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How do I choose a New Home Builder? First in a series.

Question: How in the world do I choose a new home builder in Northwest Indiana or anywhere for that matter?

Answer: Go to http://www.synergyhomes.com/ and, Indiana Dunes

There are times that I try and post too much information, at least that's what I've been told lately. Tonite a very simple article on choosing a Home Builder to build your new home in Porter County Northwest Indiana. We focus on the key communities in Porter County, namely Portage, Valparaiso, Hebron, Kouts, Chesterton and Aberdeen. But you can probably use these questions to gain an understanding of the trust in this new home builder anywhere.

I'll provide a series of five questions to ask your home builder, questions that I think will help you find a good home builder but also grow your family net worth, the real goal.

Could I please talk to five of your trade partners, also called subcontractors by some old school builders? If the new home builder does not want to provide this list, a red flag. If the new home builder needs a couple days to pull it together, a red flag. My construction staff talks to my trade partner team every day, it would only take me a couple minutes to pull together a list of five trade partners.
Why did you choose to be a new home builder? Don't you want to know why the home builder that you are going to entrust with your life savings and your families personal home chose to build new homes in Northwest Indiana, Porter County Indiana or whatever area you are in?
May I build on any lot in the area? Well the obvious answer is "of course not." There are bad lots, there are bad communities, there are places that a builder cannot build or cannot buy lots. If the builder lies, walk away. If the new home builder is honest, and talks about the way that a homesite, or lot, decision is made, then you have the opportunity to trust.
What is your normal square footage price? If the new home builder answers this question, they should be shot first and then you should walk away. The price of what? This is far too distant and open ended. Either your home builder or selling agent or new home salesperson will talk about you, your wants, your needs ... or they will throw out a low ball number to game you. You don't really want to be gamed, do you?
Do you work with REALTORs? If they say anything except "Yes, we love them and want to pay them," they are not your new home builder for your home in Northwest Indiana, or Porter County, or Valparaiso or Portage ... or for that matter anywhere. If they don't pay real estate professionals, you don't want them.

For a list of all the builder members of the Porter County Builders Association, go to http://pcbaonline.blogspot.com/ or the PCBA website.

Posted by Steve Dalton - Northwest Indiana Mortgages on 04/28/2007 11:38 PM

Comments (17)

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17 Comments on How do I choose a New Home Builder? First in a series.

APR

2007

I don't agree with your red flag comments. Just because you have a list of subs makes you reputable? Then your going ask the Builder why he became a Builder? Wow! Pretty strange approach. I guess from what I just read in your post , your market area is full of shady contractors but you have a nice one!

Oh good, Micheal, I haven't had anyone punk me for fun in months, especially at midnight.

So let's say someone comes to your community and they're trying to decide about using your home building operation, OK? Now they can try and decide if they like you personally, or if they just have to have the homesite ... those are very common. But what if the market's got a lot of parity? All the new home salespeople are great and there are more than one terrific communities that would work?

Now they will need to do a little research to choose the right new home builder. This research quite often will dwell on TRUST. Can they trust the builder? In numerous posts and comments this year I've been asked and I have commented on this challenge. This post tonite was actually a compilation of those bits of advice and comments ..... In essence how do you know if the builder is trustworthy?

By the way, the list of subs is no biggie, I agree. It's the phone calls to those subs that will yield important information. In Northwest Indiana we have a bunch of great friends who happen to be builders. Shady? Now way. But we sure get asked to prove ourselves trustworthy often, that I can assure you.

Steve, After the initial interest from the consumer, we provide a reference list of other homes built by the principal, we offer to take the consumer to other sub divisions which have "matured" so they can see a completed sub division. It is always difficult to sell a new home while under construction with most people having difficulty with the vision. I am sure you are aware of this objection. We then move forward with a second showing and we schedule a meeting with the Builder to discuss the house plan and how the project is going. This is a question and answer period and when you have a client with 30 years experience all the "trust" questions get answered. You are totally right with your comment that we get called on the trust question. Wishing you success in your sales. With respect Mike.

Steve: Good post, but I have some comments. As a sales consultant with a large national builder in a totally different market (central Florida) my potential buyers usually have a different agenda.

1. As Maronda, we employ a lot of the people working on the home... electricians, plumbers, etc. are on the Maronda payroll. This allows us to control the cost and quality of the labor. I've been with Maronda for almost a year and I've encountered hundreds of prospects and sold dozens of homes. I've never had a prospect ask me about trade references. If a prospect ever asked for a trade reference or contact information, I would tell them about how we employ many of the tradespeople, and that we use different subcontractors in different parts of the state depending on cost, quality, etc.

2. There are certain scattered lot communities where we do build on a prospect's lot if it is free and clear. In a normal community, however, the customer is presented with a price that includes the home and the lot and we will not build on their personal lot.

3. I hope my prospect wouldn't shoot me (lol) but I will occasionally provide a cost per square foot on my larger homes (when they ask) because it always blows the competition out of the water. I do disclose exactly what the figure includes. For example, I sell a 3,900 living square foot two-story for $325,000 including the lot and many options. That is roughly $80 per living square foot, including the lot. Again, I don't bring this up as a selling tool, but sometimes the customer will notice our prices are very low compared to the competition for the same size home.

4. At Maronda, we do not co-broke with realtors. It's one of the ways we can keep our pricing so low versus the competition. Most prospects actually see the value in doing business that way (cutting out the middleman). In all honesty, the main reason we do this is because a Realtor, unlike a Maronda Sales Consultant, is not trained about our unique way of doing business and may not adequately present the home to a potential buyer.

Again, thanks for the post. It's interesting to see how smaller/custom builders operate in order to gain trust with potential homebuyers.

Come on Steve, you know how I would do it, JUST CALL STEVE....

APR

2007

Bob you know I'd tell you my thoughts on any home builder, especially in Indianapolis.

Jason, I've got to tell you that I totally disagree with your companies philosophy on REALTORs. I may get in trouble talking specific numbers but trust me the very minor cost increase of perhaps 1% per house for offering to pay co-operating agents is well worth the cost. A full 35% of our buyers come with their agent to our model and register. You're missing out on those buyers, and the support and selling assistance of their agents.

I understand completely that the low-price producer likes to use per foot figures, there's one in every market. But be careful, a lot of builders will lie about square foot numbers. Let's see some of them include the garage, some include the basement, some drop the homesite cost to figure the per foot. Comparing apples and apples is tough for the buyer, and as we all know we can easily confuse them.

Steve: Understood. I know it's a Maronda philosophy to keep the prices as low as possible for our customers while maintaining uniform marketing/branding with our sales team, so even a 1% price increase to cover co-broking may never happen.

To clarify, we actually do our best to avoid a "cost per s.f." number with our prospects, as do most builders. Some prospects, however, will actually ask or raise their brow about approximate cost per square foot. I totally agree that using a cost per SF number will cause more harm (confusion) than good (understanding). Although, it is nice to have the best pricing in town!

I'm looking forward to reading and contributing to this group. Talk to you later, Steve!

MAY

2007

Steve,

Thanks for your post! I will keep this in mind when I have to interview builders to build me home! Good Luck!

MAY

2007

Great Post!!!

Regarding the cost per square foot - You can buy a Hyundai that weighs the same as a BMW, are you paying the same? I cringe when some engineer type comes in and asks what my cost per square foot is -

BTW, in that regards there's a whole "new" concept out there called "Trading Up" I can't remember who wrote the book, but it was very interesting to see the market research on folks who will pay MORE for the name brand. I believe the same is true in New Homes, if the houses are known to be quality built the intelligent buyer will not worry about cost per square foot!

MAY

2007

This post has sparked some great conversation, in an area where consumers quite often don't know where to begin. I hope to see more posts like this in our Washington Developers and Contractors forum!

JUN

2007

Great post - I wish more people would take their builder decision seriously. I've dealt with too many people jumping too fast and being sorry later. Thanks for some great consumer advice.

JUN

2007

I loved your five questions. Those are reallly helpful for us Realtors. I LOVED question 5. Have you ever thought of moving to Texas (LOL)? Like Tina I have often seen people jump too fast and then be sorry.

JUN

2007

Starting part two of the series today, should have posted in about 30 mins

How to choose a home builder - Part Two of a Series

Steve - Today's post brought me to this post! Thanks for sharing a builders perspective. Our whole business and industry is trust based. By answering our clients questions ethically and honestly, we gain their trust.

A builder who doesn't co-broke - not a wise decision. I remember when Phoenix was HOT, many of the builders reduced the co-broke or completely got rid of it. Today - I still get e-mails from them, offering 6-8% co-broke to bring buyers. How time changes the opinion of a Realtors value.

Square footage - I absolutely stay away from a square foot comparison. It is not a true determination of cost or value. We all know a single story 1200 square foot home will cost more per squre foot than an 1800 square foot two story. Why would anyone lump them together to get an average square foot cost?

At the risk of sounding uneducated about this, please give me an adequate response to why a single level 1200 sq. ft. home is worth more per sq. ft. than a single level 1500 sq.ft. home.

I seem to lose my clients in my response, which is, there is more value per sq. ft. in the smaller sq. ft. home when you include the cost to build and the lot. I'm not sure if it is taught somewhere to compare sq. ft, but I cringe when a client wants me to run comps based on sq. ft. Uggghhhh!

Paula, great question:

The largest costs in a new home are:

The homesite - ranging from 10-40% of total price
The foundation
and the Roof Construction
Bathrooms and Heating System

A small 1,200 square foot ranch has a big homesite percentage, a rather large foundation, and a rather large roof. That same foundation and roof could also easily contain a 2,400 square foot two story, just by stacking in the same space.

Even more frustrating is the fact that going from 1,200 square feet on a ranch to 1,500 square feet doesn't change the homesite at all, only marginally changes the foundation and roof, has same two baths and three bedrooms and one kitchen and one heating system. It's just a little bigger.

In your market home builders have maximized this by offering gigantic square footages for what seems like very small prices. One problem is that a "huge" house may not have any more livability than the smaller veresion. I've been in one builder's homes that the area for the toilet in the master bedroom was 10 foot by 10 foot. That's 100 square feet! Why? Because they knew that home buyers were judging the homes on square footage and not on livability.

Do you buy a car based on the price per pound? No, you buy it based on ride, and power, and warranty.

Price per foot, though a starting point, is not a good indicator of value or in the long range ... resale.

Steve -

Thanks for the detailed response! It is valuable information, especially the largest costs list. I have seen the homes you describe. You are right - buyers seem to be attracted to these homes with 100 sq. ft. toilet areas. I have looked at some floor plans buyers think are great and wonder - WHY!

I am so glad Paula asked the question. Great information!!

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