I’m interested in buying a new construction residence from a small builder. How should I check out their reputation? I live in the Seattle Washington area.
What should I be concerned about? How should I make sure that my interest is protected? and construction is not shoddy, corner is not cut and builder not fly-by-the-night?
Are there documents I should make sure I include in the contract?
Thanks in advance!
First thing you do, ask them for references. Any good contractor will not be offended. They know you are covering yourself, and it is not an insult. It is the shady builder who gets upset when you ask for references.
Second of all, ask how long they have been in business for. You can even verify this with the local authorities. Require a copy of their local licenses (should be business and contractor’s). When they give it to you, call the licensing department. It is part of public record, they can tell you how long they have been around. If the company is small, it is not a big deal. If it is new and small, be careful. Not to say don’t use them, but watch it.
Are you getting a construction loan? If so, often they come out for periodic visits. Pick the guy who takes a look for information. He has seen a lot of houses. Also make sure your contractor gets all his inspections. A list of requirements should be easily obtainable from the licensing department. If you get regular inspections from the city/county, there will be little worry about safety issues. As for quality, you should be able to see that as it goes up. Just be hands on with regular walk-throughs.
As for protecting yourself with costs, make the contractor give you a written proposal. Make sure it is very clear as to what it does and does not include. Are you working off drawings from an architect? If so, make sure the drawings numbers and dates are included in the proposal and contract. A proposal that says "build house for $_____" sounds good for you, but it is not. They will argue every little thing is an extra. The more details the proposal has, the better. Try to make the bid binding, so he is tied to it if he starts going over costs.
With every payment get lien waivers. Your contractor should provide one for the money you gave him. All of his suppliers, vendors, and subcontractors should provide one as well. This is standard practice in the industry and if he balks walk. This is how you protect yourself from a lien. With no lien waiver, you do not know if he will file lien, or worse yet his suppliers are even being paid. The last thing you want to do is pay twice because someone filed a lien. Make sure the waivers are signed and notorized. People will lie when it comes to money. NEVER pay them for work they have not done. Hold a 10% retainage on ever billing. This retainage will not be paid until the work is 100% complete, C of O obtained, and manuals/keys are in your hand. The percentage is negotiable, the retainage is not. If he balks, he is too small to pay properly and could be planning on walking. This retainage helps ensure he finishes every bit of work, and helps you hire someone else if he walks. Do it or risk it all and pay the price.
All in all there is no magic. Get references and ask around. See how much volume of work a year he does, and trust your gut. If he seems overworked, or just plain has a bad vibe, walk away. Cheapest is rarely the best, pay more for quality. Good luck, construction is a difficult thing.