[Editor's Note: Today's guest post was submitted by Ryan Mattice of Stevens General Contractors. We have no financial relationship other than the hundreds of thousands of dollars I've turned over to the company for my own home renovation project. Yes, we're finally done, excited to be back home and happy with our choice of contractor. Building or renovating a home is something many doctors do at some point over the course of their lives, but it is also a high-risk event for large financial mistakes and immense frustrations. In this post, Ryan discusses some guidelines to help you avoid many of the mistakes those who have gone before you have made.]
First, a little background. My name is Ryan Mattice and I am one of the owners of Stevens General Contractors, a Utah-based construction company. Our projects consist primarily of large remodels, but also include new construction and small commercial projects. After spending many years working in the construction industry, I have had the privilege to work with many amazing clients, designers, architects, sub-contractors, and suppliers.
There is not a perfect construction company out there. But, over my career, I have realized that if a few basic principles are followed, many of the bad experiences that are so common in the industry can be avoided.
Some time ago, we received a call from a designer that we had worked with on previous projects. He asked us (really pled with us) to take over the construction on a large home that he had designed. His client selected and hired a contractor to build their dream home, but at the time of the call, the job was halfway done and had turned into a construction nightmare. The original contractor was finally fired. That call led to a meeting with a great family who was upset and frustrated. Their project was over budget, nowhere near their expected construction schedule, and lacking the quality they had expected. They didn’t know what to do.
Luckily, they were able to wait for us to make time in our schedule and take over the construction of their home. Some items had to be completely re-done, but we created a new schedule, solved the problems, and completed the project. In the process, we not only worked together but became good friends with the clients.
While we truly enjoyed working with this family and building their home, we wish that there had never been a need for us to have entered the picture. We wish that they could have completed their dream home without the need for a second general contractor. We wish (as they do) that they would have never hired their original contractor.
This is my biggest frustration with the construction industry. The barrier to entry is almost non-existent and everyone has had a bad experience or knows someone who has. It doesn’t have to be this way!!
Our company has decades of experience in the construction industry and has worked on hundreds of projects over the years. We've even consulted with out of town clients on their builds. We've seen it all! Here are our recommendations to homeowners for successfully hiring the right contractor and making their dream home a reality.
#1 Don’t Be in a Hurry
Ryan Mattice, Partner SGC
Construction projects are generally detailed and filled with many decisions. Don’t expect to start immediately or be in a hurry. Take your time – this is a large purchase and deserves the right amount of planning. If a contractor is pushing to start your project immediately or wants to start without doing the necessary prep work, walk away – they don’t have your best interest in mind.
#2 Make an Overall Home Plan
Even if you are planning a small project, make your overall home plan first. There is nothing more frustrating than tearing out work that has recently been completed, in order to complete a future phase of construction. While it is not always possible, with the right planning, the process can be much simpler and you will save money in the long term.
As an example, the first meeting with one of our clients happened many years ago right after he had completed residency and joined his practice group. He and his wife purchased an older home in a great location but were not in the financial position to make all the desired changes at once. We spent a whole summer creating a plan for the entire home before completing a small remodel project. Since that time, we have completed another phase every year or two. Recently, the final construction phase was completed and they now have the home that was originally planned. By creating a multi-year plan, the process was smooth and unnecessary costs were avoided.
This fire pole came from a firehouse in Massachusetts
#3 Plan for Future Needs
Plan for future phases of life as well as the one you are in now. For some people this means an elevator shaft for a future elevator [which in the meantime can be used for a firepole-ed], for others, it means larger gathering areas for future family gatherings. But know that about every 20 years, the needs of our homes seem to change with the ages of children and our phase of life. Plan for what the future may hold and you can prevent the need to move or make future home changes unnecessary.
#4 Select Your Home Contractor Based on Reputation and References — Not on Price Alone
While price is important, it is more important to find a contractor based on value, not the bottom line price. Generally, the lowest bid is lowest for a reason. Value is the sum of multiple different characteristics like timeliness, honesty, quality, and price.
When selecting a contractor, start by looking to friends, co-workers, and other associates that you trust. Look for people who have had a positive experience with their own projects and find out who they used. Some contractors have an online review presence and this information may also be helpful. But, for many companies, there is not much information available online to help in the vetting process.
There is a local group of ENTs that we have worked with extensively. Over the last 10+ years, we have worked with about half of the 25 doctors in the group. At this point, when someone has a construction need, they have 10 friends willing to tell them about their experience and the decision is fairly simple. Building a new home and remodeling is common – don’t be afraid to ask those around you.
Once you have determined 2-3 potential contractors, sit down, and have a meeting with each of them. Don’t worry about pricing at this point, but spend time to make sure that the vision, attitudes, and process match what you are looking for.
Request references from each of the potential builders – ask for actual phone numbers of their clients and make sure at least one of the references is a project that they are currently in the middle of. Call each of those clients and ask them the hard questions. Ask about:
- budget
- timelines
- honesty
- quality
- any issues they had during the process, etc.
Most clients are thrilled to talk about their projects and will welcome the call. I have even found out after the fact, that some of our previous clients have invited our potential clients to their homes to show them what was done! The potential contractor should not be involved in this call process – speak directly with their clients and get the real details!
Once you have found the right contractor, it is time to work out pricing and details. In many cases, when the details have not yet been finalized, it will be necessary to select a contractor without any pricing. If you have done your homework, you should be able to move forward into the design phase comfortably with a single home builder. Pricing will have to come later once plans and designs have been completed. In the majority of our projects, at this point in the process, our clients have already selected our company – because they trust us to build a quality home, know that we can take care of their needs and that we can work together to make sure that the scope and the budget align.
If you choose to have more than one contractor provide bids for your work, make sure that any pricing is comparing “apples to apples” – meaning that you are looking at bids for the same materials, quality, and details. You will need to provide a significant amount of detail to make this possible, but make sure that each bid includes the same scope of work to be completed, the same levels of insurance, permits, and other fees, etc.
Lastly, recognize that your construction project will be the sum of the work of many different sub-contractors. [Approximately 250 people worked on our home at some point-ed.] Ask about the sub-contractors to be used. If a contractor uses different sub-contractors on each project, you will probably struggle to get the quality you deserve.
#5 Have a Signed Contract
A project contract should:
- be very specific about the details of the project.
- include an exact payment structure.
There are different types of construction contracts (cost-plus, fixed-price, etc.), but whichever type you use, make sure you understand it well.
Don’t pay more than 25% upfront and don’t make the final payment until the project is complete. Mid-project payments should be based on completed milestones (like installation of cabinets, or passing of a 4-way inspection), not simply on the fact that a certain amount of time has passed. If the contractor offers discounts for paying additional money upfront or during the project, take that as a sign that they are not financially stable and that you should find someone else.
#6 Make Sure You Are Compatible
Make sure you mesh well with your contractor and trust him or her. You are going to spend a lot of time together and are going to need to rely on them to help you make significant decisions in your home. If you don’t feel like you are going to get along well, or that they truly care about your project, don’t start a project together.
#7 Beware of Scope Creep
Be aware of “while you’re at its.” All clients have the tendency to add items during the project. While this is a standard practice and is sometimes necessary, be aware of how quickly lots of small additions can add up to a significant amount of money. Strive to plan ahead and include as many of the potential additions in the original scope. This will allow the contractor to efficiently manage the project schedule and allow you, the homeowner, to not be surprised by the cost overages for the added scope.
#8 Communication is King
Make sure you understand what is being included and not being included. Don’t be afraid to ask questions during the planning or construction phases of the process and question things that you may not understand. The contractor should have reasons for what they do and be happy to share those with you. If you ever have a concern, bring it up and make sure that communication is open throughout the process.
#9 Make a Sound Financial Decision
Don’t stretch your budget too far. Make sure you will still be financially comfortable if you come across a surprise or decide to do something outside of the original scope. There is not a reason to live life house poor – don’t be afraid to wait until the right financial time to complete your project and don’t feel pressured by a contractor to complete the project right now.
Not every problem can be avoided, but please follow these suggestions to improve your construction experience! The construction process should be fun – do it right and enjoy the process and the results!!
What do you think? Have you remodeled or built a new home? How did you find a reliable contractor? What mistakes did you make along the way? Comment below!
Thank you for a very enlightening post, Ryan! You hit all of the important points in this very very big project- that, as a client, we go through only once, maybe twice (if we’re crazy) in our lives. Therefore, the builder/contractor we pick has an outsized effect on everything.
We are custom-building a home right at this time and have been fortunate to have a stellar builder. We knew, as soon as we’d interviewed him, that he was our guy. Apart from feeling very comfortable with him, he said something that stuck with us- “I make friends by building people their houses”, he said. Now someone who has such a great relationship with his clients that they become lifelong friends- well, he must be doing something right. So, #6 is really important.
You bring up great points in #3- the kids do not remain little for ever- so it’s best to not go great lengths to customize for little kids. And financially, I think #7 is the biggest issue most home-builders run into. And a good builder can help rein it in.
Congratulations on the new house, Jim! Looks like you had a solid ally in Ryan navigating this for you.
Very helpful post! One problem I have come across is that the very first question a contractor typically ask is: what is our budget? Not being in construction myself, I have no idea what a project would cost. While I would like to talk about vision and ideas for the project first, every contractor starts with the budget. I have ended up not even bothering with the most recent renovation I am interested in because I have not found someone willing to talk about the project first. how do you suggest finding a general idea of a budget?
Just take what you think it would cost and multiply by 5. 🙂
Seriously though, it took me a year to get over the sticker shock and even then I had Katie do all the additional financial discussions once we had the bottom line figure and I knew we had the money saved up for it. Why not tell the contractor “I’m less concerned about price than quality.” That should get them interested enough to discuss the project without doing the finances first.
I found it most helpful to have the original budget discussion with an architect, who helped us do a midsize remodel of our home. It also made getting bids that are apples to apples, much easier. We could also provide value by helping make design decisions that came up unexpectedly. Having a comprehensive roadmap going in, helped me sleep well at night.
We didn’t talk about cost right in the beginning, too- since, like you, we had no idea. We connected with our builder and asked him roughly how much it would cost. Going by his experience over the decades, he gave us a rough figure of the total- based on square footage-about $200-250/sq ft. It is a fairly generous estimate, depending on your choices. And it has turned out pretty close to actual. The overages are all my doing 😉
-PFB
Those figures really come down to how nice you make things. Our per square foot figures were well over that for instance, but we have pretty high end finishes. I mean, you can spend $5K on kitchen appliances or you can spend $50K. You can leave the garage floor as concrete or you can put epoxy on it. Linoleum or tile. High end carpet or low end. Regular light switches or an automated house. $100 TV or $5000 projector and a $2000 screen. At every step it’s possible to spend a multiple of what you could spend.
The $1K-$2K projector with a sub-$300 screen is pretty darned nice too, and far bigger and more affordable than what quite a few folks spend on an LCD flat panel.
Helpful piece, thanks. Maybe it was mentioned in another article, but wondering if Jim used an architect prior to SGC completing the work? I’ve read different things about the value of an architect and often see contractors advertising their own “design” services. Is it even possible to get a ballpark of project cost from an architect?
We used their preferred architect (whose father was actually the original architect). I think you’re better off getting ballpark figures from the general contractor than the architect. But don’t expect much more precision than what the first digit is of the cost until you really get into the process and details.
As a frugal physician myself going for fatFire someday, I am always concerned about price. I was surprised to read in the article that while you interview 2-3 contractors, the decision to hire one of them is based more on if you can trust and get along with them. While that sounds good, I imagine there could be a big difference in price, even among quality contractors. Over the years I’ve found there are some quality contractors who do great work, but cost thousands less than others that do the same quality work. I’ve always tried to get at least 3 bids from contractors or any type of home service. Is doing 3 bids just too difficult with big home renovations? Did WCI go with Ryan’s company without getting other bids?
I’ve heard so many horror stories from people building or doing major renovations/adds to their homes. It’s nice to hear from a contractor who gives a reasonable rubrick on how to with picking someone and planning!
Do you plan on expanding your services to the Oklahoma City area by chance? 😉
Regards,
Psy-FI MD
No, but someone in Idaho tried to hire them yesterday. That’s a no-go too. Like realtors, contractors are local. Imagine trying to find a whole new set of subcontractors in another city.
My parents are about 90% of the way done with a major home remodel. They are going into the third year of the remodel (it was supposed to take one year), they are spending three times more than they thought even with a generous initial budget, and needless to say, they are very upset with the general contractor and would not pick him again for any future projects.
They cite poor communication, lack of attention to detail, him not treating their money like it is his own and not being upfront with costs as their main complaints. The good news is the house turned out beautiful. The bad news is it has cost them so much stress and money they still are not able to enjoy being in the house. Hopefully time will heal all wounds regarding this and they will at some point be able to enjoy the house they put so much time and money into.
I don’t know exactly what they could have done different. They selected a contractor with good word of mouth but got unlucky in that he was retiring and had his son take over the project who did not do as good of a job. I still don’t know even with the article above if I could avoid making their same mistakes — maybe the White Coat Investor has some additional resources or posts that could be made on this topic, it’s definitely an important topic.
Ugh. What a horror story. Exactly what we were hoping to avoid. I don’t know how much more we spent trying to avoid it, but we finished ahead of schedule and within a generous budget (plus the stuff we added on during the project knowing it would cost more.)
Any thoughts on performance bonds? My cousin was building a new home at Smith Mountain lake in Virginia and the previously reputable builder suddenly and shockingly went out of business.
Great idea. Never heard of them before your comment. Obviously that cost would be passed on to you, but it might be worth it.
https://www.investopedia.com/terms/p/performancebond.asp
what is a fair rate for a contractor to charge on top for the subcontractors work? Our contractor charges 15% extra for the work done by sub contractors he have to hire. For eg a tree need to be cut, what ever the cost was, he would increase it by 15%. He calls and arranges and make sure its done right. Is this a typical and fair rate?
I want to say ours was closer to 12%.