As a real estate professional I’m asked quite a lot for names of local custom homebuilders. I always thought I was pretty savvy about builders and home construction having spent many years managing large commercial build-outs in the NYC, but I have to tell you I’ve been a bit humbled by a recent project of mine, and thought I would share some important lessons learned. Let's be honest: Custom homebuilders don't always have the best of reputations even amongst the most knowledgeable of real estate buyers. That's why so many people approach the idea of having their own home custom built with apprehension, and downright fear. To me choosing a builder is the single most important decision in the custom home-building process. Choosing the right builder early in the process is essential for a successful home-building experience. Building a home can be a complex process, and one that benefits from having professional guidance from the very beginning to avoid mistakes in site selection, home design and written specifications. So choose early and choose wisely. Builders contend that the budget shouldn't be among the top criteria in the builder selection process, and to be fair no builder worth their salt can accurately quote a price for a custom or semi-custom home until he or she knows the type, style, features and finishes of the home, the site conditions and the type of contract you want for construction. Rather than focusing on cost alone, you should really base your decision on the builder's competence, reputation, professionalism, financial solvency, warranty coverage and experience. The following is a list of what I think are the most important criteria to consider when choosing a custom builder: Reputation / References Look for an established builder with an extensive client list, and by all means personally speak with as many past and current customers as possible. If for whatever reason the builder cannot provide you with a list, or is hesitating you should consider this a red flag. Ask their clients specific questions regarding how the builders handled change orders, did they keep proper and timely accounting of overages / credits, what was their accessibility and communication with the builders, was there a project manager on site every day, overall quality of work, how well did they supervise their subcontractors, did they complete the project on time, and any warranty issues which may have arisen. Experience / Training In the State of South Carolina Residential Home builders are required to hold a license issued by the State. Check the following website for confirmation that their license is active as well as checking to see if there have been any complaints made against them. http://www.llr.state.sc.us/POL/ResidentialBuilders/. One such builder I was investigating had been removed from the list because they had failed to supply the State with the proper information needed to renew their license. That should give you some insight into how they do business – if they can’t renew their license something is up. Financial stability Make sure the building company you select is financially viable. One way you may want to check into this is by researching tax records. Have they kept current on tax payments for properties they have either built as spec homes, or custom home projects they are currently building? One recent inquiry I made into a local builder revealed that they had 5 homes with Tax Liens on them. If you encounter a similar scenario with a builder you are considering I would take this as a clear sign there is something very wrong with their financial stability, and eliminate them from consideration. Financial strength Success in the home-building business is earned by building a quality product at a fair price. A builder who is financially successful will also be the most likely to still be in business during the warranty period on your new home, which is very important. Additionally, successful builders are in the best position to obtain the services of top subcontractors and suppliers in the area who are the real people who will actually build your home. Builders who run through subcontractors are most likely unable to hold onto the top subs due to either poor payment practices or even worse not paying at all. The builders will be forced to use whatever subcontractors they can find which typically will be the untested or the bottom of the barrel, neither of which you want building your custom home. Believe me it will come back to bite you during the inspection process. If you have access to an attorney I would ask if they could check on whether the builder you’re considering has ever had a mechanics lien filed against them or on a property they have built. Pay close attention to anything recent. If they have, this would be another red flag, and I would seriously consider striking them from the list immediately. Type of home Select a builder who has extensive experience constructing homes in your price range and general design style. I have found that most builders don’t have the first clue about emerging trends or new materials, and are very slow to embrace anything new. They tend to rely on what they’ve done in the past no matter how outmoded it may be. You need a builder who is constantly learning and looking for new ways to build better and smarter. I tend to adhere to the concept that if you want to build lets say a modern house with clean lines you should seek out custom homebuilders who specialize in that style of home. One great way to find compatible builders and architects is by perusing the pages of your local home design magazine. My local favorite is Charleston Home (http://www.charlestonhomemag.com/). I’ve got quite a nice stack of clippings of prospective architects and builders for my next project. Compatibility Building a home is a highly personal and emotional experience. That's why you'll want to choose a builder with whom you feel comfortable. You also need to know that they are going to be open to your thoughts and concerns throughout construction. Make sure you meet them a few times to get a more accurate sense of who they are, and if you are indeed compatible. One of the times you meet, you may want them to take you to one of their supplier’s showrooms such as the kitchen cabinet supplier. Not only will you meet the people they regularly do business with but you will also see how they interact with you in different settings. Don’t forget, the building process can take up to a year depending on the scope of the project, and you need to make sure you’ll be on speaking terms throughout the entire process. There is nothing worse for a construction project than lack of communication. Contracts You can tell a lot about a builder by the type of contract they write. Don’t get me started! I could write another blog dedicated to construction contract pitfalls so I’ll try to keep it simple. Allowances, Allowances, Allowances! Please pay very close attention to all allowances figures in the builder’s budget proposal. Before you sign anything please do your homework! Builders are notorious for putting in low allowance figures in the hope that you will have to pay them significant overage charges to get the type of fixtures / features you want. It’s just another way for them to increase their profits. Your mortgage company typically pays the builder the amount the builder tells them this line item will cost. During my research one builder was getting over $13K from the mortgage company for an allowance item of $5K for an instant profit of $8K. When the client went over the allowance amount by $7K the builder charged the client the difference bringing the builders profit on this one line item alone to over $15K. Let’s take appliances as an example. A builder proposes an allowance of $5,000 for kitchen appliances. Unless you do your homework and go out to an appliance store and really get a sense of what brand and models you are considering putting into your kitchen you will never now how far off base this figure can get. Yes, you may be able to get a GE Profile package for this amount but most people who are building a custom home want appliances that not only look good but perform as well. Further, if you intend on getting anything bordering a professional line such as Viking, Wolf or Thermador your $5,000 appliance budget will not even cover 1/3 of the cost. Once you have done your research you will have a clearer understanding of what it’s really going to cost, and therefore can negotiate with the builder to adjust the allowance amount. The same research should be done for each allowance item such as bathroom fixtures, lighting, countertops etc. Builders are counting on you not to know what the true costs related to these items are so knowledge is power. Warranty The builder should be willing and able to offer you a comprehensive written warranty on your new home, which spans at least 5 years. Beyond the factors I have listed above, the most important consideration is the quality of the builder's homes. Cost is not a direct gauge of quality. Rather, good quality is the union of good design with products and materials that are installed with superior workmanship. The most expensive window might not look any better than a substantially less expensive window. But improper installation of that window will diminish its quality, regardless of its cost. More often than not, costly finishes and fixtures won't be able to offset shoddy installation or application. I hope these insights help you as you navigate the treacherous road of custom home building. As the saying goes what doesn’t kill you only makes you stronger, and right now I’m feeling pretty much like the Terminator.