There are many benefits of working with a qualified, licensed builder when building a new home. It’s safe to say that building a new home – possibly one of the biggest investments you’ll make in your life – is one place that you want to be very careful about cutting corners.
It’s true that the economic downturn has caused just about everyone to look for ways to save money. Whether it’s haggling for the best deal or even coupon clipping, there may be ways to save money with anything you buy.
But what if you are planning to build a home? Should you just go for the best price, even if it involves you building the home yourself as an “owner-builder” or using an unlicensed contractor to run the job? Even though many people are shocked by the estimated costs for constructing a new home, using an unlicensed contractor or taking on the role of an owner-builder just because it’s the “best price” can prove to be both challenging and costly for the owner.
Licensing rules and requirements vary by state, and primarily are designed to protect consumers. In many states contractors must prove that they are qualified to do the work and even may undergo testing, fingerprinting, financial bonding requirements and criminal background checks before they are able to be licensed. States vary as to the extent that general contractors must be licensed, and sometimes licenses only are required for certain specialty trades like electricians and plumbers. Many people debate the value of a license in states with lax (or no) enforcement and low standards, and in some places can rightfully claim that the license basically is a tax.
However, when licensing is a requirement in your state, working with a licensed builder at least can give you some peace of mind by knowing that the builder has been vetted to meet your state’s requirements and is serious about both its profession and its public image. In addition, hiring a licensed contractor sometimes may provide additional protection for you that is not available to those who use an unlicensed contractor. For example, in some states a home owner may file a complaint against their contractor’s license if they have a claim about their home or the consumer may even be eligible to apply for money from a recovery fund that can help them have work corrected or their home completed. To learn more about your state’s licensing requirements for contractors, you can start at this web site.
On the other hand, there are an infinite number of stories about the nightmares of unlicensed “illegal” contractors that fail to build a home properly and just disappear after being paid a down payment. You should ask yourself: Why is this contractor not licensed if it is required in your state? It certainly could be a problem if the builder lost his license for bad acts or otherwise is just willing to skirt legal requirements while building your home.
In addition, being an owner-builder or using an unlicensed contractor can shift much of the responsibility and risk to you as the owner. Indeed you may be sued and personally liable if proper insurance is not in place and there is an accident on the job, and you likely will be taking on a larger role in managing the overall job.
So if you are considering being an owner-builder or saving money by hiring an illegal contractor, think again. Here are some of the benefits that you can expect from having a general contractor (and make it one with a proper license, when required) to supervise the entire project and build your home for you:
- A general contractor will contract with, manage, coordinate and supervise a project that involves multiple trades as subcontractors (and can do so when properly licensed; in some states it is illegal for the builder to contract with you and subcontractors for the job unless licensed);
- Working with a general contractor can save you time, as the job can be handled more efficiently and by someone experienced with construction schedules and awareness of the project’s “critical path” needs;
- An experienced general contractor will have a network of connections that benefit you – whether they are the best subcontractors for the task, or knowing how to reach the inspector quickly so you can keep the project moving;
- You likely will see cost savings with a builder evaluating multiple bids from subcontractors and getting the benefit of discounted contractor rates with suppliers;
- A good, licensed builder is experienced with processing permits and inspections (and a license typically is required for the builder to pull permits in its name), and will know up front what needs to be done to meet code requirements;
- You usually get better construction loan terms and options from banks if you are working with a licensed general contractor;
- A licensed builder should carry all the insurance coverage needed (you still should confirm first for any builder), and will manage insurance coverage by subcontractors too; this means that the builder, not you, will be considered responsible for the risks and liabilities associated with the job;
- A licensed builder can provide a contractual warranty to you for the home and its integrity; plus, commercial home warranty companies typically only provide coverage when the home is built by a licensed builder;
- In general, a quality home built by an experienced contractor should need less maintenance and fewer repairs during its lifetime; a quality home has better resale value and is likely to hold its value longer.
Chances are, hiring an experienced general contractor that is properly licensed can save you a lot of headaches, time and money when building your new home. However, like any licensed profession (whether it’s doctors, lawyers or builders), a license alone does not mean that they will do a quality job and be good at what they do. As we’ve described before there are many things to evaluate when hiring a builder, so you still should do your research, check references and make sure you have seen some of their finished projects in person.
- Checklist for Hiring a Home Builder — (LotNetwork.com)
- Being an Owner-Builder: Should You Build Your Own Home (Literally)? — (LotNetwork.com)
- Choosing Your Builder: Tip #2 for Buying Lots and Land — (LotNetwork.com)