Managing your time and money is crucial in any business-related project, and this applies to the custom home building process. Check in regularly with your contractor to make sure the project is running consistently with the budget. If the project is running over budget, go over the details of the expenses so far to determine that the contractor is living up to his obligations.
You will have to execute contracts with the people working on your custom home. If you hire a contractor, he will have contracts with the subs, so you’ll only have to negotiate with him. A good contract is the basis for good communication. You can start with a copy of the contractor’s standard contract or a contract he used with a previous client if he doesn’t use a standard contract.
A Good Contract is the Key to Managing Your Time and Money
Make sure you understand the project’s price, payment plans, and your obligations. Have everything in place on your end to make good on your side of the deal. The contract is always subject to change provided you and your contractor both agree to make the changes and initial them. A good contract includes the following list of required items:
- Names, addresses, and phone numbers of all parties named in the contract
- The contractor’s license and type
- Tax ID or Social Security number
- Workers’ compensation insurance number
- Job address
- Job specs
- Price and terms
- Time frame
- Responsibility for delays
- Terms of warranties
- Terms for conflict resolution or arbitration
- Signatures and dates.
A fixed-price contract means you agree on a single price for the project, and the contractor makes his profit on the difference between that price and the total of labor and materials. Many lenders require fixed-price contracts because these contracts protect them from cost overruns. Some contractors believe, however, that fixed-price contracts create an adversarial relationship between the consumer and the contractor.
With a time-and-materials contract, the contractor bills you at her cost for the labor and supplies and then makes a percentage profit based upon the costs. This type of contract solves the problem of the contractor looking to skimp in order to make more money; however, some conflict may still arise because the contractor can make more money by making you spend more.
Often contractors ask for a security deposit with the contract. Asking for a deposit is legal but some states don’t allow large deposits to contractors. If the contractor is asking for more than 10 percent, check the limits with the state contracting licensing board. Be aware that any money you put on deposit is at risk of being lost until the project actually starts.
The schedule for the project is created by the contractor, so he has a lot to say in managing your time. Your contractor does his best to keep to the planned schedule, but unexpected changes in any of these four areas can throw everything off kilter. At that point he adjusts and makes up time wherever possible without sacrificing the quality of the house.
Furthermore, you need to establish a method of getting everyone paid. If you’re paying for the project out of your own pocket, you can just write the checks yourself every day or fund the contractor in stages. If you’re getting a loan, you have to designate who gets the money, or the lender may designate for you.
Controlling the Funds Has an Impact on Managing Your Time
There are three basic options in controlling the funds:
- You control the funds. You have total control of the money, but you must sign every check and make sure people get paid when they need their money, which can be inconvenient, and also may cause trouble in managing your time.
- The contractor controls the funds. This method is much more convenient, but the contractor now has full responsibility for your money, which could be risky, though it helps you in managing your time.
- You both control the funds. A joint checking account gives both of you access and control. You can set up the account where both you and the contractor have to sign checks on big-money items. Using a joint account enables you to watch the larger expenses while giving the contractor funds for day-to-day expenses. This might be the best option for managing your time.
You want to make sure everyone on the project is happy and not begging to be paid. Some subs may ask for advances for materials or to secure their time. Try not to pay any more in advance than you have to, but don’t leave them hanging either, and always look for ways of managing your time wisely.