So You Want to Build Your Home?

Building a new home is an expensive project, easily running into six and even seven figures. For some homeowners, they’ve decided to save on the bottom line by acting as their own general contractor, which is the overall manager for the entire project. Books and websites flaunt potential savings of up to 20 percent and 25 percent. But before you consider making this move, remember that acting as an owner/general contractor requires extensive time and resources and an impressive skill set to tackle this role.

Shawn Woods, immediate past president of the Home Builders Association of Greater Kansas City, notes that those considering taking on the role of an owner/general contractor must combine impressive logistical abilities with solid financial and business backgrounds. But most important for Shawn is having the time and resources to do the project right because success will depend on your research.

“You’re going to need budgeting skills, plan-reading skills and incredible organizational skills. In many areas of the country, you can’t serve as a general contractor without a license. Some may have a provision that if it’s your personal home or address, you can do it. But no matter, you’ll need an extreme amount of time on your hands because you can’t do this during evenings and weekends,” noted Shawn. “It’s extremely stressful. With a full-time job, I don’t know how a homeowner would complete it. You’d need a flexible work arrangement to do it.”

General contractors not only oversee the construction phase but they also negotiate with subcontractors and suppliers to achieve the best prices and manage the work to avoid extra costs. They’ve spent years networking and making connections with a solid group of subcontractors to hire and successfully work with them.

“Scheduling contractors can be like herding cats, especially someone doing this on their own. Contractors aren’t loyal to them as far as scheduling. You’ll schedule things six to eight weeks in advance of when they’ll actually be there. But then something goes wrong or someone doesn’t show up when they’re supposed to and you have to reschedule everybody all over again,” remarked Shawn. “A general contractor usually has contractors at his disposal and can move them from job to job. The scheduling will be the hardest part of acting as an owner/general contractor. But there’s also all the paperwork that goes with it to ensure your contractors are putting in what you want installed or the specifications you want and they’re billing you properly. Then there’s all the permits and inspections that must be done. You miss an inspection, and it becomes extremely costly.”

If you want to take on this type of project, Shawn does point to a few positives for being your own general contractor. He estimates savings would be more along the lines of 5 perent to 10 percent of the actual cost of the home construction, rather than those 20 percent to 25 percent figures. Don’t count the final price of a home as your base for savings because it includes the cost of the land and real estate and other fees. Ensure you’re looking at the right figure to determine potential savings. He also highlights the flexibility that an owner/general contractor can enjoy. You can do what you want with floorplans or layout, rather than being hemmed into a predetermined plan. If you do an exceptional job of putting all of the pieces together, you might save some money.

If you’re still feeling undaunted and that this is the opportunity for you, Shawn suggests you purchase your home plan first or have it drawn and then bid it out to the specifications you want. Then you’ll be able to see the potential savings before you make this huge commitment.

You need to think through whether these potential dollars are really worth your time and trouble. In a planned community, the developer may not allow you to be the general contractor. Only pre-selected builders can construct homes in this area. Also, set your expectations for savings at a realistic number, and don’t forget to budget 1 percent to 1 1/2 percent of the total cost just in case something goes wrong and needs correction. This comes out of your pocket. Could you really save 20 percent to 25 percent off the cost of construction by taking on the role of owner/general contractor? In some parts of the country you might, but you’re investing considerable time and resources to realize the end result of a new home.

When it comes to building your own home, you can find owner construction success stories, and you can discover the nightmares that explode during the process. Do your background work, research, establish contacts and review all the facts with the right frame of mind. Then, make the call: become an owner/general contractor or work with an already established general contractor. ■