But the supply issue can
make a big difference in what you pay and when. "Supplies
are going to cost a pro less," says Don Sever, general
manager of Sever Construction LLC, in Oakton, Va. In addition,
subcontractors may have their own preferences.
Remember, if your subcontractors are buying
their own supplies, they will probably want some money upfront.
And that leads to another point of frequent debate: when to
pay the subcontractors.
"They don't get paid until the work and the inspection
[are] done," says Heldmann. The one exception: carpentry.
You might pay in stages as the work is completed, he says. "But
I wouldn't pay them the last 30 percent until the inspector
looks at it."
Sever disagrees. For a typical remodeling
job, he gets about 10 percent of the project total, plus the
cost of any special order supplies, when he signs the contract.
The balance is divided into thirds and paid at various phases
of the job.
Finally, pencil in estimates for your subcontractors,
plus any supplies that you are buying, the property cost,
permit fees, construction insurance and legal fees, and you'll
have your first total estimate.
Last but not least: money
Now that you've got some numbers, it's
time to shop for financing. And that could be ticklish.
When it comes to parting with a large sum of
money to build a house, who would you rather back: someone
who's done it a few hundred times already or an amateur doing
it for the first time?
"It's not as tough as it used to be, but
it's tough," says Heldmann, who also heads up Construction
Loan Management Inc., a firm that consults with credit unions
in Michigan on owner-builder financing.
- To reassure your lender, consider
hiring a construction general contractor under a management
contract. For a flat fee (about a third of what a regular
general contractor would make), he will help you out with
permits, hiring, generating a realistic estimate and getting
the project in on time, says Heldmann. For a referral, try
the local home builders association.
- Shop lenders as carefully as you do your
subcontractors. "You have to match the loan to the
lender because they all have different financial goals,"
You also need to choose between getting one
loan for construction and another for your mortgage, or one
loan that would cover both phases. There are advantages and
disadvantages either way you go.
Heldmann recommends separate loans for construction
and final mortgage. The advantage: a construction loan is
by nature more elastic. "You will never bring this house
in at the price you've predetermined," Heldmann says.
"It's never been done. You'll go over by 10 percent,
If you have a combination construction loan
and mortgage, you're locked in on construction costs. That
lack of flexibility might mean you'll have to return to your
bank and take out a second loan with a second set of closing
costs, says Heldmann.
But Woodson believes a combination loan is a
better choice because you are qualifying for both the mortgage
and the construction loan at the beginning, so funding for
both phases is assured no matter what happens later.
Ready, set, build!
When you hire your pros, give them a rough
estimate of when you'll need them. After you have a good idea
of when you really do need them, call with a firmer date,
No matter how organized you are, some glitches
will delay your progress and increase your costs. Figure on
running at least 10 percent over budget, according to several
When he built his first house in 1972, Heldmann
admits that his biggest mistake was "not hiring good
"I had everything go wrong that could go
wrong, including subs going bankrupt and not showing up,"
Bottom line: When you act as your own general
contractor, there are no guarantees. And no matter how carefully
you shop, things can and do go wrong. Subcontractors disappear.
The price of materials goes up. A company you've paid in advance
folds. And then there's the weather.
There can be complications on your side, too,
from changing financial situations to changing careers.
So why do it?
The chance to save some money, the opportunity
to get exactly what you want and "the joy of doing it,"
says Irwin. "You really get a sense of accomplishing
something. Everyone should do it just once in their life."
Dana Dratch is a
freelance writer based in Atlanta.