You've got your property lined up, you chose your house plans, and you're ready to get started and build your future home.
Maybe you've considered going the DIY route and that's just not for you, so instead you'd like to find a builder.
Where do you start? How do you connect with the best builders? What goes into reviewing and signing a contract?
If this is your first time hiring a home builder, you might have all of these questions and more. We know it can be daunting, so we're here to guide you every step of the way.
The Six Steps You'll Follow to Find a Builder are:
- Equip yourself with a Complete Package of DEN building plans
- Assembling a list of builders in your area
- Verifying licensing, insurance, and policies for anyone on your list
- Understanding and avoiding liens
- Requesting bids
- Making your selection
Before we dive into the 6 steps to take to connect with the best builder for your new home, let's cover some of the basics that go into preparing for and managing your home build.
Many homeowners opt to hire an ADU (Accessory Dwelling Unit) or residential contractor as the project manager for their new build. Hiring a contractor might cost you more money now, but it can be money well spent!
Besides daily project oversight, your ADU contractor takes care of the myriad of behind-the-scenes work required to complete your home build on time and within your budget.
Let's take a look at what "behind the scenes work" includes:
Permits and Inspections
If your local jurisdiction requires permits and inspections, those items get handled by the contractor you hire. Your building plans get submitted to the local building department, where they are reviewed and approved. After the plans are approved, then a building permit may be issued for your project.
Each section of work requires a building inspector's sign-off before the next trade can begin its work.
For example, a grading inspection has to occur before the foundation work can begin.
The foundation must pass an inspection before the framing (exterior and interior) work begins.
MEP systems (mechanical, electrical, plumbing) require two separate inspections "rough-in" and "final."
- The rough-in covers the major components of each system when contained within a wall or ceiling. (pipes, ductwork, electrical wiring)
- The final inspection occurs after completing the finish work is complete, and the MEP systems are operational. (faucets, registers, light switches)
Your ADU contractor will schedule the required inspections as the work moves forward. They will quickly address any required corrections with the subcontractors and then schedule another inspection. In this sense, they'll help to streamline the process for you (remember that thing we said about money well spent?).
Equipped with your plans, a good contractor can quickly and easily order the lumber and other building materials needed for your project.
Specialty finishes always require a longer lead time than standard finish options, which is one of the reasons why we develop our designs and plans at Den to utilize standard sized and easily accessible materials. We know that sometimes it may be necessary to order your cabinets (flooring, light fixtures, countertops) ASAP, so they are available for the install date two months from now.
Contractors usually get better pricing at the supply house than a homeowner would get because they purchase regularly and in large quantities. So, you may be able to reduce material costs by having the contractor purchase the materials needed, which is always a plus.
Scheduling the project
Your contractor works to keep the materials, team, and inspections working together to finish your project. Depending on your project, you may need anywhere from one to a dozen subcontractors, and that can be a lot of moving parts to manage.
Hiring a contractor will save you countless hours of phone calls and visits to the building department and supply house while trying to build your new home.
So, with all of that said, how exactly do you find the best builder? Let's dive in.
6 Steps to Finding the Best Contractor for Your New Home
You have probably heard the advice to get prices from at least three different contractors. You then throw out the lowest and highest bids and make a selection from the remaining options.
That may have been good advice until around 1980, but the construction industry has changed quite a bit over the last 40 years.
Finding the best local home builder now requires a bit of legwork and research for the homeowner. A bit of time and some due diligence now can save you precious time and money down the road.
To simplify this process, we have assembled this step-by-step checklist to make sure you connect with an appropriately licensed and insured ADU contractor for your dream home.
Step 1. Get a set of plans for your new build
The more details you can provide to your potential builders, the better they can give you an accurate estimate and bid. When getting bids, it's obviously best to have those numbers as accurate and on point as possible.
Consider how valuable it is to provide your potential builders with every last detail, down to the faucets and light switches.
The DEN Complete packages are designed to streamline this step of the process. This particular package structure helps you to:
- Save time and money with a complete list of construction materials which you can show to builders so they can get an exact cost quote for you.
- Review advanced detailing like mechanical, plumbing, and electrical systems so builders will know what exactly needs to get done with each of their sub contractors.
- Take the guess work out of which equipment and appliances to buy so builders know before putting together a bid what they'll be ordering and utilizing.
Each of our models has a Complete Package available to purchase, and if you're reading this article and ready to hire a builder, that's the one you'll need to go with.
Step 2. Assemble a list of potential home builders and residential contractors in your area.
Reminder: We are not asking for builder bids or pricing at this point.
Start by checking with friends, family, co-workers, and real estate agents for local contractor recommendations. A contractor review from someone you know is much better than an online testimonial.
The next step is to search locally online. Most contractors prefer to work within an hour of their office, so adjust your search area accordingly.
There are plenty of other online options to find residential builders, here are a few good options:
Or you can do a simple Google search using terms like this to find a list of builders:
- ADU contractors near me
- DADU (Detached Accessory Dwelling Unit) contractors near me
- small house contractors
- tiny house builders
- backyard cottage contractor
- micro house builder
- modern home builder
You can also ask the building department staff for their opinion! You'll likely be getting friendly with these people, as you work towards getting permitting approvals, so take advantage of their knowledge. They can usually offer some insight into which are the best builders and which to avoid at all costs, based on how well they pass inspections or finish their projects on time.
You should have a good list of potential contractors by now. If you don't, you can try these sites, too:
- National Association of Home Builders - From the home page, you can look up potential ADU builders in your area.
- NAHB resources page - A helpful list of consumer resources for buying, renting, remodeling, or maintaining a home.
- Associated General Contractors of America - Contact your local AGC chapter for member builders to help with your project.
- TheBlueBook.com - At this site, you can search for home builders and residential contractors by geographic area, trade, or specialty.
The Blue Book also lists building material suppliers, such as lumber, shingles, and MEP (mechanical-electrical-plumbing) suppliers in your local area. There could be potential material savings using a supply house compared to the local big-box chain store prices.
As you add different contractors to your list, you can look for complaints or bad reviews against them on these review sites:
Step 3. Shorten your list by using the following five searches to eliminate any unsuitable or potentially problematic contractors for your new home build.
Verify their contractor's license
Contractor licensing is handled at the state level and varies significantly across the country. Licenses generally fall into two categories, general (the building shell) or sub-contractor (finishes and specialties).
You can search for "my state contractor license" and look them up by both license number and company name on the state website. Take notes about the bond company or insurance policy listed there. We'll be verifying that info in a few moments.
Bonus Tip: Most state licensing sites include a section devoted entirely to hiring a residential contractor. Each state has its own rules around collecting deposits, contract language, billing and releases, and minimum warranty requirements when working with homeowners.
Most states do allow a general contractor to perform other trade work (except MEPs - Mechanical, Electrical, and Plumbing) on a project. So it's ok for a general contractor to paint your house instead of hiring a painting sub-contractor.
On the flip side, most states don't allow a sub-contractor to perform general contractor work under any circumstances.
Should the contractor work outside of their license classification, you are placing your project in serious jeopardy. Most insurance policies stipulate the policy remains in effect as long as the contractor works within their license classification. If the builder operates outside of their category, they will void the insurance policy, leaving you as the homeowner unprotected from potential harm.
Verify their business license
You can do a "my state business license lookup" to find your state or county licensing website. Do a search using the business name and the owner's name. This search allows you to verify the company has the proper business license(s) in place.
Verify their contractor bond
Some states require a custom home builder to obtain a "performance bond," which provides an extra layer of protection for the homeowner. Should a contractor leave you high and dry with an unfinished project, you can file a damages claim against the contractor bond.
Verify their insurance
Every contractor should carry some level of liability insurance. This policy protects your home and property from harm or costs caused by the contractor or their employees. Always ask for their liability policy number and insurance carrier information. Then contact the insurance carrier and verify the policy is current and remains in effect.
Verify their workers' comp policy
If a business has employees, they must maintain a workers comp policy to cover expenses from employee injury or harm while on the job site. Since the job site is your home, if a worker is injured and the ADU contractor doesn't maintain a workers comp policy, your homeowner's insurance may have to pay the claim.
Bonus Tip: If your general contractor states that their subs don't need to carry worker's comp insurance because they are independent contractors, consider another contractor immediately!!
And here is the reason why:
An independent contractor must meet the same license, bond, and insurance requirements listed above. Whether they have one or one hundred employees, they must comply with the state requirements like every other contractor does.
Let's say that the painter claims to be an independent contractor and doesn't maintain a worker's comp policy.
Due to scheduling conflicts earlier in the week, the painter brings two more painters to finish your project. One of the new painters steps off a ladder and twists his ankle.
Who is responsible for paying his medical bills?
Since the painter doesn't have a workers comp policy in place, he is essentially "off the hook" for these expenses. (The licensing board will want to talk to him and possibly issue a fine for non-compliance.)
Your general contractor has a workers comp policy, but the temp painter is not his employee and therefore not covered.
The only insurance left to cover the painter's medical expenses may be your homeowner's policy. And what happens when a claim gets filed? Your homeowner's insurance rates will increase.
Reminder: We are STILL not asking for bids or pricing at this point!
Step 4. Avoiding Mechanics Liens on Your Project.
You may be asking why all this research and verification is necessary as the homeowner? And the answer is to protect your family home from a mechanics lien.
Let's say you don't pay your cable bill. They turn off your service.
If you skip the car payment, they repossess your vehicle.
When you don't pay your contractor, what do they do?
Well, they can't repossess the materials already installed. And they have already paid their employees for the work performed.
So, they file a mechanics lien.
When mechanics lien gets filed against a property:
- You can't sell the property.
- You can't get a HELOC (home equity line of credit) loan.
- You can't refinance the mortgage.
- You can't transfer the title or deed.
Until the original filer has released the lien.
Anyone who has provided labor or goods to improve a real property has the right to file a lien, should they not be paid for their work.
That means that every sub-contractor, supplier, and employee on your project could potentially file a lien if they don't get paid by your general contractor or their employer.
Yes, even if you pay your GC in full. If he doesn't pay everyone else as he should, the homeowner will have to settle (pay) the outstanding lien(s).
The best option is to obtain material and labor releases (also known as lien waivers) from each contractor that works on your project. Be sure to ask your potential GCs about these releases when you request their bid.
The waiver dates should always match up with the payment dates. By collecting these releases during construction, should an individual or supplier file a lien claiming non-payment, you can provide the signed and dated release form to the court.
Step 5. Request Bids for Your Home Building Project
Now that you have a list of qualified and properly licensed contractors and good builders, it's time to request bids and pricing.
Price is always a significant factor in the decision-making process, but here some additional points to consider:
Schedule: Can your project fit into their availability, or will you need to wait a few weeks to a few months?
Experience: Are the employees adequately trained and supervised? Have they done similar projects before? Who is the foreman or point of contact?
Professionalism: The golden rule of contracting is, "if it doesn't get agreed to in writing, then it never really happened."
Any changes to the scope or size of the project require amending the original contract, executing a change order, or rewriting the agreement entirely.
It can also be helpful to provide a list of questions you have about the home building process and request any contacts for past clients that you might be able to speak with for a review.
Also, make sure your list of builders are people who have work to show that reflects your style of home. If they only do remodels or work on model homes and you're looking to build a modern architecture home design, then maybe take them off the list.
We'll dig into what those bids should include in the following step.
Step 6. Choosing the best residential contractor for you.
Congratulations! You have completed your due diligence to find a solid list of the best builders for your type of home.
By verifying that your potential builders are appropriately licensed, bonded, and insured before requesting bids and starting work, you know that your family and home are protected.
And should there be a problem, you have multiple state resources at your disposal to help resolve the issue.
Every bid proposal you receive may look slightly different from the next one. But all proposals and contracts should include the following components:
Listing the terms and conditions for the project. These include listing which materials to use and who is to install them. And the agreement will cover what costs aren't (site cleanup and permit fees) included in the price.
Outlining the down payment amount and due dates for the outstanding balance.
Should include the start and finish dates for your project. Larger projects may use milestone dates for completing different phases of the work.
Most building materials do provide a manufacturer's warranty against defects from the factory. Make sure the contractor includes these in your paperwork.
Most contractors must provide a warranty to cover any issues with their work. (This does vary from state to state.) Many states require a one-year workmanship warranty as a minimum.
Potential Red Flags
If the country had a national contractor licensing and contract verbiage statute, a red flag list would be pretty straightforward for everyone.
But the rules vary widely across the country, which is why your due diligence in selecting a contractor is so critical before you start the project.
Here are the most common red flags to avoid:
The contractor insists on cash payments.
Cash is hard to track, while a check, money order, credit card, or cashier's check payment provides physical proof of the transaction.
Vague contract or payment terms.
Every good contractor knows the importance of good record keeping. Dotting the i's and crossing the t's is a part of their daily routine.
Why? Because "if it doesn't get agreed to in writing, then it never really happened."
The contract should list:
- The full scope of work from start to finish.
- Identify any sub-contractors they plan to use.
- Reference the plans dated X/X/20XX.
- A schedule from surveying or grading to the date you receive the keys.
- A payment schedule.
Payment schedules don't have to be complicated, and in fact, simpler is often better for everyone involved.
They can be a simple as:
- 1/3 due upon start of the project.
- 1/3 due upon 50% completion of the project.
- 1/3 due upon 100% completion of the project.
- 1/4 due upon foundation and utility rough-in completed.
- 1/4 due upon completion of the building shell.
- 1/4 due upon completion of interior finishes.
- 1/4 due upon passing final inspection.
Provides erroneous professional information.
If the license or insurance information doesn't match at any point during your prescreening, remove them from consideration.
Excessive deposit required to start work.
Each state sets the maximum down payment amount that the residential contractor can require. If your state allows for a 10% deposit (maximum) and the contractor demands more, send them packing immediately.
Some contractors work across several states, and they may tell you that the large down payment is allowed in their home state.
Please don't fall for it!
The contract you sign must comply with the state residential contract requirements where the property is.
If your property is in Washington, and their office is in Oregon, the contract must meet Washington residential contract requirements.
Remember to be a Great Customer.
No two projects are the same, but here are some helpful tips for you, the homeowner.
Access is paramount for contractors.
Keep the driveway or access route clear at all times.
This simple step allows delivery trucks and workers to get in or out quickly. You may also want to designate a material storage area for everyone to use during the project.
Contractors have three basic needs: power, water, and restroom facilities. Be sure to discuss these topics with the contractors when requesting their bids.
Authorized personnel only.
Be sure to keep kids and pets out of the work area for everyone's safety. Depending on your project, you may want to consider a temporary fencing option around the worksite.
There are a lot of moving parts to complete a construction project. Some factors, like weather or mechanical breakdowns, always happen at the worst possible moment. Remember, it's a temporary problem.
A failed inspection is not the end of the world. Most of the time, the correction is simple and won't impact your completion schedule.
This is our best advice to find the best builder for your project, and if you follow all of these steps you should land on a great option for you. Remember, you're hoping to build the home of your dreams. You shouldn't have to settle on who is building it!