You’re building a new home. Should you be your own contractor?

You’re building a new home. Should you be your own contractor?

Simple question, right? But the answer may not be so simple. There are many factors to consider.

Why consider serving as your own contractor?

  • May be able to save up to 20% on total cost
  • Maintain control over project so you’re more likely to get what you want
  • The pride and satisfaction of building your own home
  • You’re detail-oriented and can look over others’ shoulders

What are typical responsibilities of most general contractors?

First things first, you need to have a solid idea of what a contractor actually does. While the following list is not exhaustive, it’s a good starting point:

  • Seek bids from subcontractors (carpenters, plumbers, electricians, landscapers, etc.)
  • Estimate costs for entire job, including all material and labor
  • Lock in those costs
  • Hire the subcontractors
  • Ensure the subcontractors show up
  • Spot flaws in construction
  • Secure permits from city officials
  • Understand building code requirements
  • Schedule inspections
  • Supervise entire job to completion

What are other ways to be part of the process and also save on costs?

  • Do some of the work yourself. Maybe you’re a part of the design or another phase.
  • Work with a contractor until the structural work is complete, then takeover until completion.

How do you set yourself up for success as your own contractor?

  • Understand the scope of the project on a granular level. According to the Wall Street Journal: “The work may look easy, especially if a builder only shows up briefly each day to check on the subcontractors. What the homeowner doesn’t see is the four hours the builder spent behind the scenes to get things organized to that point.”
  • Estimate as accurately as possible the time you think it will take to build
  • Learn local permit and codes
  • Schedule the work. Sounds simple, but there are many moving parts. And scheduling in the correct order is critical.
  • Carpenter is your most important hire. According to Bob Vila: “The carpenter will be your primary sub, so ask him for help in finding an electrician, plumber, or mason. And don’t worry too much about cronyism here… They don’t want headaches any more than you do.”

What are the benefits hiring a professional contractor instead?

  • Achieving a 20% savings won’t come without hard work and diligence. In many instances, unexpected issues could lead to spending more than you actually save. According to “Cost control is one of the biggest single challenge faced by all contractors, which is why so many jobs come in over budget and why almost none come in under.”
  • General contractors usually have relationships with subcontractors. Because of this, the subs often charge 10-15% less to the contractor. In other words, the retail price you pay when you serve as your own contractor may negate your savings.
  • Contractors will likely be more effective in getting subcontractors to show up. While this may be frustrating, it still makes sense. The contractors hire subs all year round, so your job may not be top priority for your subcontractor.
  • Contractors understand the order in which subcontractors need to be engaged
  • Contractors are able to provide warranties on their products and services. If you serve as your own contractor, you’ll have to absorb the cost of any fixes, which can become quite expensive.
  • You may save yourself a huge emotional price by hiring a contractor. The stress of serving as your own contractor can be high, especially if you have a day job. When you hire a contractor you’re not assuming all responsibility.

Any suggestions to choosing and working with a contractor?

  • Check references, licenses, and insurance
  • Get a lien waiver from your contractor. This prevents you from being sued if there is a dispute between your contractor and a subcontractor.
  • Your contractor may let you choose your own subcontractor. But your contractor will likely still need to vet your choices.
  • If you’d like to choose your fixtures individually, you can set up an allowance with your contractor

Is there a middle ground between hiring a general contractor or serving as your own?

  • A construction manager is an alternative to hiring a general contractor. It may be a good way for the homeowner with minimal building experience to get some of the benefits of being his or her own contractor while still to having a pro on site to lend confidence and guidance.
  • You may save significantly, but you are assuming more risk. Says Bob Vila: “If you find an experienced construction manager with good references and negotiate a thorough and fair contract, the chances are good you won’t have major problems.”

So what’s the bottom line?

It’s really up to you. If you do not have prior experience, you may spend far more time and money than imagined.

On the other hand, if you have the desire, drive and realistic expectations, it may be worthwhile to serve as you own contractor. If you have connections that can help you save on materials and labor, you have a better chance of realizing savings.

The process starts by applying for a home construction loan. Without local roots, national banks may be reluctant to make these type of loans. Your best bet could be going through a community bank, like The Bank of Southside Virginia.

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