The Builder's Beauty Contest

Editors Note: My very talented friend and designer Courtney Price asked me to write this piece for her lifestyle blog, CourtneyPrice.com after hearing of "The Builder's Beauty Contest" from her client who had read my book, Un-HINGED - A Homebuilder's Secrets for Saving Time and Money. I asked if I could borrow it back for inclusion in Build Your Nest. 

The Builder’s Beauty Contest

March 23, 2015 By Courtney Price

Reality check: Beware of the lowest bid…

For many people, the home is the biggest investment. When building one’s dream home or remodeling an existing house, one can easily get caught in the snare of the numbers game with multiple bids.  Misleading contractors have been known to say or do whatever it takes to get the job, encumbering the homeowner with devastating financial consequences. To discuss this topic and offer guidance, I have invited a highly respected Dallas contractor with a strong moral compass and decades of experience to decode the bidding wars in this special guest post.  Bob Hoebeke is all about communication with his clients; his honesty and transparency have built a solid base of repeat clients with stunning homes. Please welcome Bob:

Do you hear that angry, snarling, gnashing of teeth behind you in the Starbuck’s line while you’re ordering your “quad Venti, no whip, cinnamon dulce latte?” It could very well be the sound of an angry homeowner who has invested inordinate amounts of time, energy and money in building or remodeling their home only to have their dreams shattered through financial mismanagement, deceit, gross incompetence, cover-up or just plain stupidity on the part of their builder. Unfortunately, even for the wealthiest of homeowners, there are no do-overs.

More often than not the scenario described above happens because of the “Builder’s Beauty Contest.” Well-intentioned architects, seeking the best pricing for your home, submit plans to multiple builders. The age-old myth embraced by many is, more bidders means more competition, and more competition means a lower project price. But the reality is substantially different.

With stiff competition and the desire to secure the work, each builder will competitively price what they see as the parts and pieces of the project and begin to shape a budget story they believe the architect and owner will want to hear. But there are thousands of pieces to a building or remodeling project. As the builder bids, some pieces will be missed, others will be substituted, many will be camouflaged in other cost centers (site work, landscaping, interior furnishings and after market finishes etc.), and still others will be allowanced with expense caps so low they become meaningless (you can’t buy much of a potty for $50). Builders have to win so many will lie, cheat and even steal for a signed contract. Herein lies the problem.

“The truth is always easier- so you don’t have to defend your bid every step of the way through the…

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Since final results of a competitive bid bear little resemblance to what actual costs will be when the project is completed, more often than not the awarding of the contract goes to who can tell the best story. Usually the prettiest story wins – it’s The Builder’s Beauty Contest!

 Several ways to help you avoid The Builder’s Beauty Contest:

• Interviewing multiple builders and hiring integrity and chemistry:
  • On a material to material, and labor to labor basis, there won’t be much difference between builders if they are bidding like quantity, so hire who you like and work together on price.
  • Evaluate a builder’s project administration plan and review cost control mechanisms as well as the builder’s communication skills.
• Ask for, and check references:
  • Who were the builder’s last five clients and what are they saying about your candidate?
  • How long has the builder employed his trades or subcontractors? Frequent line-up changes often point to instability.
  • Ask for supplier references (lumber, concrete, plumbing, flooring, cabinets, etc.) and find out if he’s paying his bills on time.
• See some of his work – both finished, and under construction:
  • Are all the parts and pieces there? Do joints fit tightly? Are things well thought out?
  • Do the finishes meet your expectations?
  • Is the job under construction neat, organized, and clean?
• Smart builders will competitively bid only commodities (lumber,sheetrock, fixtures, etc.) :
  • New, and unfamiliar labor means training and mistakes. A smart builder will not want someone they don’t know “practicing” on your home.
  • Basic safety rules – why take a chance on putting unfamiliar labor in the same home with a client when unsure of the laborer’s past?

Don’t get sold a bill of goods. Let all the poising, primping, and posturing associated with the Builder’s Beauty Contest be saved for someone else’s project. Make a great decision and have yourself some fun as you build the home of your dreams-

-Bob Hoebeke

Our guest contributor is a published author with a must-read book for anybody who is building or remodeling. The Builder’s Beauty Contest is included in this book but there is so much more. Unhinged is an organizational tool that places you in the center of the process along with your contractor and design team, rather than being managed by your contractor. See more about and order your copy of Unhinged here.

Demystify the building/remodeling process with @BobHoebeke’s book: Unhinged

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For the tech savvy- Bob Hoebeke has also created an APP: BuildCHX – check it out if: 1) you plan to build or remodel 2) you are a designer 3) you want to make sense of the giant jigsaw puzzle of the custom construction process 4) you want to keep your new-build or remodel on time and within budget.  BuildCHX offers a linear chronological sequence that will prevent the common delays associated with selections. We all know how costly delays are – this app keeps you a step ahead at all times.

Want more? Bob has a blog… full of sage pointers, observations, advice, a link to project photos- great content.

If you found this article useful, please recommend it and share it with your friends.

Gotcha...

The old saying goes, "you don't know what you don't know." So when you're building that home of your dreams, or remodeling the one you love, how do you know what you don't know? It's a fair question. In today's highly competitive housing market how do you know you're getting what you paid for when half the stuff you are paying for is covered up?

Substantiated rumors are floating around town that builders are using apartment grade plumbing on million dollar homes. But how is the consumer supposed to know about the quality of the pipes being installed behind the walls? When your water lines are decomposing or being eaten by bugs five years down the road its really too late to start questioning the integrity of what your builder is using on your job! And trust me, it happens everyday...

"Specifications don't mean anything in residential construction anymore," groaned one lumberyard vendor recently. Architects may draw it, and structural engineers may specify the materials necessary to make it strong, but some builders are changing lumber grades, product spacing and materials to cheapen costs and improve profit margins. No single construction item is more prone to homeowner deception than lumber. Why? Because ultimately everything is covered up! "Builder are wanting to get through their warranty period (with a homeowner) and that's it - period!" With the abundance of products available to a builder, changing the grading stamp on a ceiling joist, varying the distance between framing members, or even swapping out a specified plywood for OSB (oriented strand board) can make as much as a 10% cost difference in the cost of a framing package. And 10% of the cost of the single largest commodity going in your home can mean thousands of dollars in the builder's pocket!!

On a shorter leash you may not know that the $7,500 allowance your builder gave you for plumbing fixtures needed in your million dollar home will barely do the Master Bath. But you'll figure it out when you go to Ferguson Enterprises to select fixtures for the whole house and spend $25,000! By then the ink will be dry on the contract and it's too late to renegotiate. Can you spell "cost overrun?"

In tight economic times where way too many builders are competing for way too few projects, many believe the name of the game is 'get the contract signed, and make it up on change orders.' Builders feel they can deal with the fallout later. After all, who doesn't build a house understanding that there will be some cost overruns?!!

Recently we were hired to review the specifications for a couple's "dream home" after some problems arose between their builder and the bank. Budgets seemed low, and parts were definitely missing. To be safe we had our guys bid the work. Our estimate was 82% higher than the couple's builder, who, it turns out, had just declared bankruptcy! Forget the dream home, the couple purchased a nice pre-owned and have settled in comfortably.

Sensationalism you say...maybe until it's your project, but then it has a way of becoming all too real.

Disasters such as these can be avoided. Consider these tips before you build or remodel your next home:

• Build a team of professionals (architect, builder, interior designer, and landscape architect) and empower them with the specific scope of work required. Part of that scope of work needs to be a realistic budget.
• Challenge the team to not only work with the parameters you've outlined, but also "value engineer" where possible to produce the same product for less money.
• Demand total accountability and absolute transparency by requiring weekly reports detailing each team member's progress. This type of communication ensures that everyone associated with your project is singing off the same sheet of music.

For more practical tips, pick  up a copy of my book, UnHinged - A Homebuilder's Secrets for Saving Time & Money (Amazon), and my app, BuildCHX (iTunes or Google Play).

A Platform to Argue

An armored truck took out the rear quarter panel of my truck a few months back. No one was hurt and the armored truck company quickly referred me to their insurance company to get the damage repaired. "Let the games begin!" After a few months of chasing my tail trying to get the truck fixed, I went back the other day to the armored truck company (couldn't get any satisfaction with the insurance company) and reminded them that this was their problem, not mine, and they needed to send someone over with a rent car to pick up my truck and take it in to have it repaired. No matter that I was stopped at a red light when I got hit, both the armored truck company, and the insurance company made getting it fixed my problem. Today, they brought me my rent car!

This most recent foray into the wonderful world of insurance comes on the heels of no less than three really good insurance fights last year! WHY WON'T THESE PEOPLE DO WHAT THEY ARE SUPPOSED TO DO, AND HONOR THEIR CONTRACT/POLICY?? Simple: Shareholders.

More and more there is talk in this country of a revolution. I'm convinced the revolution most probably will start over insurance and insurance companies. Rampant deception caused by excessively conservative policy interpretation has been inflamed by shareholder greed as they demand greater return on their investments. Who gets squeezed? You and I do! The more policies that are sold, and the more money insurance companies can take in translates to higher profit margins if  the company can weasel you out of benefits. 

Everyone knows that you have to have insurance. But when you buy protection, what do you really have? A platform to argue with the company that sold you the policy. Most likely they won't honor the face value language written in the policy. Congratulations, you've just invested your hard earned money to buy a place at the negotiation table. "Well the policy really doesn't say that, we interpret that phrase to mean this instead!" And on it goes.... If you don't like it, your Big Protective Brother's attitude is 'go ahead and sue me - we've got more money than you do, and we'll bleed you to death.'

Maybe it makes sense to hire an insurance attorney to read every policy before purchase so that all of the loopholes can be exposed. Do you suppose Big Protection will negotiate out the inconsistencies that are discovered? Good luck with that fight!