How do you choose a home builder?

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Answered by: Karl, An Expert in the Design and Build Category
Because building a new home is the single largest investment you are likely to make in your lifetime, conducting thorough research to find the right home builder is critical to preventing your dream home from turning into a nightmare.

A logical starting point is word-of-mouth. Do you know anyone who has recently had a home built? What were their experiences? How did they choose a home builder? You can also check with your local home improvement store or talk to people attending builder shows or open houses. Also look around the area in which you want to build for developments that contain housing similar to the type you want. Other sources are local home builder associations or even online or printed telephone directories.

These steps should provide you with a fairly lengthy list from which to choose a home builder. But this is only the beginning. Start weeding out builders by checking for complaints with the Better Business Bureau, your state attorney general's consumer complaints division and with any local government consumer protection/complaint agencies. Finally, check with appropriate state or local authorities to be sure the builder has met up-to-date licensing requirements.

By now you should have a more manageable list from which to ultimately choose a home builder.

Begin contacting the builders on your list. Start with a brief phone interview to describe the scope of your project and to determine whether the builder in equipped to and interested in handling it. Schedule a face-to-face meeting, preferably at the builder's place of business to give you an idea of the company's professional "face."

Be prepared for your meeting. Write down details of what you expect from your project, including the number of rooms, the approximate dimensions, the types of materials to be used, starting and ending times for the job, how you intend to pay for the work and any other factors that are important to you. Being armed with this list will enable you to focus on the key points you want to cover with the builder. You may even want to share the document with the builder's representative to ensure there are no misunderstandings. As you meet with builders, you may alter this list based on what you learn during your discussions.

One of the most important steps you can take is to ask for references. You'll want to contact previous customers and ask them key questions such as:

• was the work completed satisfactorily?

• was it completed on time and on budget?

• were there changes made during construction and how were they handled?

• were there any problems after you moved in and how were they resolved?

• and, of course, would you recommend this builder to a close friend or relative?

You'll also want references from subcontractors and material suppliers. Ask your prospective builder for these, then check with them to ensure they have been paid satisfactorily and on time. This is important in the case of mechanics liens, which suppliers or subcontractors can place on your property for unpaid work or supplies even if you have paid the builder in full.

After you've completed your due-diligence, you're finally approaching the end of your quest to choose a home builder: seek bids.

You should ask for at least three bids. After your discussions with prospective builders, you should have refined your "wish list" and have a good idea of what you want in your new home. Provide details in your request for estimates.

When reviewing the estimates, look for key elements such as:

• the cost and quality of materials—a low bid based on inferior materials is probably no bargain

• total price

• terms of payment—down payment, construction "milestone" payments, final payment

• expected time of completion

• handling of changes, cost overruns and construction delays

All of this should be in writing.

After you choose a home builder based on the estimates and other factors you have considered, you're ready for the most important step: signing the contact.

(We'll cover what to expect in a contract, what to demand and important safeguards in Part II.)

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