Don's Blog
Don's Blog

Don's Blog

Construction Problems

by Don Hannah on 01/13/11

My name is Don Hannah, and I have been in both the commercial and residential building industry for over 33 years.  I was licensed as a General Building Contractor in San Francisco, California in 1977.  I am currently doing business as a construction consultant in Phoenix, Arizona.  I am also an accredited mediation and arbitration neutral for a national company named Construction Dispute Resolution Services (CDRS).  I am the State Director for CDRS, and I perform professional mediations and arbitrations for construction disputes in Arizona.

The combination of both my professional building and construction dispute resolution experience has provided me with a unique perspective on construction and why problems arise during construction.  In residential construction the main reason a construction dispute surfaces is because some aspect of the project was not set up or completed properly during the initial set-up of the project - before any building started.  It has been my experience that most builders do not understand this nor want to take responsibility for it, but it is true just the same.
 
The most prevalent type of dispute that arises is when the General Contractor, Architect or Owner believes one of the Subcontractors has not performed their work up to proper standards or their expectations.  In addition the Subcontractor refuses to correct the problem even though they have been requested to do so.  On the surface this may not appear to be a problem that started from a mistake in the initial set up of the project.   But, it is exactly where the problem originated.

If you do not know where construction problems really originate it is difficult to avoid them.  It is my hope you will find my honesty and candor not only helpful, but profitable, especially if you are considering building your own project.  I also want to encourage and empower potential new home owners to feel confident they can successfully build their own new home or remodeling project while saving thousands of dollars in the process.

My next blog post will address the issue of building your new dream home or remodeling project yourself or whether you should hire a General Building Contractor to do it for you.

Should I Build My New Home or Remodeling Project Myself

by Don Hannah on 11/04/10

Many people question weather they should build their new dream home or remodeling project themselves or whether they should hire a General Contractor to do it for them.  This question does not have a simple black or white answer and depends on your specific circumstances.  I have found that the best answer is found in some shade of grey between the two extremes.

On the build it yourself side there are many tens of thousands of very good reasons (dollars) why you should build your own home or remodel.  Acting as your own General Building Contractor can save you the 15-20% overhead and profit a General Building Contractor must charge to build your home.  This savings is no small chuck of change!  For example, if your home is going to cost $400,000 to build, 15% of that amount is $60,000.  But, to save this money you have to build your construction project yourself.
      
As a result of my 35 years of both General Contracting and Construction Arbitration experience I have a unique perspective from having seen exactly what causes construction problems and exactly when they start.  What I learned is almost all construction problems start before any building is ever even started because they are caused by some aspect of the project being set up, priced, or contracted out improperly in the pre-construction phase of the project.  If a construction project has been set up properly from the start without any steps left out or done improperly, that project almost always is completed on time, on budget, with good quality, and dispute free!!! 

Some people argue that construction is primarily a management task and can be done by anyone with good general management skills.  But construction is a quite complex management task requiring a thorough knowledge of construction which takes time to learn.  Successful building requires an in depth knowledge of construction estimating, construction bidding, subcontractor bid contracts, accounting systems, construction lending, scheduling, building codes, subcontractor communication, trade knowledge, safety, quality standards and practices, and a lot of  hard learned lessons.  So, unless you truly have an in depth knowledge of construction you would be going into a very complex task almost completely blind.  So ask yourself the question: Do I really have the construction knowledge to properly set up and successfully complete a construction project by myself?

But again, the answer to this question is best found in some shade of grey.  Meaning you can build your own home or remodeling project, act as your own Building Contractor, and save many thousands of dollars.  But you must get professional building advice in the beginning to set up, price, and contract out your project correctly.  And you need to have professional construction advice available during the building process.  Even with a well set up project construction issues will arise.  An honest, experienced, and competent Construction Consultant can set your project up correctly and professionally from the start, save you many thousands of dollars, be available for issues that arise, and help you successfully complete your new dream home.

Perhaps you are still wondering exactly how you can save the many thousands of dollars I keep speaking about.  The answer is seen with simple arithmetic.  The amount I charge for my construction consulting services is small by comparison to the amount a General Building Contractor must charge for their services.  If a General Building Contractor has to charge you $60,000 or more, and I only charge $15,000, then you save $45,000 or more.

So, yes, build your own home, but hire the professional help you need right at the start.  When you have your project set up correctly, priced properly, and contracted out effectively you can relax and enjoy building your home.  You will have the confidence that comes from knowing there won't be any large financial surprises, and no matter what "minor problems" may arise you have an experienced Construction Consultant to help right at your fingertips.

Developing Building Plans Within Your Budget - Step 2

by Don Hannah on 09/06/10

Now that you have a realistic construction budget the next step is to develop building plans that are within your construction budget.  The term building plans as I am using it here has two parts.  The first part is a set of conceptual drawings which consist of the floor plans and exterior elevations of the home.  The exterior elevations are drawings of what your home will look like as if you were standing outside your home looking at it.  They show the homes style, type and character.  They show what type and size of windows, siding, roof, trim, porches, etc. you have.  The second part is the construction drawings.  Construction drawings take your conceptual drawings and apply them to your specific lot, and show all the details which make your plans ready to submit to your local Building Department for a permit.

To be able to make an estimate of the cost of your home you only need to develop your conceptual plans.  Developing your construction drawings comes at a later time.  There are two ways to develop your conceptual home plans.  The first is to find already drawn plans either in books or on the internet.  There are literally thousands of home plans available for literally almost any style and size of home.  The second is to hire an architect to draw it for you.  I do not recommend hiring an architect unless you want a very expensive custom home ($2 million or more) which is also quite an unusual design.

A very common misunderstanding is that you will get a more beautiful home design by hiring an architect.  The truth is most residential architects are a time a dozen, and you probably won’t get plans that are even as good as you will get from a book or over the internet.  In addition, I guarantee you will pay considerably more, and by considerably more I mean many thousands more.  It is not uncommon for an architect to charge anywhere from 1 to 4% for conceptual drawings of your home.  If you do the math; 1% of $400,000 is $4,000 and 4% is $16,000. 

Conceptual plans gotten from a book or over the internet are drastically less expensive.  You can easily get a set of conceptual drawings which include floor plans and exterior elevations for less than $1,000.  These plans are much safer because you will know exactly what you are going to get.  You have the ability to look them over thoroughly before you buy them.  When hiring an architect you will have to pay him or her upfront to interpret correctly what you told him you wanted and to then draw what you wanted accordingly.  It has been my experience more times than not architects do not interpret what you wanted correctly and draw a home you are not crazy about or they significantly over draw it.  By overdraw it, I mean they draw a home that costs twice what your budget allows.  The home may be nice, but you cannot afford it!

You may find it hard to believe, but the above mentioned problems with residential architects are the rule rather than the exception.  And to add insult to injury, almost all architects will insist you sign their contract, which makes you responsible for everything and them not responsible for anything.  Over the years I have seen a tremendous amount of unprofessional behavior from residential architects, and many times they are the cause of a project getting set up improperly right from the start.  I am not saying there are not any good architects.  There are a few.  But even the few need to be properly controlled and guided by you.

It is important to note the fee an architect will charge for conceptual plans does not include a set of construction drawings or the additional service of getting your plans approved by your local Building Department.  All architects will charge you an additional fee to produce construction drawings and to guarantee your plans will be approved by your local Building Department.  You cannot build your home without construction drawings and a building permit.  I will explain how to hire an architect for a full set of construction drawings and approved plans in another blog post. 

Now we are ready to start the estimating process.  Take the conceptual set of plans (floor plans and exterior elevations only) you have found and as a rough starting place use $100 per square foot regardless of the size or level of luxuries you want in your home.  So, if you want a 2,500 square foot home, start with $250,000. 

Please remember you are far from finishing your estimate.  In order to complete your starting estimate you will need to make a large number of decisions.  An example of such a decision is; what type of floor covering do you want in your kitchen?  Do you want ceramic tile, stone tile, hardwood, or linoleum?  Another example will be; what type of siding do you want?  Do you want wood, stucco, brick, stone, or some combination thereof?  As you can easily see the estimate of your home will go up or down significantly depending on the many, many decisions you make regarding the finishes you want in your home.  In addition, this process requires going back and forth between your conceptual plans and your estimate, adjusting one and then the other until both are completed and within your budget.  Neither one can be competed without the other. 

Please remember you cannot estimate your home without going over all the many details of your home first.  This is a process that takes some time and should not be rushed.  Remaining faithful to the process of developing plans within your budget is essential.  It is one of the most important things you will do!

Developing a Realistic Construction Budget - Step 1

by Don Hannah on 08/16/10

Every construction problem involves money!  The saying, money is the root of all evil, could not be truer than in construction.   The problem may be a simple mistake or in the perceived quality of some aspect of the building, but every problem is inevitably an issue over money!  It is an issue of how much is this problem going to cost to fix and who is going to pay for it.
 
So, if you want a problem free construction project, you must set your project up correctly from the start.  By from the start I mean before any construction is started.  By set up correctly I mean developing a realistic construction budget.  In all my building and construction dispute arbitration experience it has been my observation that very few people understand how essential it is to develop a realistic construction budget from the start.
 
In all my years as a General Building Contractor building residential custom homes I have never had or ever even heard about a construction project that did not have cost overruns.  Cost overruns are costs that exceed the original construction budget.  In some cases these overruns were due to completely legitimate homeowner changes, and they were kept down to a workable minimum.  But none the less, there were cost overruns.
 
Cost overruns create problems because every homeowner, regardless of how wealthy they are, has a limit to their budget.  Everyone has a limit to how much they can spend.  Plus, I have never had a homeowner who was not pushing the upper limits of their budget in order to get the home they wanted.  So, if you start out with your budget already at its maximum, then any substantial cost overrun is going to be a problem.  Through my arbitration and building experience I have seen this happen many times.    

So how does one create a realistic budget for their new home?  Firstly, you have to honestly and conservatively look at the maximum amount you either want to spend or can spend on your new home mortgage.  Secondly, it is essential to include all the secondary building costs when developing your building budget.  The following are examples of most, but not all, of the secondary building costs, which must be considered and included:
New mortgage interest rate
Cost of land
Architectural Plan Fees
Building Permit Fees
Increased cost of monthly services for water, electricity, gas, sewer, cable, etc.
Installation cost of new utility service lines in the county
Cost of new well for water if in the county
Cost of new septic system if in the county
Homeowner association dues
Landscaping
Distance from work
New Furnishings - furniture, curtains, blinds, etc.
Moving expenses
Increased Property Taxes

All secondary expenses must be totaled and added to the cost of building the home itself.  It must be from your total cost of construction that you obtain your realistic construction budget.  Once you have your construction budget take a minimum of 15% of it and subtract it from the budget total.  Now you have a realistic construction budget, which will serve you well during construction and after.  And now you are ready for the next step in setting up your project correctly from the start.

DON HANNAH

CONSTRUCTION CONSULTING
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