Homebuilding Myths: Get Three Bids For Best Results
As the housing industry becomes more sophisticated and conscientious about achieving genuine and lasting homebuyer satisfaction, the level of professionalism among builders continues to evolve.
As a result, clients searching for a builder have a much deeper pool of talent from which to select. Today's professional builder is not only skilled in construction and the many sophisticated systems, but also much more competent in terms of business acumen.
This more proficient breed of builder requires evaluation by prospective clients in a new way. Namely by dropping the age-old practice of collecting three bids for the work in favor of a more business-like approach to a very important & long lasting decision.
Comparative Bidding is Inaccurate:
In theory, the three-bid rule was thought to work because it assumed everything else, other than cost, from the competing builders was equal. This thought process assumed that each builder had assessed and calculated the scope of work, blueprints, and specifications in the exact same way.
In reality, however, such assumptions are rarely, if ever, accurate. Every builder and contractor, professional or not, analyzes a new-home project and estimates its associated costs differently; as a result, the three bids are not apples-to-apples comparisons. The differences can be subtle, but they exist. And those differences render an unequal playing field for competitive bidding creating confusion and misunderstanding.
In addition to being inaccurate as a cost comparison tool, the three-bid rule reduces each builder to a number rather than considering his or her various skills, experience, personality, record of success, and ability to do the work. For this reason, an increasing number of the best homebuilders simply refuse to bid competitively, opting out of such opportunities because they know they are being evaluated only in terms of a cost estimate (that is inaccurate) rather than whether they are the best builder for the job.
The Negotiated Contract: A More Useful Approach
Many of today's homebuyers are utilizing a different approach to select their custom home builder: the negotiated contract. In that scenario, a homebuilder is selected based on his or her abilities for the specific project and personality and how they fit with the homebuyer and the respective design team. These are two critical considerations, considering how closely the builder, the client, and the design team will interact with each other during some of the planning phase and the entire construction phase.
Understanding the construction cost is also very important to all project stakeholders. An experienced, reputable builder will explore all respective planning, locate the gaps in design, clarify the many grey areas, and prepare a solid preliminary budget with accompanying specifications Working through the construction budget (& value engineering if necessary) not only removes assumptions and judging a builder's worth based on price alone but also builds trust between homeowner and builder. They can explore honest communication about actual costs and, if necessary, choices that need to be made to match the project's scope with the homebuyer's budget. That's the "negotiated" part of the contract process.
The negotiated contract process is far superior to the three-bid rule in matching personalities between the homebuyer and the builder, as well as between projects and a building company's skills and experience. By first narrowing and then selecting one homebuilder based on everything but the cost of the project, buyers can better make their decision on which builder is most likely to be on budget and on schedule and result in a finished home that meets (or ideally exceeds) their expectations.
As the homebuilding industry continues to evolve, it requires new and more effective models for conducting business. The negotiated contract has strong advantages over the three-bid rule. This approach reflects the new age of home construction to the benefit of every homebuyer.
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