This is our “last” house we will build. We have lived in four houses, designed and built one of those, and so with this one we are being meticulous in planning into the future so the design will be “age” friendly. We have the drawings done, have consulted with our future builder over the course of the past few months, have the geotechnical survey scheduled, have gotten our 911 address assigned, and are filling out the water and electrical applications that we need for the location.
It is 26 acres of pasture, all barbed wire fenced that has been grazed in the past, on a gently sloping hillside down to a two acre pond that is fed through run off through some very large culverts under an old train track (tracks removed) that runs parallel to our property which is being converted into public walking trails (Rails to Trails Conservancy). Our house will be situated at the top of the hill giving us a 360 degree view of the surrounding vista of farmland, pastures with horses or cows, distant small town lights at night, and a shelterbelt of trees running along the newly converted walk
We are now working through the builder’s bid proposal and we must decide if we want to work with him on a cost plus basis or a fixed price. Research your choices and the pros and cons before deciding. We have also worked on adjusting the bid into the price range we want. The final price will be what we will apply to the bank for, what they will fund us. If the appraisal should be less than the funding, we must come up with that difference out of pocket or some other way in order to build. So be realistic about how much you want to invest in the house, and the materials going into it. We found out from the builder what bank he works with and we talked to his banker about the builder and how the draws and paperwork will be processed through us for approvals. We can go to any bank we choose ourselves, but this was our starting point.
Working through the builder’s bid we were able to see things we wanted to take out of it that we knew we would be paying cash for ourselves and so would not want him to attach his fee to as well. As long as he agrees with our changes, we are reducing the amount we need to borrow from the bank and reducing the amount of the builder’s fee we will be paying to him at the end of the project.
Understand from the builder what all the allowances are that he is assigning you (what items you will be deciding on buying like appliances, certain lighting, fixtures and flooring, for example). Understand the dollars he is assigning for each group and try to roughly price what you will spend to see if you both are eye to eye on the dollars required. Any allowance that is overspent is cash out of your pocket. Try to stay under the allowance assigned, but have the allowance in a realistic dollar amount.
We did a count of all our allowance items, I priced each one with materials I think we will be purchasing, and we reduced some of the allowances and showed our work sheet to the builder to prove the changes. We were able to get most of our allowances reduced accordingly (appliances, lighting, fixtures, hardware). Any that the builder did not agree with he explained in further detail and we agree they should stay as shown (flooring).
I cannot say for a fact that all builder’s will be this easy to work with. Some may not enjoy the challenges or tediousness of minute details like allowance changes, so either accept this or seek out another builder.
We are still debating cost plus or fixed price, but we must decide by this weekend when we meet to sign the builder’s agreement. We have the price exactly in our ballpark price, and I am pushing for a fixed price; my husband the architect is heavily considering the cost plus. He deals with these things every day so he knows the variables that go with either choice. I want fixed price because changes in labor costs, product costs or weather delays will not impact our bottom dollar we agree upon with the builder. A cost plus can change that bottom dollar if there are any price increases anywhere along the way. Once we sign with the builder, the signed agreement along with completed drawings and our completed bank loan application with all the necessary backup will go to the bank. Our timeframe for bank approval on the loan was one to three months.
It has taken a lot of energy to get to this point, and once we get our paperwork to the bank we can relax for just a bit and hope all will be given a green light.