The Perils of an Owner Builder - Will You Save Money? What Are the Risks?

Will being an owner builder save you money or increase the risks and costs? It is a loaded question. Much of the answer lies in the question: How experienced is the "Owner Builder"? An owner who has been involved in several builds from start to finish and everything in between might save money.

There are several key points to consider.
 
  • As an Owner Builder Can You Get a Competitive Bid From The Subcontractor?
    Do you have the contacts to subcontract work you are not prepared to perform yourself? Subcontractors in general serve a client list of general contractors, when times are lean they will entertain and even solicit clients outside their normal venue. This is not always to the benefit of that outside client. The mark-up is generally increased and they may not have the qualifications or experience you are expecting. When a general contractor makes a request of the sub your project may be put on the back burner until that general contractor is taken care of. The sub does this so they can retain the business of returning clients.
     
  • Can You Decipher Where the Mark-Up Is, Hidden or Otherwise?
    A general contractor is experienced in pricing and bidding. They know what the materials list should consist of. They also know the mark-ups in those categories so they can spot an unscrupulous mark-up. Owner builders typically lack this experience and skill.

     
  • Do You Have the Resources to Confirm the Material and Labor Costs are Competitive?
    Having a base knowledge of the areas industry standards is key here. If the industry standard for tile installation is $6.00 per square foot and a sub is charging $7.00, it is important to find out why. Maybe they do not charge extra for sealing. Maybe they do not charge for mastic. Maybe they do and they are overpriced.

    If a sub is charging way under the standard you still need to know why. Are they desperate for cash flow? (Will they still be in business in 2 years?) Did they miscalculate the area? Are they using substandard materials?
     
  • Can You Get the Kind of Call Back Service a General Contractor Can Extract from the Sub?
    This is just as important as the price. You need to know you can get them back to take care of any issues that might arise. This is part of the job and they know that if they are working for a good general, they will be back until it is right.
     
  • How Will You Cover Warranty Issues if the Subcontractor Bails or Goes Out of Business?
    This is where the general contractor has to step in if the subcontractor is no longer available for whatever reason. If there is no general...if it is just you...you are stuck. It could be very costly especially if it is in relation to foundation or other major structural issues.
     
  • Do You Have Contacts to Counsel You If You Have an Unexpected Problem?
    Knowing who to ask questions of is very important because the wrong answer will cost you.
     
  • Who is in Charge?
    Many questions will arise on a daily and even hourly basis at all stages of the build. The person performing the work needs someone to contact that will accurately carry out your wishes in a cost effective manner. If you are the contact person these calls cannot always wait until your conference call is over or your spouse can track you down.

    Laborers on job sites are used to dealing with a contractor or job site superintendent. Be sure they know that you are the contractor/superintendent or your instructions may be ignored.
     
  • Scheduling Systems Are a Big Part of Cost Effective Completion of a Project
    If you do not have experience doing this, you could lose a lot of money in delays. If you are financing the project, time is not your friend!

    Most trades will not double up on a project that is not supervised 100% of the time. They want assurance that they will not be blamed for another trade creating any damage on the job site. If you are doing work on the project yourself it is critical that you set realistic amounts of time to do the work and then stick to it! If you plan to paint the interior Saturday, Sunday and Monday of a holiday weekend and the project is not ready for you, take time off work. Do it when the project is ready or hire it out. The savings will be worth the lost wage or expense of the painter.
     
  • Dealing with the Bank!
    Most lending institutions will require you to present a resume if you are not a licensed contractor to assure them you are qualified to build your own home.

    Next they will require a cost break down on the project:
    • Planned materials & labor costs (do not forget to include a port-a-john).
    • Trash collection & temp safety fence.

    The bank will work on a draw system, usually 5 draws. You will have to supply them with receipts and lien waivers from the subcontractors and suppliers you are using. After an inspection (ordered by the bank, paid for by the borrower...that is you) they will release the draw to the borrower.

    Before the final draw is released the lender will have the original appraiser go out and review the project to see that all the planned work & materials were completed. So if you included extras in the cost break down, such as landscaping or a block fence, these have to be completed to receive the final draw.
     
  • To Be or Not to Be An Owner Builder
    That is the perilous question. I have outlined just a few of my immediate concerns for someone considering the Owner Builder role. It can be rewarding but if the individual is not well versed in construction I strongly recommend finding a good contractor and save more than just your time!
     

This is taken from an article by Alice Kurtz (Article Source: http://EzineArticles.com/?expert=Alice_Kurtz).
Alice is a successful realtor and broker with the Exit Corporation. Working with customers and builders in the Prescott Arizona Region, Alice has extensive knowledge and experience with the building process. For help or advice about the building process contact Alice or David Kurtz, a Prescott Builder at Timber Rock Homes in Prescott Arizona.
Thank you for visiting the The Log Connection website www.TheLogConnection.com. The Log Connection is a leading producer of quality hand crafted log homes, log cabins, custom log homes, and post and beam style log homes.
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