How to Select the Right Home Builder

‍

Building a home is one of the most significant investments you'll ever make, and choosing the right home builder is crucial to ensure that your vision becomes a reality. Before diving into the world of home construction, it's essential to understand the types of home builders and what they bring to the table. Home builders generally fall into three categories: custom home builders, tract home builders, and community home builders. Understanding these categories will help you select a builder that fits your needs and goals. But first, let's address an important point: not all home builders know who they are or what they specialize in. This identity crisis can affect your building experience, so knowing what to look for is key.

‍

Beware of Home Builders with an Identity Crisis

‍

Much like people, home builders go through phases of self-discovery. In their early years, many builders try to be everything to everyone, taking on any project that comes their way. This ambition, while admirable, often leads to a lack of focus and a scattergun approach that can compromise the quality and consistency of their work. As builders mature and gain experience, they typically find their niche and excel within it. Your job as a prospective home buyer is to identify whether the builder you’re considering has a clear sense of identity and specializes in the type of home you want to build and steer clear of home builders with an identity crisis.

‍

Understanding the Three Categories of Home Builders

‍

1. Custom Home Builders

‍

Custom home builders are the artisans of the home-building world. They take on fewer projects each year but focus on delivering highly personalized and bespoke homes. Their staffing is geared toward managing unique, boutique requests and complex projects. If you want a cigar room with custom humidity control or a lakefront property with a private dock, a custom home builder is your best bet. They employ a team of specialized tradespeople and maintain strong relationships with vendors who can deliver unique materials and features. However, this level of customization comes with a longer build cycle and higher costs.

‍

2. Tract Home Builders

‍

On the opposite end of the spectrum are tract home builders, also known as spec home builders. These builders focus on volume and efficiency, producing homes quickly and at a lower cost. They typically offer limited design options and little to no customization. The focus here is on consistency and speed, partnering with trades who can build homes rapidly and economically. Bulk purchasing and streamlined processes help keep costs down, but the trade-off is a lack of personalization. If you're looking for an affordable, move-in-ready home without the need for custom features, a tract home builder might be the right choice.

‍

3. Community Home Builders

‍

Community home builders strike a balance between the bespoke nature of custom builders and the efficiency of tract builders. They offer a range of pre-designed floor plans with various architectural options, allowing for some degree of customization while maintaining consistency and cost-effectiveness. Their staffing is a blend of design and purchasing expertise, enabling them to bulk purchase materials while offering personalized choices through a structured selection process. Community home builders are ideal for those who want a customized home experience without the lengthy build times and high costs associated with custom builders. Community builders, such as Greentech Homes, strive to produce an experience beyond the sticks and bricks of construction.

‍

Investment of Time and Energy During the Custom Build

‍

When building a home, it can drain your focus and energy, and it can be a distraction with life’s many other important things that you're juggling, whether it be your kids, your job, getting married, traveling, or other daily activities. A lot of people don't factor in the time invested in building a house and the stress that can come from it.

‍

1. Custom Home Builders

The custom home building process requires a lot more intentional investment over a longer period of time. Yes, the product is going to be extremely boutique and very unique, exactly the way you want it, but it will come at a cost of time and energy. The time and energy span over a long period, often anywhere from 18 to 36 months to build. Because of that experience, you can't assemble those custom selections and opportunities all in one studio. Normally, you're running between tile vendors, flooring vendors, meeting with custom closet companies, and making various selections. It requires a lot of investment in time and energy, but the return can be very unique and special.

‍

2. Tract Home Builders

‍

There is practically no time invested in the process because the customization has been completely removed. The autonomy is minimal, and the only time invested is for you to walk through the house and decide if it's something you want to live in. The time invested is practically nothing, no different than if you were buying a resale home. However, the compromise is that your selections and autonomy are nonexistent.

‍

3. Community Home Builders

‍

The community home building process factors in efficiency with autonomy and customization opportunities. Everything has been pre-vetted, so in one meeting, you can select between floor plans and options that are all prepared for visualization. Architectural options are decided within hours of a meeting, and design elements are selected in one design meeting within a studio. The community home builder has gathered all selections and samples in one location for you to choose from, creating a highly customized experience with very little time invested. The build cycle usually spans five to six months, and the walkthroughs are structured to minimize the time and energy you need to invest. This strikes a balance between giving you maximum autonomy while allowing you to afford more time and energy for other important aspects of life.

‍

Financial Dynamics: Risk and Investment

‍

The financial requirements and risks vary significantly between custom home builders, tract home builders, and community home builders. Here’s what you need to know about the financial aspects of each:

‍

1. Custom Home Builders: The Cost Plus Model

‍

• Upfront Capital: Buyers must purchase and own the lot on which their custom home will be built. This requires substantial upfront capital.

• Construction Loan: Buyers usually need to secure a construction loan to finance the build. This type of loan allows forperiodic draws to be made to the builder as work progresses.

• Cost Plus: The builder charges the cost of the build plus a margin, commonly known as the "cost plus" model. This margin can range from 20% to 40%, depending on the builder.

• Risk Allocation: The financial risk primarily falls on the buyer since the custom nature of the build means it’s tailored to their specific needs and not easily resalable to others.

‍

The cost plus model ensures that the buyer has complete control over the design and customization of their home, but it requires a higher financial commitment and carries more risk.

‍

2. Tract Home Builders: Low Financial Entry

‍

Minimal Upfront Costs: Buyers do not need to purchase the lot or secure a construction loan. They simply buy the home once it is complete.

• Purchase at Completion: Financing is typically arranged at the time of purchase, either through a conventional mortgage or cash payment.

• Low Deposits: If any deposits are required, they are usually minimal.

• Builder's Risk: The financial risk is borne by the builder, as they finance the construction and hope to sell the completed home.

‍

This model is ideal for buyers looking for a quick, hassle-free purchase without the need for customization, providing an affordable entry into homeownership.

‍

3. Community Home Builders: Balanced Financial Approach

‍

• Moderate Deposits: Buyers usually need to make a higher initial deposit (typically 5% to 10%), which is non-refundable but applied toward the down payment or closing costs at completion.

• No Construction Loan: Unlike custom builds, buyers do not need a construction loan. They secure a conventional mortgage or pay cash at closing.

• Curated Customization: Buyers can choose from pre-vetted design options and architectural features, allowing for some level of personalization without the extensive financial burden of a custom build.

• Shared Risk: The financial risk is somewhat shared between the builder and the buyer. While the buyer’s deposit secures their commitment, the builder still carries the construction costs until the home is completed and sold.

‍

This approach offers a convenient way for buyers to personalize their homes while managing financial outlays more efficiently, making it suitable for those who need to sell an existing home or are relocating.

‍

Expectations and Warranty: Building Trust and Ensuring Quality

‍

When building a house, you're piecing together hundreds of selections and working with dozens of contractors. You need to ensure that both the materials and the craftsmanship stand the test of time. If there is any breakdown in either a product or installation, it should be remedied and resolved. This sounds simple in theory but can become complex without the right builder.

‍

Choosing a builder who stands behind their work with solid warranties and who maintains strong relationships with reliable contractors and vendors is crucial. Here’s how the warranty and expectation landscape varies across different types of home builders:

‍

1. Custom Home Builders: High Customization, Variable Warranties

‍

• Established Network: Custom home builders usually have a network of trusted trades and vendors who offer warranties on their work. This ensures that the materials and craftsmanship meet high standards.

• Boutique Risks: If you request highly specialized or rare items, these might fall outside the usual network and might not be warrantied. This increases the risk that the product might not meet your expectations or last as long as you hope.

• Complex Installations: Custom builds can involve complex, unvetted designs, leading to potential performance issues that fall on the buyer to resolve. While the builder will correct issues, the cost often falls on the buyer if the problem stems from unique, non-standard requests.

‍

2. Tract Home Builders: Efficiency Over Quality

‍

• Cost-Driven Choices. Tract builders prioritize cost and speed, often choosing the lowest-priced materials and contractors. This can lead to lower overall quality and shorter lifespans for installed products.

• Changing Vendors: The focus on cost can lead to frequent changes in vendors, disrupting relationships and potentially compromising the quality and consistency of work. This makes it harder to manage warranties and follow up on issues.

• Basic Warranties: While warranties are provided, they might not cover the same quality or extent as those from custom or community builders due to the lower grade of materials and trades used.

‍

3. Community Home Builders: Balanced Quality and Reliability

‍

• Pre-Vetted Selections: Community builders offer a range of pre-vetted design options that have been tested for quality and reliability. This ensures that the materials and installations are consistent and durable.

• Stable Vendor Relationships: These builders maintain stable relationships with their vendors and trades, ensuring better quality control and reliable warranties. This stability translates to fewer issues and more efficient resolution if problems arise.

• Trusted Systems: Community builders leverage their experience to pre-select options that balance aesthetic appeal, performance, and ease of installation, reducing the risk of warranty issues and enhancing overall satisfaction.

‍

Resale and Investment: The Future Value of Your New Build

‍

When selecting a home builder, it's crucial to consider not just the immediate benefits but also the long-term resale value and investment potential of your home. While a new home can be an attractive proposition, not all new builds will offer the same returns in terms of equity and resale. Many home buyers focus on customization for their current needs, often overlooking how these choices might impact future resale value. While it's important to create a home that suits your lifestyle, it's equally vital to consider how your investment will hold up over time.

‍

1. Custom Home Builders: High Risk

‍

Custom homes are tailored to the original buyer's specific tastes and needs, often resulting in unique features that may not appeal to the broader market. While these homes can be a joy to live in, their highly personalized nature can sometimes hinder resale value. For instance, a highly customized bonus room with niche features might not resonate with future buyers, making it a harder sell. Real estate professionals often encounter custom homes with overly specific designs that can deter potential buyers. Although investing in a custom home can lead to a beautiful and unique living space, it may not always translate into a higher resale value. Custom homes tend to perform better when the customizations are broadly appealing, such as spacious garages, mother-in-law suites, or high-quality finishes that many buyers desire.

‍

2. Tract Home Builders: Affordable but Limited Appeal

‍

Tract homes, built for volume and efficiency, offer lower upfront costs but often at the expense of quality and uniqueness. These homes are typically found in cookie-cutter communities where properties look very similar, which can reduce curb appeal and make them less attractive to future buyers. Additionally, the lower-quality materials and construction methods used to keep costs down can lead to quicker deterioration, further diminishing resale value. While tract homes provide an affordable entry into homeownership, they are less likely to yield significant returns on investment due to their uniformity and potential for rapid wear and tear.

‍

3. Community Home Builders: Balanced and Attractive Investment

‍

Community home builders offer a middle ground, combining the benefits of customization with cost-effective construction and appealing design. These builders create cohesive communities with well-planned amenities, enhancing curb appeal and overall desirability. Homes built by community builders often feature popularized design options that appeal to a wide range of buyers, such as covered decks, high-quality bathrooms, fireplaces, and additional garage spaces. These pre-vetted options are chosen for their broad appeal and quality, ensuring that the home remains attractive to future buyers. The comprehensive design and cohesive aesthetic of these communities often lead to better resale value and investment potential. The masterful design of the community and the thoughtful inclusion of amenities can make these homes stand out in the market, maximizing their resale value and ensuring a good return on investment.

‍

In summary, when choosing a home builder, it's important to balance your current desires with future resale and investment potential. Custom homes offer high personalization but can be risky in terms of resale value. Tract homes are affordable but may lack long-term appeal and durability. Community home builders provide a balanced approach, offering quality, appealing design options, and cohesive community planning that enhance both the living experience and investment potential. By considering these factors, you can make an informed decision that ensures your home not only meets your needs today but also holds its value and appeal in the future.