Choosing a home builder is more complicated in challenging economic times. The weak new home construction industry raises concerns about the financial stability of builders who don't have nearly as much business now as they had just a couple of years ago. Builders whose businesses were once thriving may be seriously struggling now.
When making plans to build a new home, one of the first tasks is to find a good builder. Choosing a home builder is a five step process involving developing a list of builder candidates, doing background checks, conducting interviews, checking references, and negotiating a contract. During your background check on a particular builder, you may find out that he has not built many homes in the past couple of years. Given the sagging economy and the slow pace of new home construction nationwide, that should not be too surprising. Before giving a builder further serious consideration, however, it is important to understand why his business has been slow or idle for an extended period of time and how well prepared he is to take on a new project - construction of your new home.
Besides all of the other criteria that factor into your decision to hire a builder, such as experience, reputation, court actions, overall financial health, the quality of his work, and personal style, consider how busy the builder has been recently. A builder for whom business has been very slow or whose construction company has been idle for a long while may not be in the best position to gear up for your project. If you are considering a builder who fits that description, you need to convince yourself that he can fully commit the required resources to your project through its completion. And, in addition, you'd like to have confidence that the builder will be around for some time afterward to service your warranty.
Advertisements and lists of home builders willing to build in the area where your land is located can be obtained from various print and online sources. The question then becomes: How many of those builders are actively building homes?
An online directory of home builders servicing my home county of Park County, Colorado, lists 23 different general contractors. According to data obtained from the Park County Building Department, however, only three of those builders applied for new home building permits in Park County in the last two-and-a-quarter years. Does the lack of activity for the other 20 builders reflect slow business conditions or something else? For a builder you're considering, it's worth investigating.
Lack of work for a builder could be a sign of any of these issues:
Lack of demand (That's certainly a reasonable explanation if the builder is no worse off than his competitors.) Not competing effectively with other builders in the same geographic market Financial troubles in a tough economic environment Construction problems that have damaged his reputation Inability to hold onto subcontractors because he can't offer them sustained work
Here are concerns you'll want to address with the builder when you interview him:
Does the builder have the financial resources to carry him through your project? Can the builder assemble his crew and retain those subcontractors for the duration of the project? Will the builder be able to pay his subcontractors on time? (Make sure to get a lien release from each subcontractor who works on your home and from every major supplier.)
Besides the list of questions you ought to ask any candidate builder, if the business of a builder you're considering hiring has been slow or idle, you will want to get credible answers to a few additional questions. While these are valid interview questions for any general contractor, they are targeted at a home builder for whom business has been slow in the last couple of years:
How long has it been since the builder completed his last home? How many homes has the builder constructed in the previous three years? In the previous two years? Last year? In each of the past three years, how many homes has the builder constructed in the area where you want to build? How active is the builder in neighboring towns and counties? How has the builder maintained his relationships with his suppliers? How has the builder sustained his relationships with the county building department?
I do not advocate passing over a builder just because his business is not booming. I do suggest that you use a little more caution in evaluating builders in this sluggish new home construction market. While it's a good deal for all concerned when you hire a great builder whose business has been slow, you don't want to put yourself in a situation where your builder's financial woes become yours.
By: Mark M Conway
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