That is wonderful that you have found such a promising GC. I think, though, that in markets where it's more of a "builder's market" i.e. builders are not very hungry and where there are not very many builders in the market, most builders will not want to answer many of those questions. They are great questions. In my situation where I am in a smallish market and builders are not too terribly hungry, I would fear that builders just wouldn't want to be cooperative with many of these questions. Sad but I think true.

Hopefully, there are several of these questions/issues that you've already spoken to your potential GC about.

You might want to expand your arbitration/litigation question to include whether the GC has sued a client before.

thull wrote:

"Hopefully, there are several of these questions/issues that you've already spoken to your potential GC about.

You might want to expand your arbitration/litigation question to include whether the GC has sued a client before."

I asked every potential GC I spoke with every single question on my list and only solicited bids from those who were willing to answer every question. Figured those who weren't willing to answer had something to hide...

Re arbitration/litigation - Between # 12, 13 and 14, I thought I had covered the gamut. Do you see something I left out?

Of course, GCs could lie about some of these things b/c it isn't that easy to actually check on them but I did everything I could think of to double-check that the three potential GCs that I asked to bid had not been lying including: checking local court records to see if the GC's name was on any lawsuits he hadn't bothered to mention; 2) calling the references he provided; 3) checking my state's licensing registration website for any complaints about the GC; and 4) tracking down at least a few other previous customers that hadn't been included on the reference list he provided and talking to them.

No bids from me for any work on your jobs.

Litigation is expensive and you are NOT going to start of on a good footing.

I understand the desire to protect yourself, but my books and audit results are private documents.
This is a privately held company.

Brickeye beat me to it, but perhaps a little moreso.

I'd highly caution people not to think a builder is bad or has something to hide because they won't share this information with you, personally. In the same way that you (or anyone), would not give out personal financial information to another private person, I wouldn't, either.

I might be willing to share information with a professional, disinterested, third-party in order to convince you of my finacial integrity, such as a bank or title company, but not an individual. And, dont' forget this is a two-way street; if a title company or bank isn't standing behind you, then guess how much homework I'll do?

And may I make some other suggestions pertaining to specific numbers?

#3 isn't really....easy. I might be an entrepreneur and had 18 other companies. The 'why' of why they're not around is not possible to substantiate in many cases.

#4-8. This is something you should check at the courthouse; again, get the facts from the source. Also; it's a red flag, but until you hear both sides, it might or might not be an issue.

13. Nope. The BBB is worthless, and the professional association here, part of a national homebuilding network, is nothing but window dressing; the WORST builders belong to it.

31. Between 1998 and 2003, my company did over 400 different contracting jobs. You want me to pull together all that information, present it to you (professionally, of course), without pay, and then expect you to hand-pick my customers to figure out who they are and call? Even though some of them might really respect their privacy OR have contracts which specfically forbid this? NO. If you want this type of information, you should be expected to go down to the different building departments and pull it yourself.

Please see my earlier comments on 'solvency'. I notice that subs are mentioned, but not suppliers.

Again, I'm not trying to be difficult; but I would NOT share most of this information with someone looking for a bid; it's simply not professaional, and if these questions are that important, than someone should be ready to spend the time, and money to seek a third-party to verify this type of information. Even better; TOGETHER we'll get bonding insurance to ensure that both parties are satisfied with the arrangement, and you will pay for it in the cost of the house. I LIKE the way you think, but I don't believe that it's the best way to approach it.

jasonmi7 and brickeyee,

Everyone chooses how they do business and, if no builders in my area had been willing to answer my questions, then I would have been forced to decide whether I wanted to get a custom-home built badly enough to compromise and consider a GC who would NOT answer all my questions.

Fortunately for me - perhaps in part because the building boom is beginning to go bust so that builders no longer hold all the aces - I found three excellent builders in my area who were willing to respond fully. I am truly convinced that they were among the very best builders available and, after checking references and verifying responses, I am absolutely confident that I picked the best of the best!

I am not saying that those who chose not to respond in full are necessarily "bad" builders... just that I was left with reason to doubt that they were "good builders" and no reason to think they were the "best of the best"! Of course every builder has the right to refuse to answer any question asked by a potential customer. And the customer then has the right - which I exercised - to decide not to do business with that builder. Both sides make choices. If the two sides choices are incompatible, they should not be trying to do business together anyway.

As a litigation attorney - albeit in a field far removed from Construction Law - I am very aware of just how expensive litigation is. It was in fact my sincere desire to avoid ever having any reason whatsoever to wind up in litigation with my GC that drove me to do the research necessary to come up with my list of questions and then to spend at least 100 hours over the past three months asking those questions, verifying the answers I received to the maximum extent possible, following up with the references each GC provided, and then and tracking down and visiting with additional prior customers of each GC.

jasonmi 7, you are right that before any bank will loan a buyer the money for a build, it will check into the buyer's financial records in at least as much detail as I did the potential GCs! That is why you, as a builder, don't have to do the kind of homework the buyer needs to do. The bank does it for you.

Banks also usually insists that the buyer put up at least 20% of the total and the bank will look to buyer to pay back the loan regardless of whether the GC goes belly-up in the middle of the build! Thus the buyer is ultimately the one who must ensure that the GC selected is financially capable of carrying out the build. When a builder is doing a "rob Peter to pay Paul" dance, the builder's banker ceases to be a disinterested third-party because it is in that bank's best interest for the builder to find his next "Peter" with the hopes that he will somehow manage to get money ahead enough to keep from crashing and burning. And since the buyer's banker can look to the buyer to pay off the loan if the builder goes bankrupt, even the buyer's banker has only a minimal interest in ensuring the solvency of the builder. So yes, I want to look at your financial records for myself and, if a builder wants his "financial privacy" more than he wants my job, that's fine. He can go build somebody else's house. I'll find a different builder.

With regard to #31, perhaps I wasn't clear that I was asking only about projects on which the person or company I was considering hiring had been the General Contractor... not every piddly little job where he had been a sub under some other GC. Further, I was not interested in hiring some "mega-company" that GCs EIGHTY projects a year. True custom home building requires individualized attention to each home and there is no way any GC can give that kind of attention to EIGHTY projects at a time! The builders I was interested in hiring typically have 4 to 12 projects going at one time so asking for 5 years worth of project situs addresses meant more like 20 to 60 addresses, not 400!

Also note that with regard to those five-years worth of jobs, I did NOT ask the potential GCs for client names, the value of the build, the floor plans, or ANY other private information. I asked only for the address of the project site. In this computer age, any builder that keeps reasonably decent records ought to be able to pull that info together in 5 minutes flat.

I also cannot imagine what the "client privacy" concerns are that you suggest would cause a builder to refuse to provide the situs address of the projects on which he has worked in the past. That would be tantamount to an individual refusing to provide the address of his previous employers when applying for a new job! I would be very happy to have you enlighten me more specifically. Have you ever really had or even known of another builder who had a client insist on a clause in the contract forbidding them from providing the address of the build site to future potential customers? I can imagine a client insisting on a privacy clause as to their name, phone number, price of the build, etc. But, the ADDRESS? You have got to be kidding!

If, from the situs information, I am then able to locate current owner's names and/or phone numbers, it is because that information is publicly available information. Thus, no one can complain that I have "invaded their privacy" if I call and say "I understand Builder X built your home and I am considering hiring him to build one for me, would you mind if I ask you a few questions about him?" I may be prying into information the builder would rather keep private but I'm not prying into anything that should raise privacy concerns for the previous customer!

Finally, as for previous business names (my question #3), if a potential builder is an entrepreneur who has had 18 other companies in the past, he had better be ready (with supporting documents) to convince me that at least half of them ceased to exist because they were so successful the builder got bought out by a bigger company and then to explain, in detail, why he closed down the rest or I am not about to hire him! I have got nothing against entrepreneurs and know that many people fail repeatedly before succeeding. I would probably even hire a builder who admitted to having gone bankrupt in the past - if he could convince me he was now working under a better business model. BUT, the very WORST builders out there change names like the rest of us change socks and that does not make them entrepreneurs! Further, while checking on prior names may difficult, I think a builder ought to be as willing and ready to provide his business history information as I am to provide my employment history when I go job-hunting. After all, the home buyer is HIRING the builder and deserves to have that information as much as an employer deserves to have a potential new employees prior work history.

I missed the "sued your clients" question from your (very) long list in my hasty read of it. If you asked and had most of these questions answered, you're doing more than (I suspect) 99.5% of owners out there.

Looks like your next task is to make sure that your drawings and scope of work are detailed enough to ensure that you don't end up negotiating over quality during the build.

Gad, my builder would have run in the furthest direction if I had asked him all those questions or expected him to answer them. My builder and I don't even have a contract. Yep, I said it out loud, we don't even have a contract. I did have him sign a Sworn Construction Statement in order to get my construction loan. I am in it by 5 months now and I have not had one sub sign anything either. I have not had problems and don't expect any. I guess this might be the difference between "Minnesota Nice" and the other parts of the world.

"As a litigation attorney... "

An even better reason to avoid doing business with you.
And my wife is an attorney and does not want me working for other attorneys.

Wow, I think I only asked question number 19!!!! Oh and I did ask if they would be willing to work with their shirts off (since we are in Texas and to be honest my builder is one good lookin' guy!)

No really, our builder is know personally by my sister and worked with her for some time. He also was recommended by two different people whom he built homes for.

Those are good questions though!

Bevangel,
These are great questions that most people don't even think about. And if you are talking to an honest builder, I think they will be able to give you decent answers, or satisfactory reasons as to why they can't answer them.

If someone has had 18 companies in the last decade or so, I would RUN, not walk, away from trusting them with the biggest investment of my life. If they are "entrepeneuers", then they can go risk some "angel investor's" money, not mine, thank you very much.

And as for invading the privacy of past clients?? We just finished our build. Things went wrong, subs went bad. What matters is what your contracter does when things go wrong, because they always will. We had a fixed bid contract, but because our contractor was so great and didn't skimp, we helped him out and paid much more than the contract. We don't consider it an invasion of our privacy to heartily recommend him to anyone. If they don't want you to speak to former clients, another red flag. If they did a good job, like our builder, former clients should be eager to sing his praises.

Hi Bevangel,

Very helpful post and well thought out list. I'd be very interested in what you are using for the actual contract (the contractor's, AGC's, AIA's or your own) and if you have your own version whether you would be willing to share a redacted copy for guidance. This will be my first (and maybe only) new home construction experience and I have no clue as to what to look for . . . . other than I have been told tat I should not to use the GC's or the AGC model and that even the AIA is more architect "friendly" than owner friendly. FYI, I am not using an architect so feel even more exposed in my dealings with the GC. Thanks in advance for your help.

p.s., I can reached by e-mail at napaproject@gmail.com

Napavines,

We're using "our own" contract. I actually wound up hiring another attorney who specializes in construction law to draft it and my builder's attorney also approved it before the builder and I signed it. My attorney says he is a bit concerned that posting the contract on the internet could risk putting him (and I guess me as well) in the position of being accused of "practicing law without a license" in some state where we are not licensed.

Since various states' laws vary so much, you're much better off getting someone licensed in your state to help you anyway. If you go to someone who specializes in construction law, he/she will probably already have done similar work for other clients in the past and therefore should be able to pull a good contract together for you rather quickly and reasonably inexpensively. My attorney billed me for less than five hours work.

The builders in my area mostly use a form contract that was promulgated by the Texas Association of Builders (TAB). It is SO heavily biased towards builders that in my initial telephone conversation with builders, I told them right upfront that unless they were willing to negotiate a fairer, more-balanced contract, there was no point in our wasting time talking or them wasting time bidding my project b/c I simply would not agree to signing that contract. Only two builders (out of about 20 that I made an initial contact with) insisted on using the TAB contract. I thanked them both and hung up without even bothering to ask for any references. Given the current downturn in construction starts, I suspect even that 10% would be more willing to negotiate terms than they were a couple of months ago.

Good luck!

I hesitate to even add this to the conversation but I really can't help it. I worked for a trial attorney as sort of a caretaker. In doing so it was my responsibiltity to make sure everything worked in the house, if not, then I would either fix it or bring someone in.

I was witness to two seperate instances where people came in and did work and were never paid. An in-ground swimming pool with a negative edge was built and put into operation. The pool was not up to his standards, so he refused to pay. The pool company just walked away rather than try to get money from him via the courts. The next project was a very extensive waterproofing job. This contractor made the mistake of getting dust in the 2nd story of the house when they jackhammered out the floor. Of course they were allowed to finish the job before they were told that they weren't getting paid. I truly had no idea what was going on until I got a call at my home asking me to pay them...

The last project was to hire someone to put in new gas fireplaces... that guy asked me what the owner did for a living and I told him he was an attorney. He told me that he never worked for them, ever. If they aren't happy they will never pay, they will keep it tied up in court for years.

Smart guy... I left soon after. I really hated seeing this kind of thing.

I know you aren't that kind of guy but you sure are painting GC's as dishonest. I am so glad I have personal knowlege of who the good guys are in our area. I wish you and your GC luck.

Saftgeek

Thanks for your reply Bevangel. I have already downloaded a sample version of the AGC contract (for others - the link is on Gardenweb's the "remdoeling" forum - just search AGC and AIA), and I ordered a copy of the AIA one - I agree about getting a local (CA) licensed contruction attorney to advise and draft - but given how much good thought you had put in to the DD process, I thought it would helpful to see what you and your counsel have come up with . . . . Anyway, thanks again for the DD guidance and good luck to you as well on your project. E-mail if you are ever in the Napa/Bay Area - we just bottled our first vintage last fall!

saftgeek - I hate to admit it but you are all too correct about far too many attorneys! I was a high school teacher for 20 years before deciding to go to law school and I have been deeply appalled by the how truly unethical and dishonest some lawyers are.

In the six years I've been practicing law, I've run into more dishonest, downright sleezy lawyers than I met incompetant teachers in twenty years of teaching school... and people are always knocking teachers for being incompetant! Shyster lawyers make me ashamed of this profession just as incompetant teachers sometimes made me ashamed of the teaching profession.

I would urge you or anyone else who has evidence of a lawyer behaving dishonestly or unethically to report them to their state bar association. It might not do any good but then again, it just might. At least in Texas, I think our state bar tries to disbar the unethical lawyers whenever they can find them. It certainly sounds like your ex-boss was exactly that type.

I also truly am not trying to paint GCs as dishonest. I believe the vast majority are honest folks who do their best to do a good job when building a home and, if they make mistakes, try their best to fix them.

BUT, as in all professions, there are some people building homes that are either lazy, dishonest, or so downright disorganized that the homeowner who ends up hiring one of them needs to be able to go to court and get help. And, unfortunately, the contract promulgated by the Texas Association of Builders is specifically designed to protect these bottom-feeding GCs from facing the music for their bad behaviour.

The funny thing is, I KNOW that it was the TAB's lawyers who drafted the d--n contract that protects the bad builders, so when I'm knocking the contract, I'm also slamming some of the members of my own profession!

I actually suspect that most builders who use the TAB form contract do so because it is available to them cheaply and they don't know any more about what it really says than the homeowner does. And, so long as there are no major problems with the build - nobody is any the worse off.

But, I defy any honest person who has ever READ the TAB contract to argue with a straight face that it is a fair and balanced contract.

Among other things, it requires the homeowner to waive the "implied warranty of habitability". Basically an implied warranty of habitablity means that courts have said when two parties enter into a contract for one to build a home for the other, there is an implied understanding between them that the finished home will be inhabitable. The owner doesn't have to make sure to insist that language be put into the contract SAYING that the house must be able to be lived in when comleted...the courts will assume that since the contract was for the building of a home, the finished product must be something one can inhabit or it is simply not a "home." But, just in case someone WANTS just a shell - or something like that - to be built, courts will allow the parties to agree to waive the "implied warranty of habitability". Asking the homeowner to waive the implied warranty of habitablity might be fair if the homeowner wanted to build something totally new and different and the builder said, "you know, I can build that for you but I don't think it'll be something you can live in when I get done, are you SURE that's what you want?" But, I think you would have to agree that, except in those rare instances, a house should be inhabitable, just like a car should be driveable, a suit should be wearable, and a wedding cake should be edible.

Would you agree to buy a new car from a manufacturer who insisted that you agree to waive the "implied warranty of driveability"? Would you purchase a suit from a tailor who refused to warrant that it would be wearable? Would you order a wedding cake from a baker who refused to guarantee that it would be edible? Why would you buy a home from someone who refused to warrant that it would be habitable?????

Nevertheless, the Texas Association of Builders - with the help of its attorneys no doubt! - realized that implied warranties can be waived and that most homeowners don't ever really read or understand the contract they sign. So they put language into the form contract that waives the warranty of habitablility on every single home built under it. That means the homeowner may think he is contracting for a turn-key home but, even if the house he gets is so defective that he cannot possibly live in it - say the sewage pipe has broken in the wall so that there that raw sewage has contaminated all the insulation - the homeowner cannot argue that the builder breached the contract by building an UNIHABITABLE house. Fair?????

The TAB contract also requires that the owner agree upfront to "binding arbitration" in the event of a dispute. This doesn't sound too bad...unless you happen to know a couple of facts about binding arbitration. First, arbitration is MUCH MORE EXPENSIVE than small claims court even though most building disputes are going to be over amounts small enough have brought the claim in small claims court. Second, arbitrators are selected and PAID by the parties to the dispute which means that arbitrators make more money if they are selected for more cases. If an arbitrator wants future work, they have to make sure that the party that is more likely to bring them future business is happy. Care to guess which party is more likely to NEED to hire an arbitrator for a second or third or fourth construction dispute?

Some studies have shown that homeowners win less than 5% of claims that go to arbitration but win about half of claims that are tried in a court of law. Even those few homeowners who are nominal winners in arbitration almost never win enough money to actually repair their homes!

The TAB contract also requires that the builder receive his final payment, in full, (i.e. NO RETAINAGE) at the time of the final walk-through even though it also specifies that a punch list of items to be corrected/completed/repaired will be made at this same time. In theory the builder is supposed to return and finish the punch list. But, WHY should the unscrupulous builder bother? After all, he has already been paid in full AND the homeowner can't even sue him in small claims court due to the binding arbitration clause I already mentioned? Do you think that is fair?

I could go on and on about other clauses that are in the TAB contract but I suspect I've made my point. A builder who insists on using the TAB contract after having some of its many unfair clauses pointed out to him may not actually BE dishonest but, IMHO, neither is he the kind of straight shooter I really want to deal with. Straight shooters are willing to play on a level playing field.

You are absolutely correct about protecting your best interests. I in no way was inferring you as dishonest, just very, very careful, so to speak.

I really appreciate the lengths you are going to protect your investment. It is out of the realm of most folks to look as deeply as you have. I was trying to post a differing view, from the perspective of the situation I was familiar with.

I wish you luck, but with your background I think you may have a little hedge against some of the bad things that happen to some unfortunate homebuilders. By the way, I think I have a truck that has breached my contract of drivability... If you have any inside information on why my 05 Chevy Duramax would be having trouble with the transmission after only 42000 miles??? oh well, that is for another forum...

Best wishes,

Saftgeek

I only wish I new this a year ago. Being well read and and knowledgeable about many things, unscrupulous contractors wasn't one of them. We are in a mess and IF we ever build again we certainly will have a contract that is fair to both parties. There are so many things we wouldn't do now, that it is hard for me to imagine a contractor wanting to agree to the "would do's " . I frankly feel the system as it is, is very builder friendly and not homeowner friendly. It amazes me how some of these people sleep at night . We have been lied to, extorted from, stolen from, double billed, over billed, left on our own etc. yet he still gets his 80,000. fee at the end. We are building a very large home and the last time our builder was there was Nov. 17th. I do everything from sub-hiring, to supply finding, to quality control. I took on these jobs after it was obvious if I didn't, it would not get done. It's my house and I am fine dong what I have to do but not when the bank says you must have a contractor (construction loan) and the contractor is like this. I am sure there are good ones out there , he just doesn't happen to be building my home. We do have an attorney involved now and I am finally seeing the light at the end of the tunnel. We are very sorry it came to this, sorry we didn't prepare ahead of time. Lest you think we went with a small time builder with a poor record,we did not. We went with a well known, high end home builder. We easily could have asked around and immediately we would have found out that none of his suppliers like him, he has zero accounts at most of the supply house we needed to use, etc. etc. Happen to know now that he has a couple of other homeowners in litigation with him as well. All this to say, this list is just good advice.
I will for sure be saving it. Maybe shedding a few tears over it as well.