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.