Thursday, February 12, 2015

Why there isn't benefits to being your own General Contractor

Q:

Are there benefits to being your own General Contractor?

A:

As a general contractor I would say that there really isn’t any benefit to being your own general contractor, but people still do it.

Why do they do it if there is no benefit to them?

The answer is that when it comes to being your own general contractor 99% of the people that decide to go that route think that it will save them money.

Why do people think that being their own general contractor will save them money?

Because hiring a general contractor has a cost to it, general contractors charge a fee for their services just like every other business does.

The fee that the general contractor charges to people that decide to be their own general contractor is a savings in their mind, the problem is that if you were to take them and sit them down once the home is completed you would find that the cost savings of not having a general contractor has disappeared. In almost all cases you would find that the new home ended up costing you more money to build then it would have if you hired a general contractor and paid their fee. Further more the building of the home has also taken you a significantly longer time to build then you anticipated that it would, this longer timeline has also cost you more money then you anticipated.

Here is a comparison list of how being your own general contractor costs more than actually hiring a General Contractor;

Being your own General Contractor
Hiring a General Contractor (GC)
When you buy building material for your building supply store you pay the same price as everyone else.
GC’s are given a discount on the total package of the home by the building supply store because of the GC’s ability to bring them more work over many years. This can add up when the material for a home could cost two or three hundred thousand and your builder receives 10 percent off it. That’s a 20 to 30 thousand dollar savings to you.
You will not have a warranty on the home because you built it yourself, any problems with the structure or the workmanship will be up to you to fix out of your own pocket.
GC’s have to register your home with TARION which is the new home warranty company. This warranty covers you the homeowner for 7 years. All warrant-able issues in the home have to be taken care of by the GC with little to expense to you.
You will have to obtain your own insurance for the building of the home and you will need special insurance to protect yourself it someone is injured on your site.
GC’s carry liability insurance to protect them and you from any damage down to the building or any worker that is hurt by an accident on the site.
It is up to you to check that every trade that you hire is properly insured, licensed and covered under WSIB.
It is a GC’s legal job to have to check that every single trade that the hire and allow on their building sites is properly and fully insured, professionally licensed and is in good standing with WSIB.
You are in charge of all the safety on your building site. That means that you are in charge of the personal safety of all workers on the site, you are also responsible for all legal postings and signage that is required on a residential construction project.
Safety has become the biggest propriety for GC’s. They are constantly updating their safety training, they have detailed plans and checks and balances in place to protect everyone on the worksite. All signage and all legal postings along with the documentation that is required are seen to by the GC as it is one of their primary focuses.
You are liable if a worker is hurt on your building site. Even as the homeowner you can receive fines and even jail time if you are found to be negligent in the involvement of a worker injury.
GC’s are responsible for all the safety of workers and that means that they shield you as the homeowner from any fines or legal actions that could result from a workers injury.
You will be paying the normal rate to all the trades that you hire. This is because you are only hiring them once and they have to build into the price that you are organizing the job yourself. Trades charge homeowners more because they are concerned about not being paid and also about how smoothly the job will run, the more disorganized the job site the longer it will take for them to complete their work. This scenario doesn't just cost them more man hours but it also delays their full payment that they receive on complication.
GC’s are given significant discounts by the trades that they hire. The reason for this is that over the years of working together the trade knows that they will be paid appropriately and on time and that the job site will be organized and ready for them when they arrive. An organized job site means that they will be able to complete their work quicker costing them less money.
You are going to have to take time off work to meet and supervise the trades that are building your home. You will have to meet these workers every time they require it and talk to them every time they have a question. Your lost days at work will cost a lot of money as a normal house can take anywhere from 8 months to 2 years to build depending on the size and scope of the project.
GC’s have onsite supervisors. These supervisors meet the trade’s everyday and answer any questions that they might have about your project. They are also able to accurately schedule the trades in advance so the wait for the trades is less, this speeds the building process along.
You are in charge of the placement of all the rough-ins and also the kind of fixture that is installed in your home. You are also in charge of the quality control, it is up to you to understand the systems that are being installed and in the order that they are installed so that they don’t interfere with other trades.
GC’s have knowledge of all things installed and have a very particular order in the way that everything is installed in a home.
For example;
You have the electricians install the electrical before the plumber. The plumber comes in and has to cut out some of the electrical wiring to run their drains. Since drains have to be installed in very specific places then the wires will have to be relocated. This will be a charge to you the homeowner because you didn’t have the plumber come in first. It’s a GC’s job to make sure this never happens.
You will be charged fully for everything that has to be redone because either you changed your mind on its location or you didn’t understand when it was explained to you about where it was being placed.
It is the GC’s job to make sure that everything is in the proper place the first time. They do this by coordinating not only the trade but also your personal opinion, your wants and needs. GC's hold walk-through's with the appropriate trades and you the homeowner this insures that all parties are on the same page.
You will end up paying more than the quotes that you are given from some trades. The reason for this is that when a trade gives you a quote they are quoting on what you asked them to quote not on what you need or will end up with in your home. These will easily double the amount of some of the trade’s final bills for your home.
GC’s take great care in going through every quote before the project starts. This is to avoid billing problems later; they will also require a re-quote if a lot of things change in the home after the initial quotes were received.
You will have trouble scheduling trades to show up in a timely manner as you are only a single job to them. This will delay work in the home at every stage.
GC’s have a lot of pull with their trades because they are able to give them work all year long and year over year. Tradesmen build their businesses on their relationships with GC’s supplying them with work every year that they do not have to advertise for and only have to quote.
Because you are organizing they entire job yourself, you will have problems getting trades to show up in a timely manner. The process of constructing the home will take longer, this is guaranteed. The longer the home takes to construct the more costs you will incur. Things like you’re financing for the home and the rate you pay for electricity will all cost you more until your home is completed.
One of the main jobs for GC’s is to make sure that you home is constructed in a timely manner. One of the reasons for this is because the quicker your home is constructed the quicker the GC will get paid completely for the job. Projects that drag on limit the ability of the GC to generate profit so it’s in their best interest and yours to complete the home in as timely a manner as possible.
Your choice of materials will be limited to your own knowledge of building and what you are able find via television and the internet. This unfortunately gives you no actual knowledge about how the product works.
GC’s have to warranty the homes that they build; this makes GC’s choose products that have given them little to no problems in the past. This process helps narrow the choices on certain important products in your home so that you get the best product without a lot of problems in the future.
When you buy your plumbing fixtures, lighting fixtures and door hardware you will be paying retail price. It will also be up to you to select all the appropriate parts for showers, tubs, sinks and toilets. If you fail to order one piece you will have to pay the plumber to return when you have it at a later date. Any warranty issues will be solely up to you to have the item returned and replaced.
GC’s receive discounts as high as 40% on some plumbing, lighting or door hardware. They also understand what parts are needed for a plumber to properly install a complicated shower or tub. When something goes wrong it is the GC’s problem to return them or have them replaced under warranty.
It will be your job to book and meet all building inspectors for the appropriate inspections. Any failure of an inspection means that nothing can happen to the home until the problems are fixed. This slows the job down and will cost you money changing things that the inspector does not like. Inspectors are usually more critical on homeowner managed projects as they are worried about the liability if you have done something wrong.
GC’s work in the same municipalities all the time and get to know what the local building inspectors are looking for, every building inspector looks for something different. Knowing this saves you money and time, it also guarantees that you always pass your inspections. GC's are able to build a rapport with inspectors overtime and are able to gain their confidence, this allows inspections to go smoothly with little to no hassle or delays. 
As you are acting as the general contractor you are required to keep the job site clean and deal with any debris or waste from your site. Safety regulations state a job site must be kept clean at all times. This can be a very time consuming task as everyday trades will make a new mess.
GC’s usually employ people to keep the job site clean. They don’t just keep the job site clean they make sure that the trades clean up after themselves. GC’s usually bring a bin or garbage container to keep job sites clean and safe. A clean site is an efficient and safe site.
Budgeting will be a problem for you, you can only budget for what the trades give you quotes for, you won’t realize how much to budget for cost overruns and the appropriate amount to budget that will be realistic. This could be a serious problem when you are dealing with a financial institution. Because your budget was originally too small then your line of credit becomes too small as well as the house construction commences. This means that you have to apply for an extension of your line of credit. This takes time and the more time it takes the more money it will cost you.
GC’s budgets are usually within 10% of the finished project cost as long as significant changes are not made to the home during construction. When going to the bank for a line of credit having the budget from a GC goes a long way in the bank giving you the appropriate amount of money you will require and also possibly at a better rate because it was created by a professional and view it as being accurate.
When building a home you must think about energy efficiency. A lot of energy efficiency comes from how well the home is put together with foaming, taping and draft proofing in certain areas of the home. Not knowing exactly how to do this will cost you money every year because of the amount of heat loss you will experience.
As a GC they know the areas that have the potential to have the biggest air leaks and they know what products to use to make sure that they don’t ever have a draft. Decades of experience tells them where and how to do this.
This lowers all your future gas and electrical bills.
You are in charge of the quality control. This is a big issue because quality control is not only how well the home is put together but it also will have the biggest affect on the resale value of your home when  you go to sell it in the future.
GC’s build their reputation on a high standard of quality control. It is in their best interest to make sure that your home is so well put together that you and all your friends are amazed at how well it looks and functions. This is the best way for a GC to advertise to other people.

So when you look at the above mentioned items and you start to add up the costs associated with being your own general contractor it doesn’t take long to come to the conclusion that the cost for hiring a professional general contractor to construct your custom home is quickly eclipsed by the costs of being your own general contractor.

One of the main things that is hard to put a value on is the cost on you mentally and physically. 
There is a tremendous amount of stress that is put on the general contractor when a new home is being constructed. The amount of stress only gets worse when it is your own house and every decision you make, product you buy and trade you hire costs you money. When you add in the added stress of time and your family life I wonder myself why anyone would even attempt to be their own general contractor.

Save yourself and your family a lot of headaches, heartbreaks and dollars and hire a general contractor to build your custom home.

Rob Abbott

Village Builders Inc. 

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