Spec House Contract
I am about to sign a contract with a builder for my first spec house. It will be setup with me paying him $2500 going into the deal, with 4 equal draws at different stages until finished. My question is, how do I have some control over how long it takes him to get the job done?
Well that's a good question. First I would make sure you do all you're asked to do, from a contract standpoint and financing standpoint.
Your question: How do you have some control on constr. time...
Constr. usually can be wrapped up in 4 months, at least where I am located. Permitting takes a few months down here, because there is so much new construction going on.
There is nothing that I know of, someone else may, but I don't know of any way for you to help him "speed up" his constr. time unless you grabbed a shovel and helped, seriously. Weather is a factor that noone can control Other issues may arise from Inspectors... what can you do?
Stay on top of the builder and make a routine visit to the constr. site, let them know that you are watching..maybe offer an incentive if they get your C/O early..
Good question and Good Luck!
MT
[addsig]
My company builds houses in Greenville, SC and we deal with this all the time. The best way for both parties to handle it is to have an agreed on completion date and add a "weather clause" in the contract.
A typical contract will have state that the builder must plan on 3 weather days per month and any additional weather days are added to the ending contract date. Then you need to put some sort of penalty for going over the agreed on finish date. Most builders will also add a clause in there that you have to meet their schedule for picking out selections or the contract date can be extended. This also applies to any change orders you might make.
In terms of how long it should take to actually build the house that depends on a lot of factors including the stage of plans, the lot topography, change orders, type of house. We build some spec houses that take 4 months and some custom houses at the Cliffs that take 14 months.
Regardless of what anyone says, most builders want to complete a house as quickly as possible as time is money. Yes he is getting paid regardless of if the home sells in this situation, however everyday he has to deal with the project is another day that eats into his profits. There are too many things that can go wrong on a job, so it would be difficult to pinpoint a finish date. My suggestion, if you don't trust the builder and think he will drag the job out purposely for some strange reason....well then don't do business with him. Builders typically aren't the crooks people think they are
Good information guys. I appreciate your response.
Jim W.
As a builder, we put in a Time of Completion clause. We estimate the time we need, depending on the house, add a 30 day grace period, and then have a $1000 per week penalty that we agree to pay the homeowner if we go over. This gives the homeowner a period of time they usually feel comfortable about because they know I do not wish to fork over $1000 per week in penalties. By the way, I've never had to pay the penalties, but we have had to work a Saturday or even Weekend a couple of times. It's usually the subcontractors that kill you, waiting on them to complete their work is sometimes out of the contractors control, and even sometimes out of the subcontractors control, but ultimately, the contractor must take the responsibility. Part of my job is knowing my capabilities and those of my crew.
Good luck,
Terry
I'm not sure if your allowed to do this but what about offering a bonus if they finish on time or before time of $ 2000.00?
And a dinner party for the workers at the local club/bar?
Do you think they will build for you again? and again ? and put your contracts ahead of others?
There must be a tax write off for doing this?
I know we used to get these incentives but on alot larger scale down under.
The 3000 employees finished the construction 3 months ahead of schedule and were given cash bonuses and a party that required the breweries to truck in the beverages literally.
Luckily the Race Course made a great venue to do this at, and the buffet hosted by the General Partner has been the talk of the town for some 10 years.
The construction was an Oil Refinery but I'm sure you can scale this down to Home Development as well.
8-)
While penalty clauses can work they don't get you what you are asking for which is control and unless you have a magic wand there isn't much you can do,my question is what is your long term plan one spec or 50 tract units.
Bonus clauses structured on a small percentage work very well for me,I am working on a project right now If I complete by 4/15 I get an additional 2% of the appraised value of the property.With a 1/2 point deduct for 5/1 www.completion.If my painter would hurry up we will finish Friday or saturday and my crew gets a fihing trip!
Mike