Our friends at Jenkins Custom Homes, an Austin custom home builder company, provided this blog post:
Choosing a home builder can be daunting. Within the custom home industry, there are a wide variety of people who call themselves custom home builders. From the “Chuck in a truck” – essentially a person with a truck and a business card – to those who have years of experience, all have the right to call themselves custom home builders according to Texas law. The Texas Residential Construction Commission (TRCC) – created for the purpose of protecting consumers – was discovered to be functioning “as a homebuilder protection agency” – and then was subsequently shut down in September 2010. There is currently no formal governing body over residential construction in Texas. Essentially, it’s caveat emptor or ‘buyer beware’.
That means, in effect, that there is no licensing or ‘watchdog agency’ to which consumers can turn if building the home of their dreams turns into a nightmare. This is how the consumer can end up with a situation similar to what Sandra Bullock experienced in 2004 (http://www.people.com/). One way to help avoid such a potentially disastrous situation is to ask the following key questions of any builder you are interviewing:
- How long have you been in business?
- What company name should I look up, if I decide to do a public records search on your company?
- Have you ever declared bankruptcy?
- How many homes have you built?
- What is your formal training in the construction industry?
- Do you have any formal training or long-term experience managing a business?
- Do you own any spec homes or hold any lots that you owe money on? If so, how long have they been sitting and what is their status?
- Do you have references? Can you share a banker’s name who might also vouch for you?
If these questions seem invasive, just remember – this is not just a business transaction you are making. It is much, much more. This is the company who will construct what is potentially your most-valued investment, in order to house the people and pets who matter most to you. The individuals building your home need to understand all the complex details of building a home. And yet, many fall into the trap of trusting a builder simply because he or she has a likable personality. Knowing that your builder has financial strength and a sound business means that your builder will be there throughout the project and for many years afterward. Unfortunately, in the recent economic climate, many builders have either closed their doors or restructured their businesses because of heavy debt. Being educated and experienced is also an important part of being a good builder. Just as in any other industry, a good builder will market himself/herself well, manage his/her business affairs properly, and build homes properly so that he/she doesn’t get sued. This will ensure he/she is around to warrant your home for the next 10 years.
Here are some additional steps you can take to learn everything there is to know about your builder. Taken individually, these will not tell the whole story, but taken together, these may help distinguish the reputable builder from the one who will finish half your home then disappear in the night, leaving you with a huge mess.
- See if the company ranks in the area in terms of a top 10 list, like a local Business Journal. In Austin, it’s called the Austin Business Journal. You may even be able to call the local newspaper or business journal and ask them if they have a list or know of one. Top 10 companies should be more established and reputable.
- Check out the Better Business Bureau rankings.
- After you narrow it down, call the local municipality and ask for the building inspection department. Ask their opinion about the one or two builders that you are considering. If it is a small municipality, they will know most of the builders in the area and will have inspected their projects. They may not be able to tell you what they know, but it never hurts to ask.
- Call a few local vendors (a lumber supplier, for instance) and ask if the builder’s accounts are in good standing. This information will give you one more piece of the puzzle. Some builder’s credit is so bad that they can’t get an account with a local supplier. This is a bad sign.
- Do a Public Records Search. Contact an attorney who has access to judgments against anyone you are considering. Ask them to do a public records search. Unfortunately, most online searches are incomplete and, thus, inaccurate. A true public records search will require a little digging and some time to flesh out data. You want to know if an individual changed company names recently, what was their previous name, and other important data that might tell the whole story. It may cost $300 – $400, but think about how much it could cost if you make a mistake! If you don’t already have an attorney who can do this, we can help with that. Send us an email at email@example.com. Out of all these suggestions, this is the one that could make the most difference.
Note: Judgments against a contractor from multiple vendors or subcontractors may show that they are not treating their trades & suppliers right, which can eventually lead to a situation where no trades will work for that builder (the community of subcontractors, at least in this area, is small and close-knit – they share information with each other). It also could mean that the builder is cash-poor and unable to make payments on time. This means he/she may be taking your money and using it for other projects – a very dangerous situation. Judgments from a client(s) are very serious and show an unwillingness to work things out with an individual who wasn’t satisfied with the work.
This may seem like overkill, but in the end, doing your homework can save you time and money. When something has gone wrong, people will often say, “I just can’t believe it! He was a nice guy and seemed like the best builder in the world!”. But in the end, while a nice person can sell a home, it takes a knowledgeable and trustworthy company to build it and stake their reputation behind their work for years to come.