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          Building a Home? What is the biggest mistake made?

          Chuck Marunde by Chuck Marunde
          March 28, 2010
          Reading Time: 4 mins read
          0 0
          10

          A couple move to the Sequim area from California and plan to build their retirement home.   They’re excited about it, but it proves to be stressful just finding the right architect and the right builder.   How do they select their builder?   (Be careful of architects who try to lock you into “their” builder.   That’s another story for another time.)

          They meet with three builders and get bids from all three.   The first builder they go to is Rick Anderson of Anderson Homes, LLC.   Rick has built over 400 homes here since 1981, and has a solid reputation for honesty and the highest quality of homes, but he also has extremely competitive rates when you compare apples with apples.   Rick plays no games and doesn’t boast.   He shows them exactly what he will do for them and gives them the honest-to-God truth about the true cost per square foot, and he is willing to guarantee that price in a written contract.

          The second builder they go to looks at Rick Anderson’s bid, because the owners share that information with him.   He says, “Oh yea, I can beat that bid.”   Of course he can.   Shave here, shave there.   Use lesser material, don’t install this or that, cut this out.   That was easy.   But the nice clients don’t realize how this works, and they think, “Oh, good he beat Rick’s price.   Rick must have given us a high bid.”   (Not true.)

          The third builder they go to looks at Rick Anderson’s bid and at the second bid.   He says, “Oh yea, I can beat both those bids.”   Of course, he can.   He just takes the second bid with those lesser specifications, and since he works out of the back of his pickup truck and plans to do ALL the work himself at what will work out to minimum wage, his bid is lower than the cost of the other two builders.

          They select the builder who gave them the lowest bid.   He seems like a nice guy.

          So what happens?   Let’s play this out with two possibilities.   First, what could happen if they choose the lowest bidder?   Well, he may not be able to finish the house as a one-man show who is struggling financially to survive and cutting every possible corner to get the cheapest materials.   He may not have the experience of a more experienced and financially stable builder, so this is also the kind of scenario you may have read about where the house only gets partially built and the builder bails.   Can you say, “nightmare scenario.”   That was the lowest bidder.   Do you really want to the lowest bidder?   I know.   Seemed good at the time.   How much stress would you like to add to your life when a different decision could have saved you a lot of money, stress, and time?

          So what happens if you are wise enough to avoid the one-man lowest bidder?   You hire the middle bidder.   Okay.   Here’s how that plays out many many times. When the house is completed, three months past its completion date, you calculate that you have paid more than the original guaranteed bid that Rick Anderson gave you.   There were extras, change orders, and surprises during the entire construction process, starting with the excavation and concrete and all the way through to the end.   You’re tired of fighting with the builder.   You feel like he has misrepresented the construction process and costs from the get go, but once you had signed the contract and work began, you felt you were in too deep to go back.

          You talk to your neighbors who had their house built by Rick Anderson.   You ask them how it went, and they start smiling and chatting enthusiastically about how much they love their home, about how enjoyable it was working with Rick, and how their home was finished on time and at the original guaratneed contract price.   You look at the quality of their home inside, and you can’t help comparing the trim and the cabinets and the flooring, and the doors and hardware to your own home.   You end up saying what a lot of people say, but they hate to admit it.   “We should have hired Rick Anderson.”

          I kid you not.   This is an honest and real scenario.   This happens all the time.   This is not sales hype or exaggeration.   I’ve written this bold honest article to try to break through to good people moving here from California and Arizona who make the two mistakes above.   Do you know the biggest mistake these folks made?   They never brought those two lower bids back to Rick Anderson to have him do a honest apples verses apples comparison.   He would have been absolutely honest about the comparison, and he never pressures anyone to sign a contract.   Anyone who wants to make fully informed and wise decisions about building their retirement home ought to do a true comparison.   They could have and should have brought those bids back for another meeting with Rick Anderson.   Then they could have made intelligent and fully informed decisions.   Now they know that.   Now you know this.

          So, what are you going to do?

          Last Updated on March 28, 2010 by Chuck Marunde

          Tags: New Construction
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          Chuck Marunde

          Chuck Marunde

          Chuck grew up in remote Alaska, graduated from the University of Alaska with a degree in Economics and Teacher Certification, and after teaching high school for two years, went to law school at Gonzaga University in Spokane, Washington. He served four years as a Captain and JAG in the USAF at Nellis AFB in Las Vegas. After practicing real estate law for 20 years in Washington, Chuck founded iRealty Virtual Brokers covering Sequim and the beautiful Olympic Peninsula. He is the author of 2,200 real estate articles and a dozen real estate books, and he produced over 100 real estate videos. Chuck combined his love for real estate and technology to create a massive Internet presence, and his articles and videos and books have been viewed by millions. Chuck is a well recognized real estate expert and his counsel is sought by other brokers and practicing attorneys around the country. Buyers from New York to Hawaii and from Florida to Alaska seek him out to retain him as their buyer's agent, and home owners around the State of Washington seek him out because of his new Flat Fee Listing Service. 

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          Comments 10

          1. Nick Pacella says:
            14 years ago

            Bids, both for construction and for architect’s fees, should be proprietary to the bidder and not shared with others. The example above shows why. The next person may just be trying to get the job and not trying to provide the same level of quality, products or service.

            If you want to cut costs the best approach is to look at the scope of work and decide what you can and can’t live without. You could also ‘Phase certain work that could be done later, like the interior of a second or third bathroom, but still create the shell and other necessary components – plumbing – that will make it easier later.

            Most, if not all of these issues – cost, quality, products to be used – will be established through a good set of contract drawings. In that way all bidders are using the same benchmark and their bids can be more easily compared.

            Reply
          2. Chuck Marunde says:
            14 years ago

            Nick, you’re right on. Excellent and practical pointers. Thanks for sharing.

            Reply
          3. loans perth says:
            14 years ago

            Nice one. A great read yet again.

            Reply
          4. Branson Homes For Sale says:
            14 years ago

            Hiring the middle bidder is a good tactic for all things in the business world, not just for real estate and home building.

            I think it is important for people to realize that you get what you pay for. Personally, I’d rather not “cut corners” on an investment as crucial as my new home.

            Also, I think it is un-ethical to disclose information about other contractor’s bids.

            Reply
          5. interior design seattle says:
            14 years ago

            Thanks for the article, it’s really great. Building a house is a huge project, and you can make it feel like home but it takes time and patience.

            Reply
          6. Margery says:
            14 years ago

            Hi, I can’t understand how to add your site in my rss reader. Can you Help me, please 🙂

            Reply
          7. Chuck Marunde says:
            14 years ago

            Sure. The rss feed is: http://sequim-real-estate-blog.com/feed/

            Reply
          8. AmelyDesign says:
            14 years ago

            Nice posts, very useful. Rgds.

            Reply
          9. ronel marin says:
            14 years ago

            thanks for this informative post

            Reply
          10. Easter Games says:
            13 years ago

            I had looked around for several blogs that would show me what your blog ultimately have. Your blog was by far the best blog for the information because of its simplicity and easy to comprehend. Thank you for sharing!

            Reply

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