees
and warranty provisions.
- Keeping within cost estimates:
It will be tempting to upgrade on features or alter
the plans that will increase the cost estimates. It
is a good idea to have a plan ready when cost estimates
exceed their budgeted amount. This way you can act
fast so as not to delay the construction.
Suggested plans may include:
- Cash Reserve: maintain a separate cash reserve
or take out a home equity line on your existing
home: see our site YourEquity.com for information
about home equity lines
Word of caution: the equity in your existing home
may be your down payment on your construction
loan. Using your equity may increase your costs
for the mortgage loan. Analyze your numbers.
- Financing Plan: some lenders may allow a percentage
increase of the line for extra costs. But there
is a limit to this percentage. Lenders expect
the construction plan to remain within costs.
- Change Specifications Plan: be prepared to delay
completion of a room or landscaping to keep the
construction project on time and within budget.
See cost management above.
- Change Building Plan: you may need to redesign
your building plan to bring the project down to
a more modest design and funding.