• Do they have a permanent business address?
• Can they provide references?
• Ask to see their state license. (Or check online at your state Licensing Division)

You can also click on a state below to see License Requirements or to find out if a contractor is licensed in that state.

•Do they have current liability insurance and workers compensation coverage?

Note: If you hire someone who is unlicensed and/or uninsured you may be held liable for any injuries that occur while working on your property.

• How long have they been in business?

• Check with your city building department for any local complaints.

• Check with your county clerk to make sure there are no civil suits against the contractor.

• Check with your local home builders association to see if they are a member.

• Make sure you receive a complete, clearly written contract for the work to be done.

• Do not pay cash up front unless you have a signed valid contract. (Carl says never pay cash up front!)

And, be sure the estimates specify the total price and the method of payment, the kind and quality of materials to be used and the estimated length of time it will take to complete the work.

Carl

My father built the home I grew up and he has offered his contracting services. He asked me to get 3 independent home builders quotes for labor per square foot.

Based on your article in May 2008 for Illinois, it looks like around $50 per square foot for labor.

Do you have any recommendation on Chicago home builders? I am trying to find some guidance on which of the many home builders in the Chicago area to use, as there are so many.

My budget is around 500k which includes materials, labor, and purchase of the lot.

Leona

Hi Leona,

Actually, my May, 2008 IL example was for the Chicago suburbs, and it wasn’t $50 per sq. ft., it was $87.61 (See “Cost to Build a House in Illinois”)

Design Connection, LLC  Plan n586

As for finding Chicago area General Contractors or home builders to build you a new home, I recommend you contact the nearest local association of NAHB (National Association of Home Builders) for member names.

Here is a link from NAHB to find an association near you: FIND YOUR LOCAL BUILDERS’ ASSOCIATION

You could also visit areas where the types of home you desire are under construction, and get the names of builders there.

You could also visit building material suppliers or home centers for names of builders that do new home construction.

Friends, friends of friends, open houses, a local “Parade of Homes”, local Home designers and/or Architects, etc. are also excellent sources for getting names of local home builders

Get at least three references from each builder you contact and check those references.

Be sure to get those three references from each builder!

The references should be from satisfied customers and my feelings are that if a builder can come up with three satisfied homeowners, you could be number 4.

Get three building material supplier references as well to make sure that they pay their bills on time.

A bank reference would be wise too as new home construction lenders have to approve builders.

If you have any other questions as you proceed, let me know.
Carl

The company can build me a 2000 sq. ft. house on 1/2 acre starting at $162,000. My concern is that it’s on a slab and not a crawl space.

This is obviously a very simple house with nothing for addons.

Does this sound like anything I should pursue?

I have been approved for $185K with my mortgage and I am trying to get as much as possible for my mortgage.

Oh, this is my first house also!

Thanks,
Chris

Hi Chris,
What I would do if I were you is find a local Realtor familiar with the area and have the Realtor “pull up” comparable sales (comps) so that you can compare “apples with apples”. Then you’ll know if you are getting a “good deal” on the proposed house.

$162,000 for a 2,000 sq. ft. “simple” house, including land (lot) and land (lot) improvements sounds like a good deal in today’s housing market. You’ll know more with the Realtor’s comps.

Any “good” Realtor would be more than happy to do this for you, even if you are not really looking to buy a house through them. They know they have made a friend for life

Slab foundation

As for building on a slab foundation vs. a crawl space foundation; I built homes in SC for many years and personally, I would prefer a slab foundation in SC.

The soil will be either clay in the Piedmont region or sand in the coastal areas, both of which lend themselves to slab foundations.

A properly constructed slab foundation should not cause you to be concerned.
Hope this helps,
Carl

Any advice (about whether this cost plus methods seem typical and how to obtain bids, and possibly break it to him if we find a much better way to go) would be greatly helpful.
Jennifer

Hi Jennifer,

Liking your General Contractor is important. It would be advantageous for all if you could work the contract difficulties out.

A good residential construction contract can save you headaches and money.

Keep in mind that you, the homeowner, are in charge at all times in a build or remodel job… You are the captain of the ship.

A contract based on a percentage of cost is great for the builder but not you.
There is no incentive under this arrangement to keep costs down.

So, what you should tell him is you want a very detailed total cost breakdown of the project with allowances for items to be selected later and a new contract based on that total cost plus a fixed fee that covers all the duties of a General Contractor including the “Administrative” duties of looking after “laborers”.

Under NO circumstances should you ever have to worry about how many hours of labor you will end up paying for. I’ve always said, if you want to see how long a project can take and/or the most it could cost, hire labor by the hour.

Any part of any job can have the hours estimated in advance and a mutually agreeable price set.

He can adjust his percentage of total cost in anticipation of paying a bit more for contracted labor instead of hourly to compensate if he wants to, but then his fee is “cast in stone.”

I don’t think 15% is the least bit unreasonable. I wouldn’t do it for less.

The estimated total cost to build that your General Contractor comes up with is just that, an estimate.

The dollar allowances your General Contractor puts in the contract for items that are to be selected by you, i.e. flooring, tile, appliances cabinets, etc. have to be realistic.

It is your responsibility to be sure they are realistic by doing your own comparative shopping either online or in stores.

Accept NO allowances for items that are “per sq ft”, or some other obscurity. Accept them only If they have a total realistic dollar amount.

Finally, if you don’t like your General Contractor’s contract and he won’t change it, tell him, “Thanks for your help and by the way, do I owe you anything for your consulting time?”

Then, move forward on getting at least 3 competitive bids from General Contractors that are NOT on a cost plus a % basis and;

• Have NO hourly wages as far as you are concerned.
• Are very detailed as to the cost to build.
• Are either a cost plus a FIXED FEE contract, or is a;
• Contract Bid (Fixed Price) to Build (or Remodel) a House. That means the General Contractor gives you a firm total contract price for the entire project. (Note: Also called a
• Fixed Price Contract to Build)

The Fixed Fee and the Fixed Price are the only two contracts I recommend to anyone who wants to use a General Contractor.

Summary:

A good home building contract can save you headaches and money.

• A Fixed Price Contract will save you worry about cost overruns.
• A Cost plus a Fixed Fee Contract could save you money but with more worries.

• A Cost plus a Percentage will most likely be a disaster as the pricing of the work is uncompetitive with no incentive to control costs.
• With the Fixed Price or the Cost plus a Fixed Fee, the builder is NOT motivated to increase the total cost of materials and/or labor.

Here are two Sample contracts (Scroll down past the 1st one) as well as sample “Specifications” (Description of Materials). These samples are in my book and are also on my “Getting Started” page on http://www.byoh.com/.

They are merely samples. You should consult with a Real Estate attorney before using if for no other reason, state laws differ widely.

The description of Materials is by NO means inclusive of all the items you will be buying for your remodeling job. You and your General Contractor can make up your own list.

Added cautionary notes:

Have an attorney review any contract prior to it being signed.

Be sure your General Contractor is licensed and insured (see “Home Building – Subcontractor Insurance”).

Avoid deposits to your General Contractor! If one is necessary, keep it small…$1,000 or less. Larger deposits to stores for special order items may be required. If so, the deposit should be made with a credit card so that you will have refund protection.

Good luck & let me know how it works out,
Carl