Budget
The budget drives everything and everyone has a budget. The budget may be dictated by the bank or by your personal comfort level. Another item, which can affect your budget, is the reasonable fair market value for the home you are contemplating. Be prepared to discuss your budget constraints frankly with your designer and builder. Do this early on so that the guidelines for the rest of the process can be established. I hope that when you finish this review, you will understand that this exercise is done for no reason if the team does not have a budget guideline to go by. You should establish a budget ceiling and then use your professional team to find out how much lot and home you can fit into those limits. Some homebuyers try to be coy and not reveal their budget. Their only concern is to know how much per square foot a builder charges for the homes he builds. To this I would suggest an alternate scenario to consider. Picture a custom builder as if he were an automobile manufacture who builds everything from the bottom line Chevy to a top of the line Mercedes. A true custom home builder should have the ability to build this range of size and quality. Would you ask a "custom" automobile manufacture how much they charge per pound for a car? Probably not. The question would be nearly impossible to answer. The actual price for the car (price per pound) depends on what is included in the car and its relative quality. The same is true for a home.

The budget is composed of 5 basic elements- land, land development, home plans, specifications, and financing.

Land
The land is the single largest line item in any construction budget. In our area it usually ends up being somewhere between ½ and ¼ of the overall price of the home. If this line item is handled incorrectly, then the remaining elements of the budget will be seriously impacted. The single biggest mistake that the customer makes is to go out and purchase a lot without considering the other elements of the budget. If a person pays too much for the lot in relationship to the rest of the budget, or if they pick up an apparently cheap lot that has large land development costs, there may not be enough money remaining in the budget to meet the minimum standards for the home that were envisioned. This is not an anomaly and happens far too often when people purchase property without consulting a construction professional to put together the entire budget first. It is our recommendation that a customer meets with a design and building professional (or even better a design/builder like (Piazza Construction Inc.) before embarking on a land search. You need to put together a budget concept to see approximately what the home and required finishing will cost so that it can be determined what is left in the budget to purchase the property. At Piazza Construction, we encourage customers to have us walk their potential lot(s) so that we can give an evaluation of how the lot and its price might fit into their overall budget and construction plan.

Land Development
Land development is probably the least understood area of the entire process. It is not only misunderstood by the client but also by a large number of builders. If you can imagine placing a hook on top of the home and picking it up from the lot all the work that remains on the site with the home removed is "Land Development" This includes excavation, clearing trees, septic fields, sewer, water, bringing in and connecting utilities, driveways and permits. On a typical lot in Skagit County it generally runs between $25,000 and $60,000. As you can see this could easily be the second largest line item in the overall budget right behind the cost of the lot. Another consideration in selecting you lot's location is the possible impact fees (i.e. schools, parks, sewer, traffic, fire, etc.) that are charged in that jurisdiction and the wide variation of costs from jurisdiction to jurisdicion. We feel that it is unconscionable for a builder to ask an owner to go into the custom home process without having a very good idea as to what the overall land development costs are going to be.

Home Plans
Home plans can be obtained in many different ways. You can engage an architect or a design/builder to create your plans. Either one can make modifications on some existing plans that they own or start with a blank piece of paper and create a totally unique design. Plans can also be obtained from plan books that are available in most bookstores however these plans rarely conform to local building techniques, structural engineering requirements or they may not fit on your site and would need to be redrawn to fit those requirements. Plans can also be created by combining many different ideas from many different sources into a unique plan that fits your needs. Many times the custom home plan process is actually a combination of the above. The home design process should not start until an overall budget review has been agreed upon between the owner and the design team. Before the first pencil meets the paper, the builder/ designer and the owner must come to a general agreement as to what the overall size of the home should be, the general specifications and to what the overall budget is for the structure and finishing items. National statistics indicate that if this policy is not followed, the money and time put into the design process probably will not end up in a home being built. I have had potential clients come to my office that have already purchased their lot and have a complete set of plans end up never building their dream home, because the overall cost to build the plan vastly exceeds their budget. Unfortunately, this happens all too often, but with the aid of an experienced design team, like Piazza Construction, we can help guard against doing this.

Perhaps, the most infectious disease in the custom home process is the "while you are at it" syndrome. Everyone is guilty of this including architects, builders and home owners. The syndrome works like this, "While you are at it", let's add 4' to the master bedroom, because that would really be nice. "While you are at it", lets make the kitchen bigger and add and island. "While you are at it", lets add a bonus room over the garage, etc. etc. We find that this area is where the architects and the design/builders are really separated. Unfortunately, there are some architects who do not have the discipline to say no to budget busting ideas and/or the owners will not listen to them. The project that starts at 3000 sq ft ends up being 4200 sq ft and everyone is amazed when they consult a builder and find out that they are decidedly over budget. I should point out that architects generally make their living by drawing and not building. A design/builder, however, realize that their income is based on actually building the home. It is in the design/builder (as well as the owners) best interest to make sure that the entire design process ends up with a plan and specifications that fall within the owners budget. Trust me, you don't want to put your heart and soul in to spending many thousands of dollars and several weeks of time designing your dream home only to find out that it will never be built. The construction process, like life itself, is a series of compromises. Those compromises should be made at the beginning of the design and specification process and not as an after thought when the wish list has been finalized and the plans are complete. Cost surprises at the end of the design process are not fun.

Specification /Selections
Many of the technical selection items, such as what kind of lumber to use, how the plumbing and heating systems are installed, etc. that are necessary to put the home together can be made by your building contractor or designer. Most homeowners are not knowledgeable enough to make these decisions, so it is wise to pick an experienced and trustworthy builder. He can advise you in this area and explain to you the relative quality of the various ways to put a home together and its associated costs. The fun part of the selection process includes the plumbing fixtures, light fixtures, cabinets, counter tops and so forth. Once again, if the budget has been carefully monitored up to the point of making the selection, then there should be enough money left in the budget to put the finishing touches on the home that were envisioned.

An improperly handled budget, where the cost of the lot is too high, the land development cost were unknown until it was too late, and the home design has grown larger than the budget can handle, the selection and finishing items will suffer. This does not have to happen if the whole budget process is carefully evaluated at the beginning so that enough money is set aside to do the nice light fixtures, marble, appliances, cabinets, etc., that transform a house into the dream home you have envisioned.

There are two stages in specifications- the budget stage and the final stage. Everyone has heard about budget overruns in the finishing areas. This sometimes leads to an ill-advised process of the owner trying to pick every knob and light bulb before the construction process starts. I can tell you that in 36 years of business we have not had a single customer who has been able to do this without going back and completely revisited all of their selections and putting themselves through the process two and three times. We believe the correct way to handle the specification process is as follows:

The designer/builder can block out the various finishing areas and you can address those one by one. A reasonable quantity, quality, and price needs to be allotted to each of the areas to make sure you preserve enough money in the budget, so when it comes to finishing you can put into your home the items you had envisioned. You can help this stage by creating a simple file with ideas taken from your previous home, magazines, visits to stores, etc. File the photos by category (kitchen, plumbing, trim, etc.) Do not wear yourself out by trying to make your final decisions at the budget stage of construction. You will burn yourself out and will change your mind multiple times as you see the home being built. We help our clients to get a reasonable "education" on each of the finishing areas so they can then agree with the designer/builder as to how much to budget for each particular area. For instance, in the area of appliances, the thousands of appliances available can confuse any purchaser. In our initial budget process, we would have a 15-minute discussion as to what level of quality of appliances you think you are looking for and then we offer suggestions that fit into that category. We will then put prices on each of these appliances for you and show you a total we suggest be included as a line item (allowance) in the budget to cover appliances. We sometimes recommend bumping the allowance 10% to 15% to allow for some latitude in the selection for upgrades should you decide to do this later.

Once the entire budget is put together, you can revisit each of the areas in a casual and informed fashion to refine the selection in plenty of time so that the product can be ordered and delivered within the construction schedule. We have our customers start the selection process early, once they are done the owner can go back and make trade offs from one selection category to another to come up with a final specification that meets their needs at the agreed upon budget. Our goal in Piazza Construction is to have the allowance trade offs "revenue neutral" at the end of the job, so the owner does not run over the agreed upon budget. It is infrequent that any of our clients run over more than 3% to 5%. The overruns, when they come, are generally caused by the client completely changing their minds as to the level of finishing that was originally agreed upon. Many customers are concerned about being penalized for making changes as the process proceeds. If you selected a good, quality, true custom builder as your contractor, there should no monetary penalty for you to change your mind on the refrigerator as often as you want, up to the date that we actually place the order. We are, after all, a custom builder and custom means unrestricted choices.

Financing
Financing is the last item in the budget process, but should be thought of first. Many times the amount the banks will finance drives the overall budget. In most cases the finance part of the overall project is a small percentage of the cost and is really not a very big line item in the over all budget. Custom home financing in Washington is generally handled as follows. With the cooperation of the builder, the owner will obtain the loan to acquire the building lot, build the home and provide for permanent financing once the home is complete. This is typically referred to as a "land acquisition/construction/permanent loan." This is a very specialized area of financing and we strongly recommend that you interview lenders that specialize in this area of financing. We have witnessed unnecessary delays and expense stories when clients went to their everyday bank for financing and end up having their construction delayed 6 months or more, because the bank was not familiar with this type of special financing. We provide you with a list of good lending institutions that will treat you fairly and will gladly have an initial no obligation meeting with you to explain the process. They can also quickly give you an idea as to how much they will finance and what the costs to you will be.

Team Members /Designer
The next area to review is the Construction Team and their duties. The team is composed of the owner, designer, builder, and eventually the subcontractors and the suppliers.

Owner
The owner is the most important part of the Team and their duties. Referring to the intuitively obvious. These duties include communicating to the designer/builder of what they are envisioning in their new home and how much they are willing to spend. Duties also include communicating to the designer/builder of what they are envisioning in their new home and how much they are willing to spend. Duties also include making selections on a timely basis, funding the project, and cooperating with the rest of the team during the process.

Designer
The designer has the obligation of putting the dream (not those of the designer) on paper in a professional manner so it can be understood by the other professionals who will be charged with actually building the home, within the agreed upon budget and in a reasonable time frame. From "scratch" plans can easily run $20,000-$40,000 with an architect, a design/builder can start from "scratch" for an average set of plans for $5,000.00 or modify an existing set of plans for relatively small charge.

Before you decide on your designer, find out if they use the computer aided design program (CAD ). This can greatly accelerate the design process (and lower costs) as well as making changes easy. It is a custom home isn't it? Also, find out who actually does the design. At Piazza Construction our design team does 80% of the homes we build, working directly with the clients. If you have to go through third parties the cost and time involved can get out of hand.

Builder
The builder should have the total responsibility for the selection of the subcontractor and suppliers, who will work for the builder to meet the client's goal. The builder should also work with the clients as early as possible to establish the budget that will guide the entire process. The builder should also work with the owner in the selection process to make sure the items chosen are within budget and on site when the tradesmen need them to keep the flow of the project moving.

Subcontractor and Suppliers
Subcontractor and suppliers should also be a part of the Builders Construction Team and not someone who happens to be "low bid" on your home. Many times these trades are looked at as subordinate to the overall process and this attitude can lead to lack of cooperation, an unstable schedule, and poor quality. At Piazza Construction, we have selected some of the finest tradesmen in the Snohomish, Island, and Skagit Counties and use them exclusively for each of our operations. For instance, we have chosen the best drywall contractor available and we have negotiated a fair price for each sheet of drywall to be installed according to our schedule in a workmanship like manner that will meet Piazza Constructions high standard of finishing. We know we can have drywall installed cheaper, but we also know that we cannot get the same quality if we "low bid" each job, hop from subcontractor to subcontractor, and try to deny the drywall man a reasonable profit for the high quality work we expect of him. By making the subcontractors and suppliers a part of the team, we are able to get the best prices for top quality work and keep the jobs on schedule. Our drywall contractor has been with us for over 20 years and he knows what we expect and knows he will be treated fairly and will always get paid on time. He gives us great prices, top quality work, and always finishes on time. When the heating man, electrician, plumber, etc work side by side year after year, camaraderie is created on our jobs that leads to a pleasant job site. This reflects positively on the quality of the final product.

Decorator / Interior designer
Not many of our clients engage this type of professional, because we provide a lot of this through the services in house. A decorator or interior designer can be helpful in making selections and in helping define the "look "you want the home to have. As with an architect, you have to make absolutely certain that they understand your budget parameters and the importance of making selections are made on time. It is important to remember that they are assistants in the process and you and you alone, have the ultimate responsibility of making sure your selections are made on time. We would encourage you to spend as much time researching your interior designer as you would your builder. You want to make sure that you select a professional who has experience with new construction, and understands the importance of a budget and schedule.

Scheduling
Every job has a schedule. Even if a customer says they are not in a rush, we eventually find they do in fact have a schedule when they evaluate the cost of money and how it affects a job which drags on forever. How long a home will take to build depends on the difficulty of the land development, the complexity of the structure of the home, its size, and the level of finishing that will go into the final home. The schedule is also driven by the owner's cooperation in making selections in a timely fashion so the product can be on site when needed for installation. As a rule of thumb, on a reasonable lot with reasonable design you should figure a minimum of 6 to 7 months to finish a custom home that is under 4,000 of finished square feet. For every thousand square feet over 4000, you should add about a month to the construction schedule. So a 6,000 finished square foot home should take about 8 to 9 months. The schedule should be specifically addressed in the contract, as well as the duties of the owner, contractor and other team players so a schedule can be established and adhered to by all parties. At Piazza Construction, we also include a start and finish schedule with our contract and if your selections are on time, we will not deliver the home late. (Check are references). We also include a selection schedule in our contract so you know up front when your decisions will be needed.

Warranty
Many customers are not aware of what the warranty is they are getting until the end of the project. We think that it is irresponsible for any builder not to discuss the warranty at the initial stages of negotiations and to include the warranty in the contract documents. A warranty, however, is only a piece of paper and is only as good as the builder who is behind it. Many of the warranty heartaches we hear about in the industry are the direct function of the owner choosing an experienced contractor who has a poor track record of building a true quality home and an even worse track record of honoring their commitments to fix the legitimate complaints of their customers. In choosing your contractor, you should focus carefully on the builder's reputation of honoring their commitments to the owner once they have paid and the owners have occupied the home.

Change Order
Change Orders are unfortunately looked on by many as the "dirty words" of the construction business. This should not be the case. A true custom builder should be willing to customize the home as the building progress. At Piazza Construction, we are willing to customize the home at the initial stages of the design or any time during the construction progress as long as we are reasonably compensated for efforts. If we can move a closet from one side of a bedroom to the other with a pencil (on the plans) before it is built then there is little or no charge for this service. If however, we have to move the closet from one side of the bedroom to another with a sledge hammer after it has been framed, dry walled and painted, then there will be a charge commensurate with the amount effort the workman have to extend and how the change delays the project. As a result of the step by step process we use to guide our clients, tearing things out is a rare occurrence at Piazza Construction. We pride ourselves in educating our customers in the whole process as we proceed so that they can make sound decisions in a timely fashion so that everything goes in right the fist time. The change order process and the associated cost should be clearly defined in the contract with unit prices agreed upon up front so that there are no disagreements between the parties when a change order occurs. Most of our change orders are revenue neutral. When a customer makes a selection decisions or changes such a shifting from GE refrigerator to one that costs essentially the same, a customer should not be penalized for this kind of change if it is made early enough prior to the orders being placed.

Contract
The contract documents serve as the road map for the construction process once the budget is agreed upon and the design is complete. A competent custom home builder who has been in business for a period of time should be able to provide you with a fair contract that will accurately direct the course of events throughout the construction process. You should expect the contract to be one sided in favor of the builder. This is because; the owner is usually a neophyte at this process, but the builder
should be an expert in the home building trade. The builder should be held responsible for all that accrue in the construction of the home. We at Piazza Construction pride ourselves in having a contract that we have refined since 1973 that is clear, concise and fair to all parties. Once
we finalize our contract with you we encourage you to take it to your attorney and get their opinion. In many cases, our customer's attorney's advice their clients that if we are as professional in our construction as we are in our contract presentation they have made the decision in a contractor. When you come to Piazza Construction, do not ask for our "boiler plate" contract, because we do not have one. We have multiple selection contract basis which is customized for each owner and which is driven by their lot, the type of home and the finishing.

Contract formats
Construction contracts take several forms, but these 3 are the most popular.

Turnkey
Most custom home contract in Washington is referred to as 'turnkey". In this contract format, the owner and builder agree what will be in the home and the contractor gives a fixed price to complete the work in the contract documents.

Fixed Fee
This is another contract format where a detailed fixed dollar amount is agreed upon that the contractor will receive for his work. This is not generally used in this area because the fixed fee will change if the owner changes the scope of the work. A fixed fee also generally means that the owner is responsible for whatever the cost of a job ends up being which can be dangerous without a budget guarantee from the contractor.

Cost Plus
There are several forms of Cost Plus Contracts. The most common form of a Cost Plus Contract is where we give you an estimate of the cost of the home based on a set of specifications much like a fixed price contract. Much like a fixed priced contract, if the home were to be built per those specifications the cost of the home would come in at the estimated price. In a cost plus scenario you would pay only the exact invoice costs plus either an agreed upon fixed overhead and profit or an agreed upon percentage of the costs. This contract type is best suited to the client that will make numerous changes or is undecided in their selections and wants the flexibility to make those changes. The disadvantages of the Cost Plus Contract are the schedule is a continual moving target plus the end budget is also a continual moving target. The Cost Plus Contract is best suited for the client that is not tied to a strict budget, bank loan or schedule.

Summary
Hopefully this outline has made you more comfortable with the over all custom homes process. I will repeat what I said initially in that there is no way the entire process can be explained to the uninitiated in the short space and time. Your best key to a successful custom home process is to do your home work and check references extensively so you choose a good, competent, experienced custom homebuilder to guarantee your dreams will become a reality in a cost effective, timely enjoyable fashion. We are available to go over your plans and lot or to start from scratch - give us a call and let's get starte