Build your own home and save 25% or more! No construction experience is needed! Just follow our building schedule and you’ll save thousands!!!
These are just a few of the statements I have read, heard on radio and seen billboards proclaiming anyone can build a home.
You might be surprised to hear that I agree with that statement. Just like I agree that anyone can set his or her own broken leg. If you have a broken leg you can read an article, follow a step-by-step process or even have someone on the phone talk you through the resetting process but would you really want to?
That’s essentially what so called DIY and “build your own home” companies are selling. They are telling unknowledgeable consumers that there expertise, products and services is all anyone needs to build their own home.
I’ve been in the building industry almost my entire adult life and have worked for large national, regional and local homebuilders before I started my own building company – Mike Blake Custom Homes. I have directly and indirectly supervised the construction of over 1,000 homes and I can tell you without equivocation that building your own home IS NOT a good decision!
I have heard over and over again that the reason why consumers want to build their own home is cost. They believe by building their own home they will save as much as 25% on the construction of their home.
That is a patently false statement!!!
Builder Fees
Let’s first talk about builder margins. I don’t know any custom builder that get’s a 25% margin. Those types of margins are typically only seen with national or regional volume builders.
Custom home design/build general contractors depending on the size and complexity of the project will command a gross margin of 12%-18%. That margin range can also vary depending on whether the general contractor is operating under a fixed price or cost plus contract.
Professional Services
Let’s talk about the home you are going to build. We offer professional plan consulting as part of our service to our clients. We have literally saved our clients thousands of dollars by identifying architectural errors, suggesting design improvement to improve functionality and structural changes that will lower cost of construction and improve construction efficiency.
If you self build there is no one to provide you with this expertise.
A fixed price contract is always best for consumers because it takes a lot of the risk out of process. What do I mean? Lumber, sheetrock, copper, wallboard are commodities and thus pricing fluctuates monthly. With a fixed price contact the general contractor is absorbing the cost of any changes in these materials.
If you self build you will have no such guarantee. You will need to collect bids, create a set of specification and submit that to the bank so they can obtain an appraisal for a construction loan. Now days the loan process can take as long as 2 months. Then let’s say it takes you another 4 months before you order sheetrock. That’s a 6-month difference between getting a bid and ordering the material. Unless you have an establish account most suppliers will lock bids for only 30 days. This leaves you vulnerable to a host of price increases that you otherwise would not be exposed to.
You might be asking yourself is that really a big deal because I’m saving 10% to 18% on the builder fee by buying material myself.
Well not so fast. Let’s take lumber as an example. As a professional builder we construct approximately 20 custom homes a year, so we buy hundreds of thousands of dollars of lumber each year. Because I buy a high volume of lumber we buy lumber at a discount. Also, we can lock my prices for up to 120 days.
Builder Discounts
When I say discounted prices I mean prices that a consumer cannot receive. However, if you talk to a lumber salesperson he will gladly tell you that they will give you builder prices. But think about it. Do you really know what those prices are and do you really think a lumberyard will give a consumer the same prices as a company that buys large volumes of lumber? No way! In fact, if I found out that my lumber supplier provided my pricing to a consumer I would change lumber companies!!
In fact, recently a customer of mine went into a flooring store to look at tile. She asked the salesperson if she could get builder pricing for the tile she selected. Of course, the salesperson said, “yes”. She told me the selection and I called the tile company and asked for a price, which was 15% lower than the “builder price” she just received.
This same scenario plays out with everything I purchase especially labor!
I think you are starting to see my point. The savings I’m receiving from my suppliers and trades cover the vast majority if not my entire management fee.
Experience Matters
Then there’s the whole question of experience. I recently read one of these so called DIY companies say, “No knowledge of codes, trades or construction needed”. Are you kidding me? I cannot think of one custom home that’s hasn’t required my expertise to solve a problem. Sometimes it’s a simple architectural error (happens more frequently than you might think) other times it’s a code, labor or finish out issue.
What about Texas Lien laws? Would it surprise you to know that if you don’t have proper documentation and vendor/supplier agreement you leave yourself susceptible to liens being filed against your home? The general contractor is responsible for making sure all trades and vendors have their own insurance and signed agreements regarding scope of work and pricings. Without this type of documentation and detail you and your home is at risk of legal action.
Financial Institutions
What about banks? Will they loan money to an inexperience consumer to build a home they use a collateral for the mortgage? Most banks are very leery of funding “self-building” construction loans. In fact, every bank I do business with will not make a construction loan to a non-professional builder.
In fact, recently a bank that I have never done business with asked me to supply them with a resume, construction history, financials and general liability insurance. Banks recognizes that construction prices are volatile and a consumer with less experience is more likely to encounter construction errors, which creates cost overruns, and takes longer to build. Which will cost the “do it yourself” consumer thousands in additional interest fees to the bank.
The liability is just too great.
If you are building inside a city limit, then the home has to be properly permitted and all major trades you intend to use must be registered to work in the city. In addition, the city inspection process can be very intimidating for non-professionals. Having little or no knowledge of construction science principles will leave you vulnerable to numerous costly construction delaying “red tags”.
If you are building a home in the county the reverse is true. In the country typically there are no formal inspections. The problem here is if you have no experience or construction science principles knowledge it will leave you susceptible to numerous code infractions, which cause delays and cost overruns.
Warranties
Lastly, what about your warranty? To get a 10-year warranty in Texas involves several engineered components and inspections. All that documentation needs to be provided to a 3-party insurer before they will issue a policy. Most consumers don’t know this process and will be left without a major structural warranty. In addition, a professional builder has long standing relationship with most of their trades and suppliers. The long-term relationship helps insure that warranty work on our home is done in a timely manner. As a “do it yourself” you have no such assurances.
Back to your broken leg. Would you really set your own leg? Of course, you wouldn’t. You would go to hospital and hire a professional doctor to set your leg. Your health is your most important personal possession and your home is the most important financial possession so why wouldn’t you hire a professional?