Part 14- How To Have A Successful Custom Home Building Experience

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Part 14- How To Have A Successful Custom Home Building Experience 

 

From The Builder’s Perspective. 

Timely Payments. One of the reasons the Owner’s received such a great deal on the price of their home is because they are providing the financing for the project instead of the Builder. In other words, the Builder in not going into his pocket to fund the construction of your home he is using the Owner’s money. The project is being funded by your bank in the form of a progress draw or the Owners are providing periodic draw payments to the Builder from their own reserves. It’s understood that when the Custom Home Builder is constructing your dream home, the funds for the homes progress will be delivered seamlessly as various activity points are met i.e. slab poured, trusses set, appliances installed. Custom Home Builders have lots of money moving through their checking accounts. If they have two or three, $500,000-$1,000,000+ homes going at the same time they may have hundreds of thousands of dollars in their checking accounts. Unfortunately, for the Builder, that situation is only temporary. All the suppliers expect to be paid on the 10th of the month following the purchase of materials and subcontractors on the 10th and 25th of every month, like clock work. In many cases, that may only be a few days after completing their work. Depending upon the subcontractor trade, they may also be paid weekly progress payments (draws) if they have a large crew working on the Owner’s job. The subcontractors are depending upon a paycheck so they can feed their families. Timely payments from the financial institution or the Owners is critical to the progress of the home. Many trades, decide which job to work on this week depending upon the Builder’s payout schedule. If he is not scheduled to make a payout or he is unreliable in making payments, the subcontractor pulls off that job and works on another where the Builder is more dependable. That’s just how the homebuilding world works. The Builder that manages his cash flow properly keeps his houses on schedule and his workers happy.

Change orders, basically work the same way. The Builder in many instances is paying the vendors in advance for the change and waiting for your payment to replenish his checking account. The bottom line, it’s a bad idea to be a slow paying Owner if you want your home to be delivered on time.

Have an awesome day!

 

Mike