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  • Andres Betancur

Why The "Expensive Bid" Often Saves You Money

One interesting reality about construction is how homeowners often act against their own self-interest in an effort to “save” money. For many people in the home-building process money is a stressful variable that oftentimes escapes their control and budget paramet

New construction house sitting on a hill being framed with roof still incomplete.
New Home Framework

ers. In an effort to save money, homeowners often choose their builder or general contractor based on an initial bid and wonderful flowing words of a beautiful future in a new home that will forever reside under a full rainbow… LOL. The reality is that the cheapest bids rarely stay cheap. These bids tend to fluctuate and swell throughout the building process while the design of the house and interior selections evolve into something that the homeowner never envisioned or wanted before the build began.


Below are a few ways that initial bids can balloon in price and some reasons why this might happen:


1. Lack of Work + Desperation: Builder “Needs” Work


While this is not the most pleasant of explanations, at times within the construction industry, people need work and present low-ball numbers in hopes of securing the job. This might not be completely conscious or malicious in intent, but desperation can allow a builder to “over-promise” on what they are able to build given a particular budget.


At the beginning of a project, a builder might be willing to earn a smaller percentage of profit and commit to a certain price. Then, throughout your project they are able to acquire more projects and become resentful of the “low” wage (that they agreed to work for). At this point in the build “completion of project” might become more pressing than “quality of project” which consequently has a negative effect on the structure and the homeowner.


While not always true, this section might also be characterized as “lack of character.” Builders with strong character often have strong connections within the industry and consistently produce quality projects which attract more business in the future. If you receive a bid that is considerably lower than another bid, it is quite probable that the finished products will not be congruent.


2. Lack of Foresight & Cushion: Builder cannot see complications of the project

Receiving a “cheap” bid from a builder doesn’t necessarily mean that they are presenting greater value for their service – it might just mean that they missed something when looking at the scope of work for your project. Building a home involves thousands of variables, many of which are not fixed and not under the complete control of the builder.


Starting in the year 2020 material costs and construction prices have seen huge fluctuations and volatility. Receiving a cheap bid might mean that a builder is not aware of an increased material cost. If you choose a bid based on inaccurate price, the consequences can derail the entire project and change your satisfaction with the final product.


Mistakes and errors occur on jobsites with regularity. A low-ball bid does not afford the builder any economic lubrication to absorb mistakes or allow for minor changes to design midway through the build.


A builder who prices in mistakes and design changes prior to the start of the build is able to better adjust to the daily demands of the jobsite. This cushion built into the budget of the build from the onset allows for a more pleasant experience with regard to design changes and minor setbacks throughout the journey.



3. Lack of Relationships: Builder does not have network of strong subcontractors

The construction industry is “built” on relationships. Every project involves levels of people who work together to solve problems. Patterns and routines exist, but builders and crews are required to be real time problem-solvers every day. While money is mostly considered to be constraint #1 for a project, time is constraint #2.


A builder with an established stable of subcontractors already has practice working together to help solve the constraints of money and time with those crews. Both parties have a working relationship and communication is often smoother and more efficient as hurdles manifest on the jobsite. Just like a good builder typically earns more money than a poor builder, good subs charge more money than poor subs… And furthermore, with better builders and labor there are fewer mistakes and setbacks.


One possible reason for a bid from a builder to come in “cheaper” is that their subcontractors are not of the same quality as subcontractors from other bids. With less quality and less experience come a greater risk of error and setbacks throughout the project. Without a history of working together across many projects it is possible that the builder and subcontractor are miscommunicating about the realities of the project being bid on.


Home Builders – general contractors – do not actually build your home, their job is to connect all of the different crews and align their work into one cohesive project. It is rare that a house built by all of the cheapest bids is the actual house that you want to live in over time.


4. Lack of Hearing: Builder does not listen to the true desires of the homeowner


Is the bid cheap because your builder has not listened to what you actually want to build? Does the end-product reality of what you want to build actually cost $100,000+ more than what the builder is trying to build? What variables do you want?:

  • Extra wide driveway & sidewalks? (+ concrete)

  • More covered porch space? (+ roof coverage & concrete)

  • Customized closet & pantry shelving (+ carpentry work)

  • Specialty wiring & conduit for your tech (+ electrician work)

  • Etc. etc. etc.

Added customization to your home increases complexity and increases demand on the homebuilder to ensure the subcontractors execute properly. Deviating away from standard increases the demand on the builder’s focus and communication.


Is the builder providing a cheaper bid because they are not interested in building the caliber of home that you desire? Do they hear you clearly? Do they understand what you want and the intensity of your desire?



5. Lack of Details: Builder does not account for upgrades and finishing details


Similar to the previous sections, the idea of “DETAILS” is open to interpretation and can differ from homeowner to homeowner – from builder to builder. The greater level of detail a builder is able to understand the project, the more accurate their bid will become. What exact style of wood trim do you want? What grade appliances are desired? What type of countertops? What size mirrors in the bathrooms? … etc. etc. etc.


It is the job of a builder to pull the desires and expectations of a homeowner to an explicit level of understanding. What is “understood” to the homeowner is oftentimes quite different from what is “understood” to the builder. The idea of “standard” has the potential to vary from person to person and vary based on the overall cost of the home.


If a bid seems cheap or low compared to other bids it is quite possible that the builder is missing key details that the homeowner expects in the final product.



Conclusion


When construction bids are submitted to a homeowner the price can be misleading. In many ways, the builder who submits the “expensive” bid often becomes the builder who delivers the most accurate product and holds true from the beginning to the end and end from the beginning. Their professionalism can manifest throughout the project and deliver a smooth and enjoyable build experience.


When building a new house and deciding to spend between $300,000-$800,000 it is important to consider the price or cost of “experience.” It can be common for people to “save” thousands of dollars selecting cheaper bids in the beginning only to blow completely past their budgets by the end of the build. Money becomes a point of contention, compromises are made throughout the process, and animosity grows between the homeowner and the builder…. What is the “value” and price that should be given to the experience of the building process throughout?


Southern Oak Custom Homes believes in providing detailed honest bids that accurately project the turnkey cost of building your home. We stand by our word and we aim to deliver the best build experience in the industry.



Southern Oak Custom Homes

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