In my series of articles about new construction in Tallahassee, I plan on interviewing a custom home builder or two in order to get their view of the market and any good guidance that we can glean.
Yesterday, I spoke with Lenny Brantley of Brantley Custom Homes who has been a custom home builder in Tallahassee for more than 20 years.
I asked him to tell me something that our readers probably do not know, and then to share any insights he might have. What he shared was a whopper!
Custom Home Builder: We Are Scared Of The Market!
Me: Lenny, tell me something our readers don't know about people who build custom homes.
Lenny Brantley: "To start with we are scared of the market, we have seen what happened in the early 2000’s, when banks would give a loan to anyone with a hand that could sign a contract and we went along with it."
Me: Ok, that was surprising. I thought a custom home builder built homes with "other peoples money." Isn't it the speculative builders who are at risk in the market? I mean, what's your exposure Lenny?
Lenny Brantley: "Before the bubble, most of the competing bids that I saw were within a confined range of mine. Some were higher, others lower, but nearly all bids fit into a reasonable range for which I knew the home could be built. But now, with so many experienced builders out of the market, I'm seeing bids coming in from contractors that I don't know. These builders are so new to the market that I've never even heard of them. Most customers don't understand that it only takes $600 to join the builders association, so that can't be used as a 'qualifier.'"
Me: Sounds like you're saying a newly licensed builder shouldn't be a custom home builder?
Lenny Brantley: "No, I don't mean that. Every great custom home builder was new at some point in his or her career. But I'm competing against bids that are so low that I am 100% sure the home that I'm pricing-out could not be built for what others have bid. The builder is either ignorant, or they are doing a bait and switch. Once they get the customer started and the project is underway, they will start springing them with surprises about upgrades and improvements that were not part of the formal bid. It's not like many customers are "professional" customers. Have they built enough homes to know when their custom home builder is not being forthright?"
Me: So to bring it back to your revelation that experienced builders are "scared of the market," I guess it's because it pushes too many people into the custom home builder role. They cannot get speculative loans, so they all are competing for the custom jobs, right?
Lenny Brantley: "Absolutely. I'm not scared of competition, but the under-bidding that is going on now is going to leave some angry victims. There was an article in the paper last year about a builder who left quite a few clients high and dry, and it's because those clients chose the low bidder. They had no recourse against the builder, because he went bankrupt and moved away. The mortgage market has changed so much too. In the past, if a project was underbid, the banks would re-appraise a home and provide the extra money through the mortgage, but those days are long gone. Now it comes out of the customer's pocket for extras and if you cannot afford them you will have liens on your home even if you cannot pay them."
Me: OK. So get multiple bids from custom home builders who first provide you a list of clients to call to verify their competency and trustworthiness, right?
Lenny Brantley: "Yes! It is important to do your due-diligence as a buyer. First ask the custom home builder to provide not only a list of prior clients, but also a list of suppliers and sub contractors also. It is important to know how long relationships have lasted and how the contractor worked and paid over a period of time. Remember, if he hires a sub and fails to pay the bill, it will be your home that ends up with the lien."
Other Questions For A Custom Home Builder
So now I'll turn to our readers and ask a question ...
What other questions should I be asking builders? Is there something you would like to know? I will be spending more time with plenty of custom home builders, so leave a comment in the comments section below if you have other questions you would like answered.
If you are ready to hire a custom home builder, we can help you with that too.
As always, if you want help in selecting Florida custom home builder, please drop me a note and we'll schedule a time to meet and prepare you to effectively evaluate the best ones for your needs.
Joe Manausa, MBA is a 26 year veteran of real estate brokerage in the State of Florida and has owned and managed his own company since 1992. He is a daily blogger with content that focuses on real estate analytics and providing his clients with a tactical advantage in today's challenging market.