01. initial call or meeting
This is typically about an an hour meeting in which we discuss the project vision and constraints. We will discuss things such as how you intend to use and live in the home, the things most important to you, your target budget and timing, and we will also examine our team’s capabilities to meet those criteria. In this time, you can ask questions and together we can determine if it would be mutually beneficial to move forward with a Pre-Construction Services Agreement.
02. Pre-construction services agreement
This is an agreement we sign with potential clients to begin assisting you in your specific project needs. It will almost always be tailored to help with one or all of the following: (1) lot selection and feasibility, (2) plan and permit coordination with the architect, engineers, and permitting specialists, and (3) a fully-developed budget that is not just an estimate but actual pricing from our trade partners. The payment for these pre-construction services is usually between $3,000 to $5,000, depending on the project specifics, and it is applicable to the construction agreement if we enter into such a contract together.
03. Lot Selection
If you already own a lot, skip this step. If you don’t we can assist in the lot selection and feasibility process. We have systems and relationships to help identify good quality properties for your build project.
04-A. design and permitting
If you already have an architect relationship, we are happy to work with them. If you don’t, we have several we can recommend depending on a number of factors we can determine in the initial meeting. There are multiple steps in the design and permitting phase, including (1) the schematic or conceptual designs, (2) the design development designs used to begin permitting and bidding, and (3) the actual construction documents. This phase can take three to six months or more, depending on the specific project, the architect, and the permitting authority.
04-B. Pricing and construction agreement
This step is also labeled “Step 4,” because it can run somewhat in parallel to the design and permitting stage. Because we work with Fixed Price Contracts (see FAQ below for more), you can ensure that the budget we present you is something that has been thoroughly examined and prepared. During this time, you will have to devote several hours or more to finalizing your selections with our team and our trade partners. This will involve some showroom appointments. We require these selections be finalized before the construction agreement is signed. This phase can usually be completed in four to six weeks.
05. loan closing and construction
Once the design development plans and construction agreement are in place, the lender can begin the appraisal and close the loan. This can take approximately six weeks. Upon closing of the construction loan, construction can commence. Our average home takes ten to twelve months to construct in the field, depending on a number of variables that can shrink or extend that time frame. However, by having a well constructed budget and construction plan that we create in the pre-construction phase, we can maximize the efficiency of construction timelines.
frequently asked questions
how much do you build for?
Components of a Project Budget
This is usually answered on a price per foot basis, and can vary widely depending on whether the square feet include porches and garages or just heated square feet. We typically estimate based on just heated square feet, which is an admittedly flawed model, although by far the most common. That said, we are currently building at a base level of $150 per foot for our most affordable homes, but our budgets will often exceed $200 to $300 per foot, depending on the project and client preferences.
Here’s the caveat: That estimate is what we call the “hard cost” to build a project (i.e. the actual materials and labor that go into the construction of the home). As you can see in the pie chart (yes, even a pie chart is necessary for this discussion), there are four major components to a project budget, and the hard cost estimates above do not include the other three components (soft costs, overhead, and builder profit) for good reason…the hard costs are easiest to isolate on an “apples-to-apples” basis.
Once you factor in the other three components, our client’s typical budget comes in around $200 per foot for our most affordable homes with many of our more customized homes costing well more than that. Depending on your project goals and budget, we can quickly gather an understanding if it’s (1) achievable and (2) what options we have available to achieve both.
what is your fee?
We take a different approach than standard when building project budgets. Rather than a blanket fee as a markup on costs, such as a 20% fee on top of all costs, we prefer to back in based on building’s best practices. As general industry standards, a builder needs to generate at least an 8% net profit margin to run a good, solvent company.
As such, when we calculate our fee for a project, we back in to the 8% net profit margin requirement. Additionally, a builder’s fee for a project must cover his or her expense in constructing the project, which includes a variety of things such as construction supervision, bidding, estimating, purchasing, accounting, and other administrative functions, and other items such as insurance and allocations for other labor and tools. Depending on a project’s complexity and other factors, this overhead requirement is typically 8-10% of the total project budget.
We build our budgets by creating detailed estimates for a project’s overhead and profit requirements, allowing us to charge no more or less than we must. We have found this to be a more structured route to a successful project for both the client and the builder.
One final note: We are not the cheapest, nor is that our goal. We care about producing the highest value for our clients. We believe we are the best when it comes to price as a function of quality, which is how we define value. And we believe we have mastered the process of maximizing value for our clients.
how often do you go over budget?
Almost never, for several reasons. First, we offer our clients fixed priced contracts, meaning we lock in a price at the signing of the construction agreement, and any fluctuations are covered by us rather than our clients. This gives our clients peace of mind from the beginning.
Second, because those pricing risks are covered by us, we take a very structured approach to pricing construction projects. Rather than simply estimating the project, we try to obtain what are called “hard bids” for every major component of the project.
And finally, even with a fixed price contract, there are carve outs for “allowances.” Allowances are mini-budgets given to the clients for those parts of the home that aren’t yet selected when the budget is finalized. For instance, maybe the client has not yet selected the specific appliances, so an allowance is given. While we understand the occasional necessity for such allowances, we also know they are one of the leading indicators of client dissatisfaction down the road and also a source of inefficiency during construction. For that reason, we take a rigorous approach to eliminating as many allowances as possible prior to signing the construction agreement. It helps provide even more definitive pricing to the client and it creates a more efficient construction process.
why do you require a pre-construction services agreement just to bid my project?
There are two forms of providing a price to a client: one is a rough estimate that takes a few hours to complete, and the other is a detailed, “hard bid.” The same builder can perform both methods and arrive at a 10% or greater difference between the two. The latter is infinitely more accurate for the client, but it involves dozens of hours of up front work for the builder and his trade partners. Because we offer clients fixed price contracts, it’s imperative we approach the pricing and pre-construction process with a high level of precision.
This is why we work under the guidance of a pre-construction services agreement. If you plan to obtain prices from multiple builders, we cannot more strongly encourage you to invest in similar services with those builders rather than finding free bidders. With almost 100% consistency, when we have lost a client to another builder who beat us on pricing, the client came back to us at the end of the project and said that it didn’t go as they had planned and they ended up going over our pricing and spending more money. The point is, there is a VERY real difference between the starting price and ending price, and it’s one of the most common and disappointing practices in the industry for builders to purposely offer low pricing to “win” the client, only to increase the price through various less-than-professional practices during construction.
For these reasons, we insist on doing it the right way, but we also ask that our clients value that time and expertise we are investing.
what construction agreement do you use and what are the most important features of it?
We use the template created by the Texas Association of Builders. We give you a copy of the agreement with several parts still blank (final specs and price) in Step 02 of our process above. This is for review purposes only and to familiarize you early with the specifics of how we work rather than waiting until the end. Here are a few of the most important terms of our contracts:
They are fixed price, meaning we are responsible for guaranteeing you the final price of the home, with several exceptions, including any allowances for specifications or selections that have not been finalized at the signing of the construction agreement. We encourage our clients and aid however we can to avoid allowances. See the FAQ, “How often do you go over budget,” for more.
We receive payments from our clients via “draws.” We typically issue 10-12 draw requests based on certain milestones achieved over the entire course of the project. These draw requests are for different amounts each time that go to cover the cost of work completed and material that has been ordered. They usually occur on a monthly basis, more or less, depending on a variety of factors.
We require a 5% deposit at contract signing. 5 to 10% is common industry practice, because it achieves several ends. First, it ensures the client is invested, and if something happens that causes the client to delay or stop working on the project, it helps offset the damages to the builder and allows him to pay his trade partners for the work they have done. Second, the deposit helps the builder avoid being “the bank” on the project, and provides some of the working capital necessary to build the home. Because the builder only receives payments periodically at certain milestones, the frequency with which he receives bills from his trade partners is much more frequent. To keep his trade partners happy and keep the project moving he must pay them in a timely manner, more frequently than he requests draws from his clients. As a result, the builder must float (i.e. finance) these costs in between the draw requests, thus creating a “mini-bank.” The deposit goes to help minimize the float the builder must burden himself.
what warranty do you offer on your homes?
We offer the warranty created by the Texas Association of Builders. It offers one year on workmanship and material, two years on systems such as plumbing, heating/cooling, and electrical, and ten years on major structural components. Additionally, we assign all manufacturers’ warranties over to our clients.
why are you so transparent with all this information?
We want our clients to have as much information as they can about us up front. And yes, other builders can copy us, but part of our DNA is to share information and best practices to help push this industry forward and help others succeed along the way. It’s why we started our education platform in the first place, and if we can help others with something that may improve their business, we are good with it!