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

Outdoor Living Features with Excellent & Poor Resale Value

Dave,

We want to do some outside renovation to our home this spring/summer and are considering all of our options. In your experience, what do you think people value the most in outdoor living spaces?

We’re considering all options, from a built in BBQ, to a hot tub, maybe even a pool. We enjoy being outside in our wonderful Colorado weather and want to look ahead to when we sell our home as we undertake this project.

Thank you for your input.

Todd and Lacey - Fruita, CO

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Todd & Lacey,

I think any improvements to your outdoor living area will be beneficial and be a selling feature when you eventually sell your home. Most important I would suggest you evaluate your lifestyle and the family activities that you enjoy most and design your new outdoor living space to fit what your family enjoys most. 

This question is with perfect timing, I was just speaking with one of our builders this week about outdoor living spaces and how valuable they are to consumers. This value is magnified in our location, because of the wonderful weather we enjoy 8 months of the year (virtually all 12 months this year!). An outdoor deck or patio with pergola and built in BBQ or fire pit can be a neighborhood gathering area and the spontaneous parties with friends and family will provide memories that can last forever. This kind of upgrade is very valuable and fairly cost effective in the grand scheme of things and generally found to be of added value to most any home buyer. Hot tubs and pools can be much more polarizing.

If you are considering a hot tub remember they are often one of those, “we can take it or leave it items” for most buyers. It is my experience that a hot tub generally does not move the needle very far in either direction when it comes to perceived value. A pool is one feature that is VERY polarizing. If you are going to put in a pool, do so for your own enjoyment. Do not add a pool looking for a large return on your investment down the road, because it is likely not going to be there. People are either pool people or they are not…it is that simple. I do find that pools are becoming more valuable and sought after by consumers, but it is a specific subset of them, not the majority. As I discussed this week with a friend of mine, your general return on a pool is 50% max, and that can go up or down depending on the price of your home.

“The bottom line is this, whatever feature you decide to install will hopefully be with your family’s enjoyment in mind and the time you spend using it will further your relationships and really what more could you ask for!”

The bottom line is this, whatever feature you decide to install will hopefully be with your family’s enjoyment in mind and the time you spend using it will further your relationships and really what more could you ask for! Sometimes we do things that might not make financial sense, because they are done for pure enjoyment and there is nothing wrong with that! Life experiences and memories made are what these features are all about! Have a blast this summer and enjoy whatever you decide to create!

Dave Kimbrough
The Kimbrough Team

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Numerous Showings, Great Price & Feedback, But No Offers...What Gives?

Dave,

Our house is priced right, it has received great feedback, great staging on the reviews and 19 showings in 2 weeks. No offers…what now?

Art, location withheld

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Art,

AWESOME question! First, hats off to your real estate agent…19 showings in 2 weeks during Christmas and New Year is incredible. You should really take a minute, if you have not already done so, and thank them for their work. I am honestly a little afraid to print this question as some of my clients may wonder what I am doing wrong and wonder why they are not getting 19 showings in 2 weeks. Generating traffic during that 2 week period is not easy! That being said, you have a couple options and some things to ponder.

It is clear from the traffic that your home shows well and is appealing to online home buyers, so you can feel confident that the online pictures are doing their job. It is also clear that your price must appear very reasonable, heck even a pretty good deal, or you would not have the revolving door syndrome that you are currently living through. I do wonder if you have had any 2nd showings? If you have, then that would change things a bit…for the better. It sounds like your feedback has been very good, bordering on complementary and that is typically a wonderful sign. From what limited information that has been provided, everything pretty much smells like roses and if EVERYTHING smells like roses you would have received a contract, right?

Statistically speaking a home seller should receive an offer after somewhere in the neighborhood of 10-12 showings, on average. I have always evaluated our listings using about 12 showings as the bar for an offer, but sometimes as few as 8 or as many as 15 depending on the feedback. From your feedback I would say you are right to be pondering your next step. I have heard this said, and I have since repeated it many times, you can control three things in real estate….condition, marketing and price. After those three things, there is not much you can control in the home selling process so I would do my best to focus on those three things and let everything else sort itself out. It sounds like your home is being marketed properly or you would not have had 19 showings. Your home must be in good condition or you would be hearing things like “deferred maintenance”, “dirty”, “cluttered” or “needs a little TLC”. It is clear you are not hearing this, so the condition of your home must be very good. This leaves price as the only other thing you can control!

Ugh…the dreaded price discussion. I know…you said your house is priced right! Typically knowing what little you have told me I would battle you on this, but honestly with 19 showings in 2 weeks over Christmas and New Year, it must appear to the consumer to be “priced right” or they would not come like lemmings marching to the cliff. If it’s in good condition, it’s showing 1.5 times a day over the slowest 2 weeks of the year and is “priced right” why is it not selling? Actually that is a very good question! I would guess that you have a specific property feature, whether it be floor plan obsolescence, too many stairs, a busy road, un-kept/ugly neighbor, barking dogs from neighboring yards or whatever odd thing you can think of that is holding your home back and ultimately none of these are easily fixed. All of these items boil down to one of two things…price or patience.

“At this juncture I would encourage guarded patience and if you have had one or two second showings, I would feel even better that you just need to find the right butt for the saddle.”

At this juncture I would encourage guarded patience and if you have had one or two second showings, I would feel even better that you just need to find the right butt for the saddle. If it’s a busy road, then you need a buyer from a big city. If it’s barking dogs, you need a dog lover or someone hard of hearing.  If it’s too many stairs, you need people who see stairs as a fitness aid. I hope you see where I am going. You just need the right butt for your saddle and sometimes it just takes a little more time than we would anticipate or want. If you do not have the time or the patience, then adjust your price and get it sold!   My bet is you are not very far off and your buyer is closer than you may think. Hang in there a bit longer and I bet you find the perfect fit for your saddle.

Dave Kimbrough
The Kimbrough Team

Have a Question? Ask Dave!

2018 Predictions for the Grand Junction Real Estate Market

Dave,

I know you have answered this question before, however I would love to hear your answer—so hopefully I’ll be the one to ask it this year. What are your real estate market predictions for 2018? I’ve seen several news stories throughout the year that new construction in the valley appears to be booming. Do you think it will continue in 2018? What other market trends do you think we’ll see?

Cheers to the New Year!
Doug, Grand Junction

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Doug,

Cheers to the New Year is absolutely right, but also cheers to last year! 2017 was the best real estate year we have seen (in number of sales and total sales volume) since 2008! It is hard to believe that 2008 is nearly 10 years in the rear view mirror…I remember in 2010 lying awake at night and wondering if the misery would ever end, but end it did and the future of the Grand Valley is bright! 

A quick recap. In 2017 we consistently saw sizeable market gains (price increases) and low inventory levels in the under $350k housing market and much of this upward push was driven by new construction. When all the final numbers come in, we will see construction numbers come in at least 30% higher than last year and the majority of the new homes being built are in that under $300,000 price range. Don’t be led to believe that all the partying was done under $350,000, we even had some fair to modest gains in the higher end homes (those between $400-$700k). The inventory of homes over $700k is still moving slow with few buyers really working those upper end price points. Keep in mind that I believe there is a “trickle up” effect in our housing market, meaning as our market gains strength in the lower end price ranges it will slowly build up the higher priced homes over time. The upper end will come back, but only as the strength in the market is built and sustained from the bottom up. We also saw the demand for investment properties, residential or commercial, really build some solid momentum and this segment continues to remain very active with good properties in high demand.

In 2018 I believe…

1. We will continue to see the entry level price ranges (under $300,000) remain very strong with low inventory levels that require buyers to be very aggressive and competitive when buying. This segment of the market will remain strong as our jobs and wages fuel these entry level price points.
   

2. We will see the upper end home market continue to post modest increases and gain incremental sales growth year over year. As more people move in from booming markets, they will be willing to open up their pocketbooks for nicer, more expensive homes.
   

3. We will see new construction play a larger part in the market as we are on the cusp of having a robust inventory of lots. These lots will emerge from the development process between July of 2018 and July of 2019. While lots are hard to find now, choice will soon be much more plentiful with ample choices for buyers. I believe this will lead to a leveling off of lot prices and hopefully will open up some new home opportunities below $200,000. We need more affordable housing options.
   

4. We will see the demand for investment properties remain strong! As the stock market surges to a new record level every month, many investors will seek a safer haven and I believe that safer haven will be real estate.
   

5. We will see interest rates climb a little, but will still be between 4.5 & 4.75% by year's end and have little to no impact on the housing market.
   

6. We will see that the secret of the Western Slope is getting out. Our area is going to get more and more popular! As big cities boom and people become exhausted with all that large metro areas entail, the lure and appeal of a slower pace of life paired with an incredible outdoor lifestyle will prove too attractive for many to pass up. Like in the movie Field of Dreams, build it and they will come…trust me, they will come!

I realize I am not stepping out on a very high ledge, but ultimately I believe our immediate future (baring some unforeseen world event) is very bright! We are blessed to live in one of the best places I have ever been. Every time I go on vacation to somewhere “amazing”, I come home and realize that we live somewhere “amazing”. The word is getting out. Buckle up and enjoy the ride!

Happy New Year,

Dave Kimbrough 

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