by Art Macomber
When building their dream home, most landowners don’t understand how much work is involved. This posting briefly reviews a few considerations to be made before committing to a residential building project and addresses some issues we have seen in our law office. This article is not meant to be comprehensive. It addresses a few major points that, if implemented before starting construction, may avoid expensive problems later on.
For a detailed treatment of what it takes to successfully build your dream home, Building Your New Dream Home: What You Need to Know by Todd Stam and Dave Konkol is available by contacting Aspen Homes at 208-664-9171. Tell them Macomber Law referred you.
Building a home is a complex undertaking. Defining how a house will sit on the land, where utilities will run, how many rooms, how large they will be, and details regarding layout, appliances, lighting, windows, outlets, textures, materials, and colors requires more planning than most non-professionals would ever imagine.
Do your homework regarding which contractor to work with. Interview multiple builders and require references. Start by creating a list of questions, and make sure each question is asked of each reference, so you can compare results. Get competitive bids, control your costs, and work out the details before committing, rather than getting overwhelmed by aggressive decision-making timetables beyond your control.
In the face of a starry-eyed landowner, a contractor may provide the owner with a generic floor plan and an estimate in order to get started. The project is started on a handshake, without either party having a clear idea of layout, materials, how much labor will be involved, what kind of profit the contractor expects to realize, or whether there is a maximum cost.
Before entering into a written contract with a builder, you should know the three common contracting methods:
- Fixed-cost. Contractor provides a bid for the total cost of the project, with the final cost not to exceed the bid. Any change to the original plans goes through a formal Change Order process, which usually results in an upward adjustment to the overall cost.
- Cost-Plus. Contractor and landowner agree that the total cost of the project is determined by the actual cost of materials and labor, plus a mark-up percentage to cover overhead and profit.
- Cost-Plus with Not-to-Exceed Price. This is a hybrid contract where the cost of the project is based on time and materials, plus a mark-up, with an agreed upon Not-to-Exceed cost that operates as a cap on the maximum outlay.
Realize that each contracting method has its strengths and weaknesses, but any signed contract is better than a bid or an estimate any day. The main point is that estimates are not binding on the contractor. Maintain some degree of control and accountability over your building project by reaching a meeting of the minds with your contractor and signing a contract. Monitor the project as it proceeds by documenting time worked, materials used, and changes to original plans.
Bottom Line: Landowners who are clear on their vision, do their research, create a budget, perform reference checks, and get a signed contract, then stay involved during the building process, are more likely to be satisfied with the results of their home building project.
Note: In the State of Idaho, home building contractors are not required to be licensed or registered. Therefore, it is especially important that Idaho contractors demonstrate the skills and experience necessary to deliver on your vision!
Note: This post is not legal advice, and should not be relied upon as such. Different sets of facts will likely lead to different legal conclusions. If you need assistance with real property matters, call Macomber Law, PLLC for a forty-five minute, no charge consultation to see if we can help.
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