When do I hire a builder?

It is Urban Home Builders belief that you want to get the builder involved as soon as possible, no matter where you are in the process.

With that said UHB is second in command. Everyone else, works for us. Why not get us involved as soon as possible? Let us look after your best interests. Allow us to start saving you money sooner rather than later. We can instantly lower anxiety, set a comprehensive plan in place, review what you've done already and make recommendations if we feel you've made a misstep. Look at it this way, if your brother or father was us, wouldn't you assign them to this second in command position as soon as possible? 

As a friendly reminder, you do make all the decisions, all we do is give you the facts and the unfiltered truth. What we have found is it comes down to trust. We are very aware that the home builder is second to the used car salesman; no one trusts a home builder. Well, ALL of our clients have given us the highest accolades on Yelp and Google. You'll talk with them and maybe meet a few, and they will say that honesty and integrity cannot be carved out of us. So let us start working for you. Let us blow you away. Let us restore your faith in humanity. 

Choosing an Architect

We were recently involved in a project where a client couldn't decide between an architect Urban Home Builders knew and one we've never heard of. The architect we are familiar with knows what the City of Austin wants, what the process and flow is, and most importantly, just how much information needs to be on a set of plans. The client would only tell us (See, the trust thing is coming out here), that the architect we didn't know was several thousand dollars cheaper. Several thousand dollars is a lot of money, don't get me wrong, but was it $2000 or $9000? Anyway, they went with this other architect.

I gave them a long, long list of things to make sure they had in their contract with the architect they picked. Things like: Exterior elevations, all interior elevations, cabinet drawings, details, door and window schedules, etc. This may all be Greek to you, but its massively important. Well, for whatever reason, they didn't see it through. Their plans ended up costing several thousand dollars more than the architect we were familiar with because for the quoted price they were essentially scratch paper. On top of that, it took 8 months longer to draw their plans than the other architect! 8 months!!!

The clients were not happy at all. It wasn't our fault, but we inherit a client that was on the wrong foot to begin with. Just to be clear, I'm not saying you have to use an architect we know, but it's the little things like this that are so important to your -and our- sanity that we would like to make you aware of just how much we put into your building experience. 

An email I sent to a potential client

I have reviewed your plans. As they are, there is not enough information to bid your project. We would like to warn you against any company that can put a price on building your home at this point.

Only one of two things can happen if they do:

1. They establish a long list of Allowances and you end up not happy and vastly exceeding your budget.
2. They radically over-inflate the price to cover themselves and you pay too much for   your home.

A small sampling of several big, big ticket items that need much more information:

A. Your foundation (There are no plans for it)
B. Your windows and doors
C. Your flooring, including all tile
D. Your appliances

Just in those 4 items, the price could swing, easily, over $100,000. And I didn't even list the pool or landscaping. We've installed landscaping on homes that, by itself, cost over $100,000.

So, I am writing this to you to protect you and your family. Be very wary of signing a builder for a set cost of construction at this point. Personally, knowing the ins and outs of construction, Texas lien rights, and construction law, I don't see how you could protect yourself.

To give you some more clarity, as I bet all this is new to you, I could bid your project for $800,000 and list Allowances of $150,000 for pool, landscaping, foundation, flooring, plumbing & lighting fixtures, windows and doors, hardware, masonry, appliances, countertops,
cabinetry, and metal work.

You may think, "Great!  UHB is on budget and I have $150,000 to spend on all that stuff.  Let's get to building!"  Well, the engineer designing your foundation can get the go ahead to produce a set of foundation plans and we could find out that the engineer wants us to build
a foundation that costs $75,000.  The remaining $75,000 is not enough for the rest of the Allowance items.  You either need to kick in a ton more money or pick things that are very low end, and, eliminate the pool so as to not exceed the budget.  This is how things fall apart on building a home and all the horror stories you hear about, happen.

So, what do you do?  It is, to a certain degree, a chicken or the egg.  How does the Smith family decide if they can afford to build the home?

On one hand, you need more information.  You need architectural plans (Much more than you have.  Showing cabinets elevations, trim elevations, metal work elevations, flooring types, etc, etc, etc), engineering plans (Showing foundation and framing), and you need Specifications (What type of windows and doors, flooring, lighting, plumbing fixtures, etc.).  "Well, Gary, what if I do all this and it comes back $1,200,000?"

This is part of the chicken or the egg.  It may happen.  If it does, it's a good thing.  Now you know.  Imagine if you find out 30% of the way into construction and you have to go borrowing money to finish your home?  If it does happen that it comes back $1,200,000, then you scale down.  You get the architect to tweak the plans (Most often the total square footage of the house gets lessened), the engineer will update their plans, and you compromise on your Specifications until you reach the point where you are in budget.  "Well, Gary, doesn't that cost about $5,000 for the architect to make those changes?"  Yes, but hopefully at this point you're seeing that as an extremely valuable $5,000 and it is saving you from a nightmare.  If I have explained this well enough, you'll see that there is really no way around this when building a home with a ridged budget even though your budget is a nice one at $800,000. 

Our belief/ethos, is for you to do the following:

1. Hire a builder that you like and that can produce referrals.
2. Have that builder be in on every meeting, email, etc.
3. Have them educate you where you can save money and where you shouldn't skimp.
4. Have the architectural plans drawn much more.
5. Get foundation plans engineered or at the very least, have a geotechnical report done on the soil so we can get a feel for what it's like.
6. Go to that builder's vendors and pick Specifications.
7. Have the builder bid the project with a decimal point on it and with as few Allowances as possible.
8. If you're over budget either accept it and head to building or make compromises until you're happy with the cost.
9. Permit & build.
10. Move in.

Saving money starts right away.

I often get a call saying, “I’ve found a property that we want you to work on. How can I save money between now and closing?”

You’ll need a survey to close on the property (for the title company). If we’re doing anything more than remodeling, get that surveying company to do all items required for a City of Austin permit, such as a topographic study, tree study, etc. This will save you about $700.

Shop around for a bank with the best deal. Keep in mind that a lot of the fees on a HUD statement are negotiable, like the Origination Fee. This could save a thousand dollars or more.

Get a One Time Close. This means you get a loan that will allow you to: buy the property, do construction, and modify into a long-term mortgage all at the same time, and you will not have to pay separate closing costs such as Title Policy, Origination Fee, etc. This saves thousands of dollars.

 

Financing your build.

Another question I get a lot is: “What will the bank require to get a loan?”

The bank will require the usual financial information, such as proof of income, income tax returns, etc. In addition, the bank is understandably interested in collateral, which is the home that is yet to be built. The bank will want to see:

  • A set of plans (including a survey)
  • A set of Specifications (what is inside your home specifically)
  • A builder who has been validated by that bank (we're approved by everyone in Austin)
  • An appraisal (An independent 3rd party puts a value on your plans and specifications)
  • The amount of money they are lending you to be within their guidelines, which are called Loan to Value, or LTV. It would look like this if a bank had a 90% LTV:

Property cost - $300,000
Construction costs (everything from plans, nails, and the kitchen sink) - $350,000
Down payment - $65,000
Appraisal - $700,000

This leaves you at an LTV of 83.6%, (300,000 + 350,000 - 65,000 = 585,000. 585,000 is 83.6% of 700,000) so in this case the bank would do the loan.

 

Be prepared for the paperwork.

I’m often asked: “What will the City of Austin require to build my home?”

Here’s your checklist:

  • A building permit (to get that, you’ll need a set of plans stamped by a draftsman or an architect). You can see the building application form here: City of Austin Residential Construction Application
  • An owner’s authorization letter.
  • A demolition permit if applicable, which includes a Certified Tax Certificate.
  • An Electrical Service Plan Application (ESPA) permit. (How much demand for electricity will your house create?)
  • A tree permit, formally known as a Tree Ordinance Review Application (if applicable).
  • An historic review (if applicable).
  • Structural plans stamped by a licensed engineer.

 

How long do the separate stages of construction take?

  • Finding a realtor who is a good fit: about a week.
  • Finding a house to remodel/renovate/tear down/etc: who knows? This one’s up to you.
  • Finding an architect and draw the plans: four weeks to a year.
  • Get all the various engineering completed: four weeks to three months.
  • Submit to the City of Austin for all applicable permits: four weeks to three months
  • Make your selections (which are called Specifications): one to four weeks.
  • Get everything bid out so that we know what everything will cost: two to four weeks.
  • Shop banks and close on the loan: four weeks to three months.
  • Construction on a typical urban Austin 3,000-square-foot home: about five months.

 

Choosing Specifications wisely saves time and money.

Everyone always asks: “Why is it so important for me to pick out the Specifications before we even start construction?”

This one is so important. Please spend as much time as necessary identifying the items that we will be filling your home with. No one likes surprises, increased costs, or longer build times.

The best way to get a project to come in on time and on budget is to specify everything before construction starts. We can order everything ahead of time, check it for damage when it arrives, and warehouse it so that the minute we need it, we have it. No back orders. No returns due to damage. No costly delays for any reason.

You may think that by stating, “I want a black, steel fireplace that is 36'' x 36'' in this corner right here,” that you’ve been specific enough. Well, it is possible when you pick out the actual fireplace unit, there will be some changes in framing and that will lead to a potential code violation. These are any number of scenarios where something like this can happen. Let’s say you decide at the last minute to pick a toilet that mounts to the wall instead of the floor; plumbers charge more for that type of installation. Now the price goes up and there could be delays. There may even be code issues. Had we known earlier about that specification, we could have double-checked the code, ordered what you wanted and negotiated with the plumber.

Planning ahead saves time and money in the end so it’s worth it to take a little more time to pick what you want before construction begins.

What’s most likely to send your home over budget?

The answer to this one starts at the bottom—your foundation. The most foolproof way to control the largest variable in construction is to get a structural engineer to design it.

But an engineer can’t do that until they have a final set of plans from your architect. By having the soil analyzed, we can get a sense for a ballpark figure of what your foundation is going to cost, but to truly have control of this huge variable (foundations can cost from $10,000 to $100,000) we need a set of foundation plans that we can get bid out and get under contract. This is just one of many reasons, a final set of plans from your architect is so important.

 

The challenges of buying a tear-down or an open lot.

In Austin, we have bentonite, a type of clay, in our soil, and it can cause a lot of problems. Bentonite expands considerably when it gets wet and shrinks a whole lot when it dries out. Rain and sun—we can have plenty of both in central Texas and these conditions make it very hard for a foundation to perform.

We can design foundations to combat high concentrations of bentonite; the only problem is these foundations are expensive. And bentonite concentrations around Austin can vary considerably. The neighbor down the street may have a “normal” amount, but the lot you’re looking at can have high amounts. Before you spend several hundred thousand dollars on a lot or a tear down, you want to know whether your foundation will cost $10,000 or $100,000.

You can talk to us before you buy and we will hire the right geotechnical engineers to tell us what kind of foundation you will need. If you love the location and decide to proceed even if the property comes back with a high concentration of bentonite, at least you’ll know in advance and can adjust your budget accordingly.

 

Why can’t I buy from Home Depot or the internet?

When clients are creating their Specifications (what it inside your home specifically), we often are asked if it’s okay to buy from Home Depot or the internet. The answer is, that’s not a very good idea, and here’s why:

  • The products you buy from our vendors are authentic, manufacturer products not close-outs, cheaper versions, counterfeits, or knock-offs.
  • The prices you get from our vendors are not marked up by us. You get the same price that we do as a home builder.
  • All of the products our vendors stock have been checked for damage and operation.
  • All of the products are warehoused and delivered when we need them. They are not laying around the job site where they can be lost, stolen or damaged. No one can order that item out from under us.
  • If there is something wrong with a product our vendors will replace it.

Websites are great but not when it comes to shopping for the building of your home. The building process is challenging and we work hard to make things happen the right way and on time (some like to call it flow) and when we are dependent on the reliability of online retailers things can go wrong quickly. It could be as small as a light fixture coming from an online source that’s missing a light bulb. Typically it’s not that big of a deal, but the City of Austin inspector is scheduled that day and he shows up a half hour early while one of our guys is out bulb shopping. If the inspector won’t wait for my guy to return, we fail inspection. Then there is a rescheduling, probably a time delay, back charges to you, and so on. It sounds a bit ridiculous, but this very thing has happened.

But, we get it. If there is a beautiful Italian chandelier online that you absolutely must have and our vendor can’t track it down then we will ask you to buy it, store it, and take full responsibility for its quality and working condition. At the end of the day we work for you and we want you to have your dream home just the way you imagined it.