WHAT WE WOULD WANT EVERY HOMEOWNER TO READ BEFORE STARTING A RESIDENTIAL CONSTRUCTION PROJECT

This page is provided for informational purposes only and does not constitute expert or legal advice. Each construction dispute is unique and must be evaluated based on its specific facts, contracts, and applicable law.

Common misunderstandings:

• All contractors are created equal. They are not. Homeowners should search for contractors that have come to their systems/habits thoughtfully, driven by quality first. Actual builders who can answer technical questions, not salespeople.
• Your contractor is better than most. Hopefully that is true, but most people don’t properly reevaluate things along the way, and unwisely opt against checks & balances to save money. We recommend people engage their own advocate for key moments (before things are covered) or to simply answer questions.
• The contractor has insurance for anything that happens. In most cases, general liability insurance does not cover defective work, and homeowner insurance often does not cover construction defects. It is ideal for contractors to have defects liability insurance; it costs more, but it is available.
• The “Codes” inspector will catch all defects. They will not, it is not even their job to do that, and many jurisdictions even limit what they are trying to inspect (many do not inspect roofs). They make very few trips to the house and are often asked to do 8-10+ inspections per day; impossible to do thorough reviews. This is why they have almost no responsibility to their inspections, even in the best cases. Worst case, they likely know the builder, and they likely do not know you.

What happens when things go wrong:

• Cost overruns. This is most common with cost-plus contracts and when selections/decisions are not made ahead of time.
• The cost of mistakes is long term. Improper installations void manufacturer warranties, everything installed on a mistake has to be removed to repair that mistake, and people often get talked into waiting for visible damage to show up before even starting repairs. All not good.
• Lawsuits. These are VERY expensive and should be avoided whenever possible. If you aren’t willing to spend a lot of money & time, don’t even threaten them. Idle threats are easy to sniff out and only hurt efficient resolutions. Spend your time/money/efforts on prevention or be prepared to spend thousands on an attorney.  You will likely not recover your attorney fees unless your contract calls for an attorney fee recovery, and you win the lawsuit

Planning a project:

• Create the budgets: a target budget (must be realistically achievable) and a do-not-exceed budget. Planning partners need to understand both budgets to help control risks and be efficient. Passions run high during construction projects and goal budgets will vary; be disciplined.
• Identify the location. Make sure any land development costs or utilities, needed to make the site buildable, fit inside the budget.
• Select the architect and design team. We have found it is best if these are different companies, to provide different perspectives. Personality matching is important, as is researching the past work of design professionals to make sure their work matches the desired look. No designer or architect can do every theme well, and there is a lot more to designing than picking things out. You are [likely] not a designer.
• Finalize & organize the construction documents: architect plans, landscape architecture, design specs, engineering, and scope of work (preferences/standards/selections). Anything not defined will be done however the contractor decides to do them. Costs are always lower when included in a bid package, and this is for good reason; great planning helps the contractor as much as the client.
• Send out the documents for bid to contractors; very simple free market at work. There should be 2-3 contractors bidding any project. They should be selected from different recommendation sources, and they should only include contractors that the homeowner is comfortable actually using. Getting comparative numbers only is a disrespectful waste of everyone’s time. Any bids far below the others should be eliminated; contractors needing to make up lost money is a bad situation.
• Take the time to value engineer with your chosen contractor, prior to the final contract. After bidding, they will understand the project and be able to improve it.
• Cost-plus contracts should be avoided. The risk is all on the homeowner; common when people start building prematurely. If the documents are accurate & tight, there should be a predictable cost to complete a project, with change orders used in the case of unforeseeable items and homeowner adds.
  • Change orders are almost inevitable, but they should be minimized and optional. In any situation, changes to the contract budget should be approved in writing before the work is completed. People often get lazy with this, and it is the cause of many arguments. Both parties should have a contractual duty how to handle changes. A helpful step is to make sure the contractor understands the target cost of any proposed change, before they waste time on a pricing exercise that is too expensive from the start.
  • Include a clause allowing for homeowner-hired 3rd party inspections. This should include certain construction phases through which the contractor cannot proceed without homeowner permission (after review). The lead & execution times for these inspections should be defined in writing; we often find the most important is right before insulation installation, followed by the moment before exterior wall cladding is installed. Then shower water-proofing before shower tile is installed, and so on.
  • Include the start date and agree to a closing date, adding time for delays & changes. Some people like including a per diem penalty for every day after a certain grace period, but these have an upfront cost. If homeowners include this, they should consider including a per diem bonus for early completion can help provide a carrot to the stick. “Completed” should be defined to include ALL of the following: a certificate of occupancy, workmanship approved by the client per an agreed standard, cleanup complete, all systems in place & operable.
  • Make sure the pay schedule is defined in the contract based on percentage of completion. We strongly suggest small bites; running budgets/payments even bi-weekly, tracking the budget in its parts. A detailed budget should be provided by the contractor with their bids, with more line items being a handy clue of a more skilled builder.
  • Make sure that lien releases are available prior to draw requests.
  • A construction attorney should always review the contract. Tight contracts save a lot of problems by simply defining expectations. Anything not well defined often translates to cost. Well done contracts are the best tool to prevent ever needing to pick them up again.

How homeowners can help during a project:

• Hold regularly scheduled meetings with the builder, and bluntly discuss schedules & budgets. Spend time onsite, always be respectful/thankful of the workers, but be brief; don’t distract them. Always be very careful on jobsites; no kids, appropriate attire, follow written & verbal instructions, don’t talk on cell phones, etc. Common protections like covered holes or fall-protection handrails should be assumed to be missing, so you MUST pay attention.
• Pay on time or dispute an invoice quickly. Good contractors and good tradespeople will not waste their best crews where they have to chase their money. Minimizing that chase only helps the project at a very low cost. You want the best crews on YOUR site.
• Do NOT instruct tradespeople directly (unless you see a safety concern). Empower your builder and respect the chain of command. Communicating with trades can open you up to legal liabilities and often creates confusion.
• Raise concerns in writing, but not through text messages. Emails are great records, and we recommend noting the concerns in the subject line for searchability. Concerns should be raised quickly but take care not to pepper the builder constantly; organize, consolidate, and track concerns. Peppering will inevitably lead to avoidance, and that is a common first indication of a project slipping off the tracks.