The Definitive Guide to
CHOOSING THE RIGHT DFW HOME BUILDER
Also, how to save money and avoid getting ripped off during the process.
The time has come! Your lovely DFW home just isn’t meeting all of your needs any more, and you’re ready to build a beautiful home that matches your life, your family and your preferences perfectly. Something with a little more space that matches your sense of design and your ideal floor plan.
But wait: You’ve heard the horror stories. Home builders running away with people’s hard-earned money. 9-month projects stretching out over 3 years. Warranty nightmares. Calls going unanswered. Subcontractors not getting paid. Prices changing without notice. How do you avoid that? Everyone with a hammer in DFW who knows about the sizzling DFW real estate market wants in on the action, so what do you look out for?
Fear not! We are going to cover all that, and more! And no, this eBook isn’t a course in fear tactics, so don’t worry. We are going to cite specific examples instead of merely throwing out over-generalized statements. But after building homes in DFW for many years, we have a pretty good grasp of what DFW residents have been going through when it comes to bad homebuilders in a red-hot DFW housing market.
The Ugly Truth about Most DFW Home Builders
Most DFW home builders fit into 4 distinct categories. We aren’t one for labels or stereotypes any more than the next guy, but it’s almost creepy how much the 4 types of builders below fit the bill:
We’ll call our first builder Joe.
Joe is a great guy, but he doesn’t build homes, despite what he may tell you. Joe is that guy we all know with a pickup truck who will take any job he can find. Joe Pickup-Truck has been doing odd-jobs all his life. A little tile work here, some drywall there and even plumbing! He’s a weekend warrior at Home Depot, and he guarantees you his best price. Yikes. Mr. Joe may come highly recommended from a neighbor, and offers an unbeatable price, but does he know how to build your dream home? Your builder should be on the jobsite regularly, but he shouldn’t be doing most of the work himself, like Joe does. Did you know that the state of Texas doesn’t require home builders to have a license? Joe knows, and he loves it!
The Joes of the home building world generally don’t carry insurance or use subcontractors. He’s got a truck and some street skills, but he has no idea what the permitting schedule is in your city, how to work with a bank or how to communicate with you regularly. He’s attracted to the idea of a fat paycheck, but both parties will likely end up paying more in the long run.
Our second builder goes by Bill.
Bill is a remodeler who wants to up his game. Bill Remodeler has been doing kitchen additions and bathroom upgrades for several years. He makes a good living but wants to step it up a notch: He wants to build a home. Your home, to be exact. He sends you some decent referrals and pictures of past work, but is a bit dodgy when you ask the hard questions: “When was the last complete home you built. Who was it for? Do you have General and Liability Insurance? Can I see your background check? How long have you been building for? Do you have a college degree in construction management? How much are building permits in Prosper? McKinney? Does Carrollton require a fire suppression system?”
Bill is certainly better than Joe, but not by much. It takes years and dozens of homes to really get a good feel for building custom homes, and Bill just isn’t cut out for it quite yet. Are you willing to be his guinea pig? Bill often has a hard time paying subs on time, and thus delays are inevitable. You may be even get a call from a subcontractor you’ve never met, asking to be paid. Hint: This should never, ever, happen.
Our third type of builder goes by the name of Greg.
Greg Custom takes great pride in his craft. He builds 1-10 homes per year. He is on the job site regularly and has extensive experience building custom homes. He has a list of references that he’s willing to show, and he carries all of the necessary insurance. His price is a bit on the higher side, but you wonder if it isn’t worth it to just pay a little more to avoid the headaches that go by the names of Joe and Bill.
Greg is your best option of the 4, but it’s hard to tell just how experienced Greg actually is. Ask Greg for a list of homes he’s built and show up to one randomly, asking for a reference. Ask Greg if he has a degree in construction management. Ask him for a background check (awkward…) or to interview some of his contractors. Ask him if he’s been sued or if you can talk to his subs. This will go a long way. Greg is looking like a pretty good option after meeting Joe and Bill. I mean, just look at that smile! Are we sure Greg doesn’t moonlight as a dentist?
Our fourth and final type of DFW home builder is named Donald.
Okay, so we lied, Donald isn’t the name of the actual builder. Donald Tycoon happens to be the name of the sales rep that you’ll be working with for 12 months, not the owner, because the company he works for has subdivisions going up all over the metroplex. And trust us, these subdivisions are yuuuuge.
Sure, Donald’s company can build you a home, but don’t expect much love, control, communication or customization. Donald’s company makes the big bucks building homes by the neighborhood, not one at a time. Their price is sometimes a bit lower than Greg Custom, but they will fight you every step of the way. Every tiny upgrade is marked up 3x and requires 7 steps to request. Sorry – your sales rep, Donald, just got transferred to a new neighborhood in Coppell, so you’ll be working with Peter now. You don’t like Peter so much, but the company doesn’t really care, because you’re locked into an iron-clad contract anyway.
The megacorps of the world aren’t always all bad, but you have to be very careful (just google “M Christopher, Bella Vita, or Tower Custom Homes”). Oftentimes they get in over their heads with growth, they can’t service their loans and they go belly-up. Your 5-figure (or 6-figures, in some extreme cases) deposit goes with them. Their price per square foot might attract you, but pay close attention to the building materials. Mega-builders generally build spec homes, so craftsmanship and material might not be to your satisfaction. Don’t expect things to be different just because your home is custom. The subcontractors and materials will almost always be the same.
What to Watch out For
There are some signs you can look for that may be evident from any of the above 4 types of builders:
- They pressure you to rush into a contract
Citing things such as “increasing costs and decreasing land options” they will instill a sense of urgency that is merely a tactic to lock you into a contract. You should never rush a decision as big as building a custom home. Never. If you feel slimy by the pitch, then go with your gut and choose someone else.
- They will not show proof of insurance
This should be a non-negotiable. Do not build with anyone who will not show you general and liability insurance. If someone gets hurt on your property, you don’t want to be liable. I know, I know, you know this already. J
- They will not provide a background check
Does your home builder have a history of getting sued? Declaring bankruptcy? Poor credit? Going to jail? Hasn’t lived in the area for long? A background check can go a very long way. The best builders will offer you a background check without you having to ask.
. The price seems too low
Ask upfront what that price per square foot includes and get a spec sheet. Does their price per square foot include the septic tank? Water injections? Fire suppression? Permits? Piers? Certain cosmetic upgrades that are common for the area? Combinations of these (often) necessary costs can add $10-$30 per square foot that may or may not be included.
5.They don’t have a history of doing “build on your lot” builds, but rather, only spec homes.
There’s a big difference between building a home to sell to anyone, and building a custom home while working alongside the client for months at a time.
”What is your communication plan throughout the building process?”
Most builders will answer this with a blank stare. Sadly, the truth is that customers usually have to beg for progress updates. It’s the worst. The right builder should proactively
1. Tell you what they are about to do
2. Tell you what they are doing
3. Tell you what they are going to be doing next
“What SPECIFICALLY is included in your price per square foot?”
We can’t emphasize this enough. The last thing you want it to see a $10,000 bill for a septic tank and $8,000 bill for water injections when you thought they were included. How about a $10,000 bill for a DRIVEWAY!? Yes, sometimes even the driveway is not included. Crazy, right?
“Can I have an editable spreadsheet to play with upgrade scenarios?”
If they have this ready, then it means that they have their stuff together.
“What is the average price of homes you usually build?
Do you want someone building you an $800,000 home when most of what they build are $200,000 starter homes?
“Will you build on my lot?”
You don’t want to be forking over money to the builder every month. Aside from the deposit paid to the builder, you want the bulk of your trust to be placed in the bank, not the homebuilder. Why? Read below.
So you’ve finally found a builder that meets most or all of the criteria mentioned thus far. Congrats! You are in the small minority of people that have made it this far unscathed. Now what? Now you need some land!
Why not just build on the builders’ land? Well, what happens when the builder goes belly up, like at least 3 custom home builders have in DFW in the 1st quarter of 2017 alone? See below:
What do all three of those home builders have in common? All of them were well respected home builders that ran away with hundreds of thousands of dollars in deposits. Yes, hundreds of thousands of dollars per customer, not collectively. The articles are literally sickening.
When you buy the land (with or without a bank loan) it’s yours! Not the builders’. You are safer than you would be otherwise. And then, when you take out a construction loan with the bank, you aren’t paying the home builder directly, but have the buffer and support of a reliable 3rd party – the bank. So if the home builder goes belly up, you have more recourse than you would otherwise. There are simply less downsides doing a build on your lot program than any other scenario with a home builder. You own the lot, you control the construction loan, and the home builder does what he does best – provide the service of a building a home on your land. Anything else can get too messy.
You’ve gotten this far…don’t leave us now! It’s only fair that we throw in a short pitch for Liahona Home Builders at this point, right? After all, we didn’t spend all this time writing this 2,356 word eBook for nothing, right?
We, Ed Wilson and Chris Koerner, the co-owners of Liahona Home Builders and the writers of this awesome eBook, practice what we preach. It would sure be embarrassing if we recommended something above that we didn’t do ourselves, right? Awk-ward…
Want a background check or proof of insurance from us? Gladly! References? Absolutely! Would you appreciate an adherence to a communication schedule that looks exactly like this:
Every Friday, we…
- Tell you what we are about to do during the upcoming week
- Tell you what we are in the middle of doing as we are doing it (framing, rough plumbing, etc)
- Tell you what we just did
We know this sounds basic and simple, but in the home building industry it really isn’t. It’s so nice to have clear definitions of prices, options and occurrences regularly and in writing. (almost done…!)
Ed has a degree in construction management from BYU and has been building both residentially and commercially for years across the DFW metroplex. By his best guess, he has built between 120 and 150 homes, most above 3,000 square feet. Ed has an astute attention for detail on the jobsite and an uncompromising dedication to integrity. He regularly walks the lot and keeps close tabs on the subcontractors throughout the whole building process. Ed is happily married and has 5 kids under 15 and enjoys coaching his kids’ sports teams.
Chris is a lifelong entrepreneur and really loves making the business hum nicely. Chris keeps the numbers in line, the customers happy (no matter what) and the communication lines open. Chris has a BS in Business Management from the University of Alabama (Roll Tide) and is currently pursuing his Executive MBA on weekends at TCU to further perfect his business skills. Chris is happily married with 4 kids under 7 and enjoys working on the farm and fishing with his boys.
Chris and/or Ed would love to speak with you either over the phone or in person and discuss your home building needs. Don’t worry - no greasy sales pitch. In the home building business, most lookers don’t become buyers for a long time, and we are happy waiting patiently.
Thanks for reading, and give us a call or shoot us an email sometime!
Ed Wilson and Chris Koerner