Retiring in Sequim or Port Angeles?  Many retirees have not found that perfect floor plan in the existing inventory of homes for sale, so they are considering having their own home built.  What next?

A homeowner can build their own home or act as their own general contractor, but is that a good idea?  Will you save money and get a quality home built the way you want it built?  Why can’t a homeowner simply find out who the best subcontractors are and hire them to do the job?

Playing golf looks pretty easy.  Why can’t a beginner just beat Tiger Woods?  Michael Jordan may be the best basketball player in history, but why can’t anyone tall and athletic go one-on-one with Michael?

What’s so hard about building a house?  It’s not exactly an athletic event.  The answer is much longer than we have space here.  I want to touch on three significant reasons to hire a GOOD general contractor.

Many retirees have been planning their dream home for years, and have looked at hundreds of house plans, options, materials, and compared costs.  You can purchase a nice floor plan, or you can hire an architect to design a beautiful home.  I’ve worked with both architects and builders, and here are some thoughts worth considering.

1.  The first issue is cost.  A good general contractor who builds quality custom homes brings a wealth of experience to the table in design and the selection of materials.  He can look at a floor plan and suggest ways to make the refinements you want for your perfect home, and he can also help you select materials that might be much less expensive than your first choice while achieving the desired quality result.  This is important, because architects are not typically tuned into the cost of materials as builders are who do this work every day.  An architect is focused on his design, and he understandably has a lot of pride in his work, but he is not necessarily designing with the goal of saving you every dollar he can on materials or the design itself.

2.  The second issue is quality.  A good general contractor maintains quality control during the entire construction phase of your home, and that includes quality control over the materials used and the quality of work of the subcontractors and their employees.  Without a lifetime of experience doing just that, you would be well advised not to attempt to be your own project supervisor.  Without a trained eye, you won’t know what to watch for.  One other thought on this issue.  Some assume that the county or city building department will be supervising to watch for code compliance and quality, but that is definitely not their job, and they won’t do it.  Code compliance is important, but they have checklists on the code and the quality or lack thereof of the construction or the materials is not within their authority or interest.

3.  The third issue is honesty and fairness.  A general contractor who has built many homes will have a discount contract with the lumber company and other suppliers, and an honest builder will tell you about these discounts and even pass them on to you.  These discounts can amount to 10% or 15% off retail you will pay directly if you act as your own general.  I should add here that if you do act as you own general and hire subcontractors, there are subs who will take advantage of you, and you will pay much more to that sub or subs than your general contractor would have paid.

There is one builder I highly recommend in Sequim and Port Angeles.  He has built homes here since 1981, has an incredible customer satisfaction rate (the highest), does get volume discounts, and knows how to pass savings on to you and keep design costs down.  His name is Rick Anderson and he does have a website at Anderson Homes, LLC.

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Many people plan to build their home in Sequim or Port Angeles, but do not know how to select a good builder.  The following is a true story.  The names have been changed.  I have to be careful about slander or defamation, so I don’t mention anyone or any companies.   I heard many stories just like this during 20 years of law practice, and I’ve written extensively about builders who misrepresent the cost of construction.  Unfortunately, the majority of good people still think the lowest bidder is the contractor to hire.  Only after great stress and a lot of extra money do they ever begin to admit to themselves that they chose the wrong builder.  Why do people keep going down that path like sheep to the slaughter?  After all these years I think I now know why.  People simply don’t believe articles like this.  They don’t believe I’m telling the truth.  Well, you decide for yourself if you think this true story is relevant to you.  I have inserted some relevant comments where appropriate.

Question:

Hello, My name is Tom Jones. Last year my wife and I purchased a lot in [city deleted] in hopes of building our retirement home. After interviewing and dealing with several contractors in the area, we were not convinced that they could build our home as we wanted it, since we do not live in Washington.  We needed them to communicate effectively and constantly with us about the project and budget.

We went to our real estate agent (and friend)  for advise and to suggest a builder.  He did suggest one and we made contact with the builder.  He seemed friendly and honest [they all do, and some of the slickest ones are extremely good at winning you over], was willing to work closely with us on communicating and about budget.  [Of course they'll all say they will do this.]  He did seem to have some unconventional estimating methods [red flag] and at times a bit headstrong [red flag, your builder is working for you, not the other way around] and vague [red flag] when confronted about the pricing.  [You should have walked away right then.  Seriously.  Vague on pricing means he intends to jack up the costs without your agreement in the beginning, but once he has your John Henry on that contract, he's got you.  And he knows that.]  At one point, a $3000.00 16′x8′ insulated garage door finally got reduced to $1600 after I told him I refuse to pay the $3,000 and the company that makes the door would do it for $2,000.  I have done some related work to contracting in my lifetime, so I do understand some of the “quirks” each contractor has.  ["Quirks" are not acceptable.  Honesty does not require quirks of any kind.]

Anyway, During our meetings we would discuss other parts of the project, like landscaping, concrete work, interior trim finishes, and so on.  One area of discussion was regarding a driveway. His suggestion was to put in gravel, however the CC&R’s state that you can only have concrete or asphalt. [This lack of attention by the builder could have gotten you into an expensive problem, since the builder would have put you in violation of the CC&R's.]  On our last contact, we discussed  getting a price for concrete and signed a contract.  [Never sign a contract with a builder without knowing the exact price to build the home with everything included, and only sign with a builder who guarantees the contract price in writing.]

Being a few weeks away from closing on my construction loan, I kept inquiring about the driveway cost. Finally, the day before I was to sign loan papers, I received an email stating that the driveway would be a minimum of $4,000, but could be as little as $1500.  That didn’t make sense.  [Of course, it didn't.  Red flag, red flag.  Folks, this nice person who is apparently honest and was trying to get a good builder for his home, has had many red flags.  These red flags don't keep popping up with a builder who has integrity and is absolutely honest with you from the first email or the first meeting.]

After this huge discrepancy on the driveway costs, my wife and I discussed our options and decided that we were not comfortable with all this and decided not to sign the loan papers. The next day, we received a phone message from the builder and he wants to start digging for foundations tomorrow. I informed him that there are no funds, as we did not sign loan docs and there is not enough money in our personal account to cover the driveway, moving expenses, window coverings and any other expenses that would be necessary to move in.

We ended up paying $1,800 to settle or what I assume made the contract null and void.  My wife and I are not sure what we can do now. Can we try to hire another contractor to build our home without any repercussion from this one?  [That depends on your contract and whether your builder signed an agreement with release language and with no other rights to sue or be sued.] What happens to the building permit, is it in his name, Can we change that? How long do they last?  [Again, that depends on the builder and how he applied for the permit, but if he did it right the permit should be in your name on the application and he should only be listed as the contractor.] I am sorry for rambling on in this email, however we are both upset about the turn of events and are not sure that [city deleted] is right for us to retire in. [Wait a minute.  You are going to decide whether or not this area is the right place to retire for the rest of your life based on a bad contractor you hired?  You got stuck with a bad builder, but I will shout from the mountain tops that there are more wonderful and kind people in this area than any place I have ever lived, and probably more than where you live now.  Don't make an irrational decision on where you retire based on one bad person.  My goodness, find a place in these United States where everyone is perfect and absolutely honest, and you are in another galaxy my friend.] Any help or advice will be greatly appreciated.

Answer:

I read your email.  I’m sorry to hear you had such a nightmare with a builder.  I’m not sure who your builder was, but believe it or not, this is a very similar story to what I’ve been hearing for 20 years.  One of my passions is trying to help people who are planning to build their next home connect with a good, honest, and competent builder.  While that seems pretty simple, it is a process that is full of traps, and there are many wolves in sheep’s’ clothing out there who will say anything to get customers to sign a contract.  The checklist of little tricks and deception is very long.  I’m sorry you had such a bad experience like this.  [See my notes as part of this answer inserted in brackets inside the question above.]

On the other hand, I think it is good that you are out from under that contract, so you can move on, even if the builder did extort a fee from you.  As far as moving on to a new builder, I have a couple of thoughts.

Many professionals in my business are asked for referrals to a builder, and for some odd reason they think they have to give three names, including the one they know is the best and two others they don’t really want to recommend.  Why do they do this?  Well, some are thinking they have to because of liability reasons.  They don’t want to be responsible if a builder does something wrong, and they think it could come back to bite them.  Poppycock!  If I know the best dentist, I’m not recommending two others who don’t deserve the referral.  If I know the best doctor, lawyer, accountant, or auto mechanic, I will recommend that one.  I owe that kind of honesty to the person who asked for my opinion.  So I will boldly recommend a builder here.  So what if I offend other builders.  You’re reading this article to get the truth, not some watered down version of what I think is “safe” to share.

A builder I love to refer people to because of his absolute integrity and because he never ever mistreats clients is Rick Anderson.  Let me be absolutely honest and share a small frustration.  Rick has lost clients that I know of because they got a lower bid from someone else who made promises that sounded good, but what the customer did not know is that comparing Rick’s estimate or project manual with one of these other builders is not comparing apples with apples.  It’s very easy for a builder to generate a lower bid.   In fact, they will do it every time.  It’s easy to do by just cutting something out or using an inferior material.  So if it is a lower bid you’re shopping for, I can guarantee you will find it.  But Rick has never misrepresented the true cost of work just to get a client to sign a contract and then keep sucking more money out of the client like so many builders do.  By the way, Rick never talks this bold about himself or his company, but I will–for your sake.  I can tell you after 20 years of law practice that the lowest bidder is often the most expensive builder by the time the house is completed, unless you’re building a cracker box with the cheapest material.  Even most, if not all, of the builders who do build cracker boxes misrepresent their cost per square foot just to suck the clients in the front door.  (A former employee of [name deleted] wrote on a Seattle blog that in the hundreds of homes that were built while he worked there, not a single home was ever built for the advertised $38 per square foot.  Not one.)  Rick guarantees his contract price and people always know what they are getting from the beginning.

I think it would be fair to say that some people who hired a builder with a lower bid often end up paying more than they would have if they would have hired Rick in the beginning.  One other huge factor that is true, but again people don’t seem to know this, is that the process with Rick is almost always much smoother and happier for clients, AND the finished product is of a much higher quality.  I could give you a lot of evidence on the quality issue, but not in this short answer.

If you have a house plan already, why don’t you email or send it to me, and I’ll ask Rick Anderson to go over it and see what he can build it for.   He is very enjoyable to work with. By the way, don’t make the huge mistake some people make.  They go to Rick Anderson and get an estimate, and then they go to a couple of other builders and get a lower estimate and immediatley hire that builder with the lowest bid WITHOUT going back to Rick for an honest comparison.  Remember, you will always get a lower bid.  That’s easy for them to generate.  Don’t you want an honest comparison?

Chuck E. Marunde, J.D.
Broker/Realtor
Sequim & Port Angeles Real Estate, LLC
618 South Peabody St., Suite I
Port Angeles, WA  98362
360-775-5424

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Building your Sequim or Port Angeles retirement home soon? There are a small number of luxury homes for sale in the area, but the sellers have been frustrated, because they’ve been unable to sell their homes in the upper price ranges, $500,000 to $900,000. If you are planning your retirement in Sequim or Port Angeles, you may be grappling a little with the choice of buying an existing home or having your next home built by a custom home builder.

What is the biggest single reason people ultimately decide to have their retirement home built? Perhaps some visual aides will make the point best.

Not everyone has the same concept of architectural beauty. Some like a traditional architecture, and others like . . . well . . . something else.

What is your idea of a beautiful custom designed kitchen?

These photos represent luxury homes in the upper price ranges. Unless you fall in love with a unique design, you are unlikely to want to pay for someone else’s idea of a dream home.

Some people like log homes, but even among those who do, their tastes and preferences are decidedly different. Does this catch your eye? More than that, would you be willing to pay a high price for someone else’s unique log design? It’s actually a hybrid of log and frame.

The kitchen is clearly one of the most important rooms in your home, so this is where people tend to customize their design, the cabinets, and the countertops, and it’s easy to get turned off by someone else’s kitchen plan. Just another reason to build your own kitchen from scratch.

The living room or great room is also a major factor for homebuyers, and buyers are usually impressed, turned off, or feel nothing when they walk into a home for the first time. If the living room doesn’t instantly delight you with feelings of comfort and peace, move on.

I’ve seen some really impressive luxury homes, but not necessarily something I would want to live in. When you buy someone else’s design, it never really feels like it’s entirely your own. Of course, you can redecorate or rehab or completely rebuild a kitchen, for example, but then you’ve just bought it twice. Why do that when you can design your own and pay for it once?

Granted, these photos are of unique designs, but they are certainly not wierd or way out. These are designs within the universe of homes for sale.

My point is that any luxury home, or home in the upper price ranges, is someone else’s design, and while you may look at something more traditional than what I’ve displayed in these photos, you’ll still have the same issues.

Want to look at more floor plans for the Northwest? For floor plans, photos, and descriptions, take a look at RickAndersonHomes.com. I think you’ll be glad you did.

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There are a good number of retired (or nearly retired) folks who are planning to build their retirement homes in the coming months.  I know because I talk to them reguarly.  These are people who are not waiting to sell an existing home, who have excellent credit scores, and who have savings and the financial wherewithal to buy a lot and build a home.  Some already purchased their lot several years ago.

Obviously, there is a large segment of our population of retirees who are not in that group, because they must first sell a home before they can build, and right now try to find a good market to sell anywhere in the country.  So these folks are going to patiently (or impatiently) wait for the market to begin to return before they make their move to sell and build their next home.

For those who are in a position to build, why is now such a good time?  As they say in any area of investing, and building a new home is a huge investment, “timing is everything.”  If I were a high pressure salesman working for a large tract home builder in trouble in the Seattle or Tacoma area, and I was trying to force your hand to buy a spec home that’s been on the market for nine months (and is headed to foreclosure if the builder doesn’t get it sold stat), my pitch to you that now is the time to build or buy a spec home would be colored with conflicts of interest.  I’m not in that position, and no one I associate with is in trouble to sell spec homes or anything else.  We all have our personal motivations, and I have mine, but judge my counsel here on its own merits.

Here are five solid reasons this is one of the best times to build a home in the next five years:

1. If you are buying a lot for your new house, lot prices are lower than they’ve been in many years, and developers and private owners are bending over backwards to sell you their lots;
2. The prices of timber and other materials are lower now than they have been and will be in a long time;
3. The subcontractors are reducing the labor component of their bids right now out of a need to work;
4. Builders and subs are likely to give you more personal attention right now than ever, both in the relationship process and in the quality of workmanship; and
5. When the market starts to come back, we will see significant inflationary upward pressure on prices across the board as consumer spending and massive government spending kicks in and as we see the economic multiplier effect play out.

This is a good time to build, provided you do your due diligence in selecting a home builder with experience, integrity, and financial strength, and provided you surround yourself with professionals to gather information and make wise decisions at every point.  Be wise in chosing a Realtor, an architect, and a home builder.  You’ll be glad you did.  If you need help in this process, you can email me or call me.  It would be my privilege to be a part of your exciting plans to build your retirement home in Sequim or Port Angeles.

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Are you planning to build a new home?  You’ve probably read some of the articles allegedly written by experts who willingly share the secrets to saving a lot of money.  Saving $30,000 to $120,000 is a pretty attractive concept.  Who wouldn’t want to save money like that?

The first rule is don’t believe everything you read.  Of course, I’m laughing, because you are reading this article.  But if I am telling you the truth, you can benefit from what you read here.  Research, read, analyze, and do your due diligence.  Make fully informed decisions before you decide how and where to build your next home.

The second rule is that you need to dig into facts yourself to discover the truth.  Today I want to dispel a few misrepresentations that are all over the Internet and even in some print media.  Truth is like a flashlight that exposes the contents in the corners of a dark room.  Once you have seen what is in the corners, you can never forget the truth.  But until you know the truth, your beliefs may be clouded.  So let’s shine the light into the four corners of a room right now.  Let’s look at false or only partially true statements that hide in each of these corners.

Corner No. 1:  Be your own contractor and on a $300,000 project save $60,000 to $120,000.  I talked with a home builder who has over 25 years of building single family homes, and his response to this statement was, “That would be a 40% profit.  That is out of the park.  I’ve never even made a $60,000 profit on a $300,000 project.  Gross maybe, but certainly not net.”

There is so much more to working with a good general contractor that is not explained in a bold and exaggerated claim that a home owner can save up to 40%.  In other words, there are several expensive traps for the unwary home owner who decides to be their own general contractor.  What are these traps?

1. An honest and good general contractor brings value engineering in both design and the selection of materials.  I recently interviewed a retired couple who had an architect design their beautiful home, but the architect did not control costs in line with their budget.  Their contractor made suggestions, both in design and in the materials used, that saved them tens of thousands of dollars.  This alone paid for the general contractor.
2. He brings quality control over the subcontractors and his own employees.  I learned it takes a “trained eye” to recognize potential problems during the construction of a home.  The average home owner will not have that eye that takes decades of experience.  There are a thousand things that can go wrong and might go unnoticed from the excavation and foundation to the finish work.  A good contractor is constantly supervising and correcting as construction progresses.  Problems avoided is money saved later.
3. He has buying power the home owner simply does not have.  A medium sized or large home builder will have huge discounts from suppliers, and no home owner gets these volume discounts.  This could also amount to tens of thousands of dollars on an average home.
4. A few contractors offer fixed or guaranteed contracts and eat any overage.  Most builders do not offer their clients a fixed contract or a guaranteed contract price.  Find one who does.  If his costs exceed the contract, he eats the difference.

Corner No. 2:  You can use the local building department to prevent costly mistakes during construction.  This is simply not true.  Building departments are tasked with enforcing building codes, NOT providing quality control or cost savings tips to home owners.

Corner No. 3:  You can save by using licensed and bonded contractors.  This argument was actually made by one author who was writing about how to save money when building a home.  A good general contractor only uses licensed and bonded subs, and even more important, a general contractor gets better rates from his subs than a home owner will get.  This could also amount to tens of thousands of dollars.

Corner No. 4:  Purchase your own materials by watching for sales and buying dented items.  First, most people don’t want damaged appliances or materials.  Second, buying appliances on sale can be a good thing, but it certainly isn’t going to save a fortune on the construction of the home itself.  In fact, a general contractor who does any volume will be able to purchase materials at much larger discounts as already explained.

If you’re planning to build your own home, seriously consider the possibility that hiring a good, trustworthy general contractor may actually save you more money than if you tried to build your own home.

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Let’s face it, we are in a buyer’s market in Sequim and Port Angeles for existing homes and land, and most people know this. But something many people do not realize is that we are also in a a great market for building a new home. The cost of building a new home is lower than its been in years.

There are three major reasons the cost of building a new home is at such a low point right now:

1. The cost of building materials has dropped;
2. Land prices are lower; and
3. Subcontractors and General Contractors have lowered their profit margins.

Premier House Plans magazine cited new figures from the National Association of Home Builders:

Despite the gloom surrounding the housing landscape at the moment, there are appealing bright sides for saavy investors and homeowners who are considering construction of a new home from house plans.

First of all, the cost of key home construction materials has declined dramatically–and that rate of decline is slowing. As of the first quarter of 2008, framing lumber is 65% cheaper than it was two years ago, and 15% cheaper than a year ago. Drywall producers report a 36% decline in prices since last year, and a 5% decline since last quarter of 2007.

While sales of existing homes are down, sales of vacant lots are really down, and so if there ever was a buyer’s market for land, it is now. The inventory is high, and buyers are few and far between. While a developer is not likely to sell a lot for less than his own cost basis, he will shave profit to get some cash flow coming in the door. And with business so slow, of course, contractors are willing to shave profits to get business.

If there was ever a time to buy a lot and build a new home, that time is now. It’s been said that once a company shows up on the cover of Forbes magazine, the time to buy its stock and profit from its success is long past.  By the time the guy on the street is talking about it, it’s too late.  The same will be true of building your home. By the time everyone agrees that the market is going to recover, and the banking system is getting its equilibrium back, and the mortgage and real estate markets are getting their legs back, interest rates will already be on the rise and lot prices and construction prices will be back to normal. The opportunity is a small window in time, and that time is now.

[See Sequim and Port Angeles custom home builder Rick Anderson's website with photos, house plans, and more.]

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Since this is a buyer’s market, it’s not a great time to be selling your home, but if you own a lot, and you are planning to have your home built in the near future, this is a good time to start the process of selecting a builder and planning your home.

Most people plan to finance the construction and long term mortgage of their home, and this is why it is a good time to get started.  Interest rates are at historical lows, and most experts are saying that interest rates are headed upward in the months ahead.

At an interest rate just 1.0% above the current rate of 6.52% on a 30 year fixed, your mortgage payment on a $300,000 loan would increase by $200 per month.  You would pay $72,000 more in total interest on your loan than you would at today’s interest rate.  At an interest rate 2.0% above the current rate, your mortgage payment on a $300,000 loan would increase by $400 per month, and you would pay $168,000 more in total interest on your loan than you would at today’s interest rate.

It’s a good to build your home.  It’s a good time to get a loan to build your home.  Procrastinate, you and it may cost you in the long term.

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Building a home in Sequim or Port Angeles?  Finding a home builder for your next home is one of the most important decisions you will make as you start this next phase of your life in retirement.  This is part two of a two part series that asks the question, “Does Size Matter?” when it comes to hiring a home builder.

In part one, we looked at common misconceptions when hiring a builder, and we looked at the pros and cons of hiring a small builder.  Today, we look at hiring a larger home builder.

A large builder in Pierce or King County would build hundreds of houses each year, but in small towns like ours, a large builder would be someone building perhaps 8 to 30 houses per year.

I would categorize large builders based on criteria like their business model, their customer service, the quality of materials used, the quality of workmanship (i.e. the quality of their subs), the process by which they quote estimates and final bid prices, their contracts, their warranties, and their integrity.

Volumes could be written just on these criteria, but this is a blog post, which means it gets down and dirty quick.  The question, the answer.  Let’s get to it.

Business Model. Large home builders around the country have learned to create a business model that is a money machine.  Now this is America, home of the free and the brave, and we boast about our free enterprise system.  That’s all good.  And there’s nothing wrong, and everything right, about having a corporate goal of making money.  But many builders have taken this to levels unheard of 30 years ago.  Slick advertisements that often border on fraudulent advertising, bait and switch, and lopsided contracts are very common among many large builders.  From the beginning of the first meeting to the walk-through, there are a thousand ways to maximize every dollar of profit to the detriment of the unwary homeowner.

(more…)

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Building Your Retirement Home
(or having a contractor build your home)
Sequim Real Estate, Port Angeles Real Estate

You’re moving to Sequim or Port Angeles, and you’re planning on having a contractor build your retirement home. You’ve been planning this for 5 to 7 years, and finally you’ve reached that magic retirement date. You’ve purchased a piece of vacant land in either Sequim or Port Angeles, gone through many checklist items when making the offer so you don’t get caught by a Trap for the Unwary (wet lands, land doesn’t perc or other septic issues, well water contamination, site approval issues, easements and set backs effecting site building permits, environmental contamination (from prior uses or from neighboring properties), access, encroachments, boundary lines, etc.), and your next step is hiring a contractor to build your home. After 20 years of law practice and many years as a Realtor, I have put together a checklist from real life experience, and you can read the full article at:

10 Due Diligence Steps Before Hiring a Contractor in
Sequim or Port Angeles

As always, if you have comments or questions, email me at chuckmarunde@gmail.com. Best of luck, Chuck Marunde, J.D.

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