This week’s post is inspired by one of my favorite resources for homebuilding and design ideas and advice: Houzz, short for House buzz. That site not only gives you access to thousands of inspiration photos, but also short blog posts and a helpful forum called GardenWeb.
When I was looking through the “Building a Home” section of the forum, I saw a couple of valuable discussions that inspired this week quick tips — one discussion having to do with the inclusion of a job site visitation policy in the construction contract and one discussion regarding deleting items from the initial specifications list.
Let's get right into the quick tips.
Tip #1: Make sure your contract allows you to make job site visits as often as you want.
One homeowner on the GardenWeb forum wrote this:
"Currently having a house built. Got a nasty signed letter last night from the builder saying that
I have been seen on site every evening and am in violation of the site visit policy. It said that this 'needs to stop or else things will escalate to the next level'
So the question is: what is the next level? What can the builder do?
Can he take all my deposit and option money and run and I get no house?
Or is there not much he can really do? Please advise, thanks."
The answers on the forum varied. Some said the builder is making an empty threat and could legally do nothing to the homeowner. Others thought the builder could sue the homeowner for trespassing if the land was actually owned by the builder.
The "Building a Home" subforum has a range of perspectives since everyone from homeowners to designers to general contractors and architects regularly chime in.
Many homeowners who had homes built in the past said they were surprised by the builder’s reluctance to have the homeowner (his client) visit the job site. Those homeowners said they often visited their job sites while their houses were being built and their GCs had no problem with that.
Many people on GardenWeb concluded that builders like to include a visitation restriction policy in their contracts to protect the homeowners from injury, and protect themselves from being held liable for any injuries that occur on the job site since construction sites can be dangerous. But if you remember, builders must take out liability insurance on each job and that liability insurance will pay for any injuries that occur on the construction site. With that in mind, many people questioned whether liability was truly a valid reason for including visitation restrictions in construction contracts.
Others on the forum said it’s usually unscrupulous builders who want to restrict you from exploring the job site. Because they plan to cut corners and do subpar work, those unscrupulous builders are afraid that you will discover and take photos of that shotty work. And they don’t want you seeing and documenting bad work that will eventually be hidden behind sheet rocked walls, so they want to limit your time on the job site.
Ok, let’s be real… the reasons some builders want to resist your visitation probably varies from builder to builder— sometimes they’re looking out for your best interest and sometimes they're looking out for their own best interest. I’m not sure legally what right the builder has to keep you off of the homesite, especially if you own the lot. But the best way to ensure that both you and your contractor are okay with the frequency of your construction site visits is to specify your expectations.
Make sure your contract either has no visitation restrictions, or has restrictions that you can live with. For example, if you live close to the area where you are having your house built and know you’ll be visiting the job site almost everyday, you don’t want your contract to limit your visits to once a month.
If you feel strongly about being able to visit whenever you want, but your builder is hesitant to allow that because he says he doesn’t want to be held liable for any injury that may occur, respectfully ask something like “Wouldn’t your liability insurance cover any injuries?” Or you could agree to sign a “visit at our own risk” waiver that states that the contractor will not be held liable if you are injured on the job site. That sort of waiver should satisfy the contractor if his concern really is liability. Talk to your lawyer about the specifics of such a waiver.
But if the builder insists on putting a very restrictive visitation policy in your contract and you feel uncomfortable with that, you may want to consider another contractor.
You want to work with contractors who are reasonable and who want to protect you, but who are also open and honest about their work. If a contractor has a problem with you looking at and taking pictures of his work, that’s a red flag. He may not be doing anything wrong, but like Dr. Phil says, "if you have nothing to hide, you should hide nothing."
You shouldn't feel unsettled about the visitation policy in your contract. Don’t feel pressure to sign a contract that has a clause that makes you feel uncomfortable, whether it’s a restrictive visitation clause or some other clause.
It’s ok to tweak contracts. Most people don’t sign a contractor's contract as-is. It’s always best to get a lawyer to review your contracts, especially if you don’t understand the language.
Alternatively, you or your lawyer can draft your own contract and have the contractor sign it. That way you know the contract is acceptable to you. But the contractor has a right to ask for changes to a contract that you’ve drafted just as you have the right to ask for changes to a contract that the builder drafts.
Alright, so that was the first issue. There was another subject on the forum that I want to warn you about. Here’s the situation:
A homeowner looked through his builder’s estimate and specifications. The homeowner decided he wanted to lower his overall cost of building by completely deleting many items on the specifications list. I'm thinking he’s talking about items like chandeliers, ceiling fans, extra sinks, wall tile, things like that, things considered extras.
So the builder deletes those items and the prices for those items from the estimate, but the builder did not delete his markups on those items. Even though the cost of the items came off of the overall estimate for the house, the amount builder added in markups stayed in the total cost of the house.
To be clear, if the builder deletes items, he should also delete mark ups on those items. And as an aside, markups should be clearly stated in the estimate and not hidden in a lump sum amount and you as homeowner need to agree to the markups.
I've told you in previous episodes that most builders not only get paid a builder's fee, but they also mark up products and materials that they purchase for the home, plus they mark up labor. Average markups range from 10-30%, and sometimes more. If you don’t want to pay markups on labor and materials, you’ll have to negotiate that with your builder and put it in your contract, or your could become an owner builder.
Unfortunately that homeowner who started this discussion on the forum agreed to pay those extra markups by signing off on a contract that included the inflated cost. He hadn’t scrutinized the numbers until after he signed the contract. It was only after he agreed to the terms of the contract that he realized the markups on the deleted materials were still in the price of the house.
That was obviously bad news for the homeowner. But here’s what we can learn from that situation.
First: read the entire contract, including itemized costs, BEFORE you sign it. Tell the contractor that you need to take it home to review it, and have your lawyer review it before signing. Don’t feel pressure to sign a contract the day you get it.
Secondly, if you’ve agreed to allow your builder to mark up materials and labor, make sure they delete markups on any and all deleted products and materials. And inquire about decreases in labor costs if you’ve deleted a significant number of items from your estimate. And if labor costs decrease, so should markups on labor.
So those are the quick tips for this week
1. Be careful of job site visitation restrictions in the contract
2. Make sure you delete any builder's markups on all items you delete from your specifications.
Please remember that the purpose of this podcast is simply to educate and inform. It is not a substitute for professional advice. The information that you hear is based the only on the opinions, research and experiences of my guests and myself. That information might be incomplete and it’s subject to change, so it may not apply to your project. In addition, building codes and requirements vary from region to region, so always consult a professional about specific recommendations for your home.
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