Apples and ORANGES
The truth about “competitive bidding” among Home-builders
by Mickey Munir
In most cases it is virtually impossible for a potential home-building client to get a true “apples to apples” bid from various home-builders. There are several reasons as to why this phenomenon exists in today’s marketplace. Home owners innocently or ignorantly believe that they can round up a few builders and get a competitive bid. There are several good reasons as to why this is a FALSE sense of performing due diligence to select a home-builder.
For starters, the plans that are produced to build a home are in most cases, greatly abbreviated as compared to the detailed plans for a commercial building. Most homebuyers are not willing to pay Architects and Designers to draw and specify the details that are needed to get true comparison bids. Consequently, in most cases a “builder’s” set of plans are produced, which consist of a site plan, floor plan, basic elevations, a roof plan, basic plug/switch/fixture location plan, and a few simple wall sections with little or no detail, that are required for a residential building permit. Written specifications are rarely provided as it is up to the builder to specify what he is accustomed to using on his projects. Interpretation is wide open with very little guidelines. The plans and specs are the instruction book that everyone uses for building your new home. The more brief the instructions, the more room for liberal interpretation and low or incomplete pricing.
To further fragment the process, every builder has vastly different resources from their perceived competitors. There are no licensing requirements for builders or general contractors in the State of Texas. Anyone can deem themselves to be a homebuilder with no real construction experience or educational background such as a college degree in architecture, interior design, engineering, or construction management. Years of experience plays a small factor but is sometimes ignored due to a lower price from the less experienced. The tradesmen that different builders use can be as different as the adjectives used to describe their finished product.
Framers, drywallers, trim carpenters, cabinet makers, painters, and tile setters all have differing talents and skill levels that can produce radically different results using the exact same materials. This is no different than two cooks using the same ingredients to prepare a meal and getting dramatically different outcomes. Likewise two painters can dip paint out of the same bucket and get dramatic differences in the outcome. Construction workers are not trained by the factory like auto workers. There are no standards other that meeting minimum local area building codes. Most of these trades are the artisans who have a significant impact on the quality and longevity of a home. One should carefully study the builder’s finished product for craftsmanship and finish detail as well as materials and equipment used.
Air conditioning contractors are NOT normally given mechanical engineering drawings to bid from. They are left to their own practices to calculate heating and cooling loads, determine required tonnages, decide how air is to be distributed, and what type of duct work to use. Electricians are in the same boat. They are only supplied with an electrical location drawing giving them units to count of plugs, switches, and cans to bid from. The number of loads for outlets and lights on each circuit is up to the electrician. There are rarely any specs provided for breaker panel boxes or breakers, what weight of wire is used, and what gets a home run, leaving only the standard of following the electric code which is the minimum. An air conditioning design based on the lowest price going in will usually result in less comfort and higher utility bills eclipsing initial savings. An improperly grounded electrical system can use more energy and prematurely wear out electrical appliances, as well as leave a home vulnerable to power surge damage to many of the sophisticated electronics found in today’s homes.
Another myth is price per square foot comparison. Price per foot is the absolute WORST method of comparison anyone can possibly use in selecting a custom builder. Only tract and apartment builders can accurately use price per foot comparisons in residential construction. They are assembling hundreds of repetitive buildings and can scientifically calculate their costs down into the pennies per foot. There is such a wide variance in what custom home-builders include when they are asked about their price per foot as well as a significant difference in gross square footage (garages, porches, and covered areas) of homes. Unfortunately, whether a home has a three car garage or a five car garage and has a large outdoor living area with a full kitchen, a half-acre lot or a one acre lot to landscape, it all gets packed into an air conditioned price per foot number which is grossly inaccurate as a measure of comparison. Always find out EXACTLY what is included and NOT included in builder price quotes.
More comprehensive plans and specs with complete interior design selections would greatly help to improve the comparison process. A more carefully selected peer group of bidders would be better, but you are still dealing with varying resources as previously mentioned.
A better way to make the selection of a builder may just be an extensive investigation of qualifications, experience, ability to build the type of home you are looking for, and telephone interviews with numerous prior/current customers who would not hesitate to use that builder again. Customer experiences tell the story. If you can talk to TEN or more happy customers, you have probably found someone you can TRUST, which is the most important factor of all in the selection process. Knowing you are and will be treated fairly will go a long way to a good experience. Aligning expectations, budgets and cost structures can be planed and value engineered to yield the desired result you are seeking. After all the building team that you choose will be involved with you for years to come which should be the biggest choosing factor over price.
At the end of the search, an experienced trustworthy builder will get to your price/budget if there are realistic expectations to work from, not by comparing apples, oranges, and peanuts in an industry with no standards. There is a reason why many realtors tout name the quality builder in their real estate ads. Your home is your biggest personal investment and its longevity shouldn’t be all about the lowest price.
— Mickey Munir