New Construction Talk... Protect Yourself from Price Gouging and a Bad Builder Relationship

Custom new homebuilders set prices using one of three different methods. The first two seem reasonable enough, but there are serious caveats to each. The third is the wiser choice because it protects you from an unfavorable relationship with the builder, and from any incentive for price gouging.

Option #1: Set Price for a Set Scope of Work

Advantages: Arranging financing is easy with this option, and you know early on exactly what your cost is.

Disadvantages: Because there are so many variables that affect the cost to build a home, including materials, fixtures, and other options, the builder may overestimate to give you a set price. In order to guarantee that price, he must factor in more expensive options or ask you to make decisions you’re not ready to make.

Percentage over Cost

Advantages: A set percentage (usually around 15%) allows flexibility for the builder and buyer, since choices can be made during the building process. Disadvantages: This arrangement seems straightforward, but it allows the builder to be vague about certain costs until after the contract is signed. It also allows the builder to be careless about cost-effective planning, resulting in greater expenses for you. Most important, it could create an incentive for the builder to bring in higher-priced trades and sell you on more expensive options, since he’ll earn a percentage of your cost.

Option #3: Cost Plus Builder Fee

Advantages: This allows a close estimate for planning financing and competitive, upfront pricing with slimmer profit margins. It also provides flexibility for the buyer to choose options and change some details during the build. But most importantly, with this structure, there is no incentive for the builder to inflate any costs during the process.

Disadvantages: None. With a set fee, the builder and buyer have no conflicting interests.

This is why we recommend that when signing a contract for a custom home, you get an estimate based on cost plus a set builder fee, no matter which builder you choose.

Then

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When architect Kevin Parma bought his home in Lochwood eight years ago, he had every intention of remodeling to his taste. But life tends to impede intentions. When he married Sherry Sauter Parma about six years later, she gave him the nudge he needed to get it done.

Parma Residence

Lochwood

BUILT IN: 1963

REMODELED IN: 2010

THE MISSION: RECONFIGURE A MID-CENTURY MODERN HOME WITHOUT CHANGING THE FOOTPRINT.

The Parmas didn’t add any square footage to their mid-century modern on Silverock Drive, but they did open and brighten things up. “We changed the configuration of the home to something that made more sense. We more than doubled the size of the kitchen, took down walls, and combined two bedrooms and a bath to make one large suite,” Sherry says. They turned the home’s ubiquitous dark paneling white and created tons of natural light by widening windows. During the process, which was carried out in two phases, the Parmas turned one room into a nursery and welcomed their new son, Seth. He was born in the middle of construction, Sherry says. Kevin, who founded and owns the small architecture firm Parmadesign, designed the new home and contracted the services of Rob Leonard of AWI Creekview and Kyle Boettcher of One Eighty Group, both neighborhood businesses, to help with the building. Another local outfit, Mess Masters, provided the essential cleaning services that come with a major remodel.

—Christina Hughes Babb

Ron Siebler remembers riding, often on horseback, to check on windmills as a kid on his grandfather’s Nebraska farm. “He would hang metal cups on the windmills so we could always have something to drink from,” Siebler says. “I can still taste that water. Water from a windmill is the coldest, purest, sweetest-tasting liquid ever.” The paralegal-turned-remodeler and historic restoration expert, who lives near White Rock Lake, has restored two vintage windmills. He does it using the tools and methods of the late 1800s-early 1900s. The first one, near his family’s farm in Nebraska, was on display in a local museum for a year after it was completed. The other, in Lantana, Texas, was dam- aged by hail and out of use for decades. There is some crossover between historic restoration and home remodeling, Siebler says. Because of his knowledge of ancient tools and methods, he was brought in to work on a home that was fashioned after “Harry Potter” and “The Hobbit” in Preston Hollow. “Remodeling is different than building in that we often get to be a part of the solution, be creative and have a say in what is being created,” he says. Siebler’s grandfather died years ago at age 99, but Siebler still has some of those old tin cups that used to hang from the Nebraska windmills. “The windmills I restore each get their own tin cup,” he says.

—Christina Hughes Babb