Owner Builders

Owner Builder

With the growing number of home shows like Home & Garden TV's, PBS's long running This Old House and Bob Vila's Home Again, Your New House and Home Time, some Buyers will consider being an "Owner Builder" rather than contract with a builder/General Contractor to build their home. I must be upfront that although I enjoy watching the building shows and learning about the latest in home development and construction I do not believe that being an owner builder is the best option, both emotionally and financially.

There are several things you need to consider before taking on this task. Realize that owner builder issues will fall out of the spectrum of this web site and if you do decide to be an owner builder the internet can be a good resource for you.

"Builders generally make between 20% to 30% gross profit on an individual residence. "

One of the primary reasons individuals look to being an owner builder is for cost savings. One of the biggest misconceptions consumers have of the building industry is that builders and general contractors have large profit margins built into the construction of a family residence. Builders generally make between 20% to 30% gross profit on an individual residence. Out of that a builder must pay for all their staff, expenses and overhead. Builders generally will get quantity discounts on materials and labor and suppliers and sub-contractors are willing to do this due to the volume and repeat business they given. Individuals generally do not have this kind of leverage and as such will not get the same savings a builder will for the same job. Unless the individual is experienced with construction issues and problems that can and do come up during the building period any cost savings they expected could be wiped out in one mistake. Keep in mind a builder generally contracts for a specific amount for building the residence in whole. If the job costs the builder more because of unforeseen issues or problems usually it is at the builders' cost and the buyer is protected.

If you are needing a bank loan you may find it difficult to get a lender to underwrite a loan to an owner builder. Even if you were a builder in another part of the country, banks are leery about allowing owners not familiar with building codes and practices in their local area to build a home with the bank's money.

If you do not have residential construction experience or have experience with construction but not in your local area then you should have a builder in your area build your home for you.

Saving Money without Being the Owner Builder

Talk to your builder about "sweat equity" work. Your builder might be open to reducing some cost of construction if you agree to perform non construction trade work, such as cleaning or other type of work.
Ask your builder about building your home under a "cost plus" agreement. This can allow you to choose, negotiate and make construction decisions as to tradesmen, materials, etc. In such an arrangement the entire budget and true cost of every item or work is spelled out to you. The builders are also guaranteed a percentage of the total gross cost of the home.

Resource Links

Top Ten Signs You're Becoming an Owner-Builder (humorous)
Owner Builder Loan Services
Owner Builder Services - Good Resource for the Owner Builder
Owner Builder Book - Has some goof forums for Owner Builders

Last Updated: August 06, 2005 09:58 PM