Do you need an inspection on a new construction home?

Dave,

My wife and I are currently building a house and wonder if we need to get a home inspection even though the home will be new? We don’t want to spend money if it isn’t necessary, but also want to make sure we go through every process correctly. If we do need an inspection, at what point in the building process should we have it done?

Thanks, Josh—Grand Junction

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Josh,

Yes. It is my recommendation that you always get an inspection (especially if the home you are purchasing is NOT new), but I will say that if there is one scenario where it might be ok to skip the home inspection it would be in the case of new construction. You have to remember that any new home has been inspected over and over and those inspections have also been inspected. To put it mildly, any new construction project has been meticulously inspected from the foundation up and this ensures that each new building has been built to local building codes and is structurally sound and mechanically safe. These inspections catch most mistakes along the way and thus limit the real effectiveness of a new home inspection for anything but minor/cosmetic items. 

A home inspection will cost somewhere between $300 -$450 and my experience is that very few substantive items are discovered on new construction home inspections. Generally items that are discovered are VERY minor, but there have been times where something more significant was found and needed to be corrected. I will also point out that virtually every one of those more significant items would have presented themselves in short order without the home inspection. From a timing perspective, you should consider the home inspection sometime around the CO, Certificate of Occupancy. If you use this time frame, you can be confident that the home will be mostly complete and all that is left will  be mostly cosmetic issues. This is also a good time to do the inspection as any items identified can just be added to the builders punch list to complete prior to close.  Although there are no guarantees with getting any home inspection, they do provide some surface level peace of mind. Also remember that every builder will provide at least a 1 year home warranty for your entire home and most of them are willing to help even after that one year if the problem proves to be a material or workmanship issue. 

“Ultimately what an inspection on a new home provides is some insurance that there are no major problems with the quality of construction, workmanship or mechanical systems.”

Ultimately what an inspection on a new home provides is some insurance that there are no major problems with the quality of construction, workmanship or mechanical systems. You have to ask yourself if the peace of mind is worth the cost? I can say that I have not seen a home inspector yet that is as qualified as the general contractor you hired to build your home and the inspections your home goes through prior to getting its certificate of occupancy have been extensive and complete. It is a call you must make, but it is completely understandable if you skip the home inspector on a brand new home! Hope this helps.

Dave Kimbrough
The Kimbrough Team

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What's Next for Grand Valley New Construction in 2019?

Dave,

It seems like a ton of new construction neighborhoods have been sprouting up and growing across the valley over the last year—which we think is a great thing! What’s next for 2019? Will the new construction market continue to grow? And what areas of the valley will we see more new neighborhoods pop up?

Thank you as always for your insight!

Johnny, Grand Junction

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Johnny,

Great question and I completely agree…new home building and new subdivisions are a great thing and a welcome sight for our local economy. New home building and new subdivisions bring excitement, good financial growth for our local businesses and just an overall positive vibe that helps set the tone for many other sectors of our local economy! Moving forward I believe we will continue to see good things on the horizon, but there are a couple of potential storm clouds that require monitoring!

Seems like each and every year (at least since 2012) we have seen steady home building growth and almost all of the building growth from 2012-2015 was by home builders purchasing and building on existing lots that were left over from the last recession. When we entered the last recession there were literally hundreds of lots that were un-built and those lots largely sat empty until we started to recover in 2012. Inexpensive foreclosures drove market prices down and created an environment that made building very difficult and not very profitable. However, once the foreclosures were in the rear view mirror, our builders started dipping their toes back into the new home business and eating through the existing lot inventory. During the recession lot prices dropped significantly and were very affordable, which was an added bonus to jump starting new home construction. Once that inventory stated to dwindle down (2015ish) many realized that there would soon be a need for new lot inventory. 

With the realization that our existing lot inventory would soon run thin, many builders and local developers started the process of creating new subdivisions and new lots.  Some big, some small, but those yellow signs started popping up all over signaling the start of the next wave of growth in the Grand Valley that continues today.

Overall residential building growth was up 20% in 2018 for a grand total of 802 residential single family building permits pulled by our local builders! Again, this is incredible news for our local economy. For some historical perspective there were over 1,200 permits pulled in 2008 at the height of the last boom. To go along with residential construction, commercial permits held their own and remained neutral in 2018 with a total of 48 commercial (47 in 2017), but the value of these permits was up nearly 30%, so the project numbers were the same but the project sizes were substantially larger! Again, nothing but good news and I expect the good news to continue into 2019! 

“There are many more subdivisions on the horizon from Fruita to Palisade and all points in between, so 2019 should again provide plenty of new subdivisions and homes to look at. ”

There are many more subdivisions on the horizon from Fruita to Palisade and all points in between, so 2019 should again provide plenty of new subdivisions and homes to look at. I believe new home construction will remain strong and we may not see another 20% gain, but we should easily see an additional 10% and with that we should continue to see good commercial growth that typically follows in a more supportive role to residential growth. Even with all of the good news and positive outlook there are always reasons to keep a watchful eye.

Interest rate increases are the low hanging fruit here, but for me the rising building costs and a slowing national economy are the two kind of under the radar things that I am keeping an eye on. Building costs are soaring and this could start to put significant pressure on affordability. A slowing national economy creates issues as it may become harder to sell in other markets as demand and prices begin to shift downward! If you sell for less when you sell, you logistically have less to spend when you buy.  Again, I do not believe these are immediate threats, but worth keeping a watchful eye. Hope this helps and onward and upward in 2019!

 Dave Kimbrough
The Kimbrough Team  

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Hiring an Experienced Builder vs. Acting as Your Own General Contractor

Grand Junction Real Estate Advice

Dear Dave,

I’d really like to build a house, but I’m not sure where to begin. I’ve looked into hiring a contractor to build it for me but, by my estimates, I think we could save about 30% if I hire all of the subcontractors myself. Do you think that is accurate? And would you recommend it? I would appreciate any advice you can provide.

Ron and Cindy - Grand Junction, CO

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Ron and Cindy,

I understand the lure of acting as the general contractor on your own job, however, I believe your estimates of a 30% savings are significantly over estimated, unless you plan on doing A LOT of the work yourself. Everyone would like to save a few bucks on a new home build, but consider that most general contractors operate on 10-15% margins. 10% would be typical and 15% would be a best case scenario.

If a build goes near perfect with few mistakes and no big surprises then 15% might be achievable however, most jobs I have been around have problems that were not predicted and many times those problems are expensive. The National Home Builders Association reported in February of 2014 that the average gross profit margin of home builders was 17.4% and after all expenses were paid the average net profit was 4.9%. Listen, in my opinion your best savings would be 17% and that is if their expertise in running a construction job site was worthless and saved you no money at all.

To obtain this number you would also have to assume that the subcontractors would give you the same or better price than the prices they give the builders. I don’t believe that in most cases that would prove to be true. One of the advantages of hiring a builder is not only their expertise in building, their knowledge and ability to manage a construction site, their vision and input, but also the pricing they get from their subcontractors. Your builder should get great pricing from his/her subcontractors because he keeps them busy and in turn can pass these cost savings on to their customers. All of this, does not take into account the time, energy, headache and heartache of you acting as the general contractor on your own job site.

“Here is my advice, if you do not have experience in acting as a general contractor on a construction site - don’t do it! Everything that goes into making a job run smooth, run on budget, run on time and ensuring that corners are not cut is worth 10-15%!”

Here is my advice, if you do not have experience in acting as a general contractor on a construction site - don’t do it! Everything that goes into making a job run smooth, run on budget, run on time and ensuring that corners are not cut is worth 10-15%! I can also tell you that most of the time when I see a home where the home owner was the general contractor it shows! Listen, I say this to my kids all the time, little things add up to big things. When the little details are overlooked or not given the constant attention they deserve, the end product will suffer and not be nearly as good as it could be! An experienced home builder is a master in managing the details and making sure your finished product is the best that it can be.

When it comes down to it, building a new home is a huge project. Put it in the hands of a professional. If I need heart surgery I am not going to my family doc and handing him/her a knife - not because they could not do it, but because it is not what they do every day! The hiring of the right builder will be worth the money and the proof will be in your finished product!

Dave Kimbrough
The Kimbrough Team

Most valuable upgrades in new construction homes?

Dave,

My husband and I are buying a new construction home and are very excited to build a house we love. We’ve decided on our lot and are about to meet with our builder to decide on some major aspects of the home. Our question for you is what upgrades should we go for? What holds the most value?  High end finishes vs larger square footage?  I’m sure our builder will also have an opinion, but we’d love to hear what you think as well!

Thanks,
Becca, Grand Junction

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Becca,

Great question! There are many aspects to look at when deciding what lot to choose and which floor plan will best fit your family. Remember to start with the basics and work from there. By basics I mean start with which floor plan will work best. 

When choosing a floor plan remember to stick with a few common features that will help retain and increase future value. Some simple things that I believe are here to stay are floor plans with a great room concept design and feature raised or vaulted ceilings, split bedroom concept (master bedroom on one side and secondary bedrooms on the other side of the house), large kitchens, luxury master baths and a 3 car garage. If you are lucky enough to incorporate all these into your floor plan, consider yourself blessed! If you can’t get them all, you will need to prioritize which of these features are most important for your family. Also remember that today’s open concept floor plans live larger than their square foot size so don’t be surprised if a smaller plan lives larger than its actual size. If you are able to find a smaller plan that lives large you can use some of the savings and splurge a little on your finishes. After you have chosen your floor plan, stick with more basics by focusing on how to best position your home on the lot.

“Keep in mind that you will boost your long term value if you position your home on the lot leaving maximum space along the garage side to be used for RV parking. ”

If you have options of how to best position your home on the lot you will want to focus on how to maximize back yard, privacy and RV parking. Keep in mind that you will boost your long term value if you position your home on the lot leaving maximum space along the garage side to be used for RV parking. This is an easy one to miss, but if the lot allows enough room to make RV parking make sure you take advantage of it, as it can be a make or break feature for some buyers. Lots are getting smaller and pushing your home forward on the lot can help create a few more feet in the back yard and even a few feet can make a big difference.  After you have conquered the basics of the lot and floor plan, focus on the finishes!

Picking the finishes for your home is the fun part and this is where you will give your home some personality. When you start picking finishes ask yourself how long you are planning on living there? If you plan on this being your long-term home then you might pick finishes that focus more on what you want and less on what will prove easier to sell when the time comes. If you are planning on being there a few years and then moving up or potentially moving out then you might stick closer to a conservative middle ground than on the edge of new trends! Timeless finishes are wood and tile floors, granite counter tops, neutral carpet and wall colors (maybe with a splash of color on an accent wall). Hard to go wrong with any of these and they are all for maintaining and enhancing future home value. Most importantly have fun with the process and choose things that you love!

Lastly, for all the Mom’s out there enjoy your day! For every person reading this column, take time to thank your mom for all she has done. Remember, without her you would not be here! Happy Mothers Day!!

Dave Kimbrough
The Kimbrough Team

How do we find the best builder for our house?

Dave,

We have been planning to build our new home, which has already been designed. We have already purchased our property and have been talking to people and getting the names of reputable builders with the intent to interview them and hopefully get started sometime this summer. We have been saving towards this goal, but we are nervous that we may have not saved enough. A friend of ours went through this process a few years back and the builder he used was nearly 60 days late in completing the job and 10-15 % over budget. How can we protect ourselves from falling victim to the same problem? Obviously we will not use the same builder our friend did.

Best regards,

Bill, Grand Junction

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Bill,

As always the solution is really quite simple, but easily overlooked. I too have fallen victim to the promise of a 8 month job that turned into 18 months and escalated to 20% over budget. When it happened to us it was one of the most stressful and frustrating experiences of my life.  The stress of when will the job end and how in the world will we pay for the overages, was constantly stressing us out. The best way not to fall victim is to get everything in writing prior to the start of your job.  Make sure the contract you sign spells everything out, in detail. If you do not have a detailed contract, bid and schedule then I would move on to the next builder. If you feel more comfortable have an attorney look the contract over to make sure all your bases are covered.

I am one of those who has an innate trust of people, call me naive if you wish, but it is one of my short comings to believe what someone tells me. I have learned, or should I say am still learning, to trust what is in writing and ask the hard questions up front. If you have already had your home designed and have building plans then you should be able to have a couple of builders put your job out for bid to their subs and get a number back that is fairly tight. In their bid number you should have allowances for lighting, flooring, fixtures etc. When you look over those numbers you will need to go out to the stores and see if the allowances are going to cover your tastes. In my experience where you see the numbers really start to escalate are in the finishes. If the builder only budgeted Granite tile for the counter tops and you wanted Slab Granite, you can easily do some serious budget damage with that one upgrade. Like lighting for instance, when we recently did a remodel our builder budgeted X for lighting, but when we looked it over we told him to double it. What he did not know was, we are lighting freaks! He could have never known that, but luckily we knew it about ourselves and thus averted blowing our lighting budget. Check the numbers up and down and make sure that you can live with the allowances the builder has set forth in the bid for your job on all your finishes.

If I were to do it again, which I may never do, I would make sure that the builder provided a detailed building schedule and I would build in incentives to make sure that the schedule is met. Let’s face it, one way to get what you want is to provide incentives and bonuses for goals that are met. I would easily pay my builder 3% more to come in on budget and on time than save the 3% and suffer through 2 months of inconvenience and coming in over budget. Set it up as a win/win for everyone involved.

“Lastly, check references and ask the builder what happens when he comes in over budget? What percentage of jobs has he had that are on time and on budget? When your previous jobs have gone over schedule, what were the delays caused by?”

Lastly, check references and ask the builder what happens when he comes in over budget? What percentage of jobs has he had that are on time and on budget? When your previous jobs have gone over schedule, what were the delays caused by? Do you have 5 references?  When you call the references, drill them with questions about the experience. Would they use the builder again? Would they refer them to their own family? If they could change 3 things, what would they have been? These are all questions that will lead you down the path of if they are the right builder. The more homework you do, the better you will generally do on the test! : )

Dave Kimbrough
The Kimbrough Team