Competitive Bids
If you wish to have a custom home built, it is virtually impossible for you to compare competitive bids from several home builders. The common complaint is that the comparison of the competitive bids is simply not “apples to apples” and therefore causes a lot of confusion. Most people believe they can talk to a few builders, ask them what their cost per square foot is to build a home and then make their decision based on that information. Comparing competitive bids of cost per square foot is a very inaccurate way of comparison to select a custom home builder. So why is this such a bad method of comparison? Let’s examine the following topics:
1. Architectural Plans
2. Specifications
3. Builder Experience & Resources
4. Sub-Contractors
5. Price per Square Foot
Architectural Plans
The plans that are drawn to build the home provide enough information to construct the home but are usually missing a lot of information that is needed to provide an accurate competitive bid. It is very common for most residential architects and designers to not specify the details necessary to provide a true competitive bid because most people either do not know to ask for that information or are not willing to pay extra for them to be included with the plans. As such, a basic set of plans are created that consist of a site plan, floor plans, elevations for each side of the home, roof plan, and a basic electrical layout of plugs, switches, and lighting fixtures. This is enough information to submit for a building permit but is not enough for a builder to provide a proper competitive bid.
Specifications
Specifications for the home are never provided leaving the builder to specify what materials he typically uses, making assumptions, or not specifying anything at all. This leaves a broad interpretation of the materials and specifications to be used for the home which adds to the problem of why competitive bids can vary so much from builder to builder.
Builder Experience & Resources
Builders must rely on their resources to build a home, and the resources that one builder uses is going to be greatly different from his or her competitors, causing more confusion when comparing competitive bids. The State of Texas has no licensing requirements for builders, leaving anyone to designate themselves a home builder with little or no construction experience or formal education such as a college degree in architecture, engineering, or construction management. Many years of experience can sometimes be a factor, but a competitive bid with a low price given by the less experienced can open a pandora’s box of problems that unfortunately may not be discovered until it’s too late.
Sub-Contractors
The sub-contractors or various trades that different builders use can be as different as the adjectives used to describe the quality of their work. Much of this stems from low prices that will be reflected in the variation of the competitive bids created from builder to builder. Excavators, foundation and concrete laborers, framers, roofers, plumbers, electricians, HVAC installers, sheet rockers, trim carpenters, cabinet makers, painters, tile installers, masons, countertop installers, flooring installers, landscapers, and pool builders all have different levels of skill that can produce an enormous difference in the finished product using the exact same materials and equipment. People working in construction are not given specific training like many other occupations, and they do not have to pass a quality test. There is a wise saying: “Experience is the best teacher, but a hard grader. She gives the test first, the lesson later.” Don’t let your home be “lesson learned”. A home buyer would be wise to carefully study a builder’s finished product, ask questions, and talk to previous clients of the builder when comparing competitive bids.
Electricians are not given engineered plans for residential homes to provide a competitive bid. They are only given a set of electrical plans that show the basic locations of plugs and switches, as well as locations of light fixtures and recessed cans. They determine the electrical loads, wire sizes, and how to distribute the power across circuit breaker panels that feed all the areas of the home. An improperly grounded system or unbalanced electrical load can use more energy, wear out appliances, and leave the home automation, audio/video, and other expensive electronics more vulnerable to damage from power surges. The electrician must follow the electrical code, but that is considered the minimum standard. It poses the question of whether the competitive bid is also the minimum standard for your custom home?
HVAC or air conditioning contractors have the same situation as electricians when it comes to a competitive bid. They determine heating and cooling loads, A/C tonnage, and design the air distribution systems, with no direction to follow other than the floor plans from which to provide a competitive bid. Today’s homes have a large percentage of glass, and a Modern style home will have an even higher percentage, so the HVAC system design is not as simple as it used to be. Plus, when it comes to A/C tonnage, more is not better. It must be correctly sized to match the design of the home. An HVAC system competitive bid based on minimum standards is going to result in higher utility costs and less comfort.
Price per Square Foot
Comparing custom home competitive bids strictly from a price per square foot perspective is vague at best and is not an apples to apples comparison. No two builders will answer this question the same way when it comes to what is included in their cost per square foot. There is a wide variety of factors that will greatly affect the cost of a home and the competitive bid. Some of those factors are listed below:
How many garages?
How large are the outdoor patios and covered areas (non- A/C areas)?
Is there an outdoor BBQ area? If so, is it an outdoor kitchen or just a simple BBQ?
Single story or two story?
Is the lot a half acre, 1 acre, or larger?
Is there just a driveway to the motor court or is there a circle driveway? Additional parking for guests?
Is the finished driveway materials special such as stamped, stained, or pavers?
Is the landscaping on a half-acre or 1 acre lot?
What was the scope of the landscaped areas and how extensive is it?
Was a pool included with the cost of the house?
What was the scope of the overall pool design?
Was home technology / automation / audio / video / lighting / and supporting electronic equipment included or just pre-wired?
Was the media room completed with the equipment or just pre-wired?
What was the condition of the lot before construction began?
Is there a water well or pond created on the property? What about accessories such as fountains, pumps, etc.?
Whatever combination of these items mentioned above, it will all be included in a price per square foot, using the air-conditioned size of the home, in the calculation. This is a grossly inaccurate means of comparison. Always find out exactly what is included and NOT included in a competitive bid.
Epilogue
Although a more detailed set of plans and specifications with interior finish out selections would greatly benefit the competitive bid process, you are still dealing with varying resources as previously mentioned in an industry with no standards.
Maybe a better way to select a custom home builder would be to not only understand the competitive bid, but also examine the builder’s qualifications, experience, and references. Then, ask yourself if this is someone you can Trust and work closely with over the next 12+ months. Knowing you will be treated fairly by an experienced trustworthy builder can go a long way to a good experience. If there are realistic expectations to work from, costs and budgets can always be tailored and value engineered to provide the results you desire. Your home is your biggest personal investment and its lasting value should not be entirely about the lowest price.