Building a New Home – Saving Big Money

Are you planning to build a new home?   You’ve probably read some of the articles allegedly written by experts who willingly share the secrets to saving a lot of money.   Saving $30,000 to $120,000 is a pretty attractive concept.   Who wouldn’t want to save money like that?

The first rule is don’t believe everything you read.   Of course, I’m laughing, because you are reading this article.   But if I am telling you the truth, you can benefit from what you read here.   Research, read, analyze, and do your due diligence.   Make fully informed decisions before you decide how and where to build your next home.

The second rule is that you need to dig into facts yourself to discover the truth.   Today I want to dispel a few misrepresentations that are all over the Internet and even in some print media.   Truth is like a flashlight that exposes the contents in the corners of a dark room.   Once you have seen what is in the corners, you can never forget the truth.   But until you know the truth, your beliefs may be clouded.   So let’s shine the light into the four corners of a room right now.   Let’s look at false or only partially true statements that hide in each of these corners.

Corner No. 1:   Be your own contractor and on a $300,000 project save $60,000 to $120,000.   I talked with a home builder who has over 25 years of building single family homes, and his response to this statement was, “That would be a 40% profit.   That is out of the park.   I’ve never even made a $60,000 profit on a $300,000 project.   Gross maybe, but certainly not net.”

There is so much more to working with a good general contractor that is not explained in a bold and exaggerated claim that a home owner can save up to 40%.   In other words, there are several expensive traps for the unwary home owner who decides to be their own general contractor.   What are these traps?

1. An honest and good general contractor brings value engineering in both design and the selection of materials.   I recently interviewed a retired couple who had an architect design their beautiful home, but the architect did not control costs in line with their budget.   Their contractor made suggestions, both in design and in the materials used, that saved them tens of thousands of dollars.   This alone paid for the general contractor.
2. He brings quality control over the subcontractors and his own employees.   I learned it takes a “trained eye” to recognize potential problems during the construction of a home.   The average home owner will not have that eye that takes decades of experience.   There are a thousand things that can go wrong and might go unnoticed from the excavation and foundation to the finish work.   A good contractor is constantly supervising and correcting as construction progresses.   Problems avoided is money saved later.
3. He has buying power the home owner simply does not have.   A medium sized or large home builder will have huge discounts from suppliers, and no home owner gets these volume discounts.   This could also amount to tens of thousands of dollars on an average home.
4. A few contractors offer fixed or guaranteed contracts and eat any overage.   Most builders do not offer their clients a fixed contract or a guaranteed contract price.   Find one who does.   If his costs exceed the contract, he eats the difference.

Corner No. 2:   You can use the local building department to prevent costly mistakes during construction.   This is simply not true.   Building departments are tasked with enforcing building codes, NOT providing quality control or cost savings tips to home owners.

Corner No. 3:   You can save by using licensed and bonded contractors.   This argument was actually made by one author who was writing about how to save money when building a home.   A good general contractor only uses licensed and bonded subs, and even more important, a general contractor gets better rates from his subs than a home owner will get.   This could also amount to tens of thousands of dollars.

Corner No. 4:   Purchase your own materials by watching for sales and buying dented items.   First, most people don’t want damaged appliances or materials.   Second, buying appliances on sale can be a good thing, but it certainly isn’t going to save a fortune on the construction of the home itself.   In fact, a general contractor who does any volume will be able to purchase materials at much larger discounts as already explained.

If you’re planning to build your own home, seriously consider the possibility that hiring a good, trustworthy general contractor may actually save you more money than if you tried to build your own home.

Last Updated on October 30, 2008 by Chuck Marunde