Buyer Beware! This poor woman was ripped off for $80,000.

Buyer Beware!  This poor woman was ripped off for $80,000.  Check out our interview on how to protect yourself from unlicensed and unscrupulous builders.

A Surrey woman is fighting to get some of her money back after discovering the builder she hired isn’t licensed as a new home builder in British Columbia.

Queency Marfa says she didn’t learn this critical information until after she signed the deal, and now she’s discovered there are a whole lot of things she should have done differently.

For example, she should have checked the licensing of the builder, as well as had an expert or real estate lawyer take a look at her contract before she signed it.
The Home Builders Association says there’s a lot more to being a good home builder than knowing how to swing a hammer and use a saw – you need business skills too. The company you hire needs to meet regulations and provide up to date paperwork and invoicing.

Larry Clay, VP of the Greater Vancouver Home Builders’ Association, took a closer look at Marfa’s contract and immediately saw a red flag with the warranty the builder was offering.

“This is not a licensed builder providing a 2-5-10 warranty,” Clay said, nothing this means a two-year warranty on labour and materials, five on the building envelope, and 10 years on the structure.

The 2-5-10 warranty is the strongest defect insurance you can get on a new home in Canada, but not every builder can offer one. Only a licensed residential builder can offer a warranty, and it needs to be registered with BC’s Home Protection Office and held by a third-party company – not just the builder.

Clay was also concerned about the 40 per cent down payment required in the contract, given that 10 per cent is the industry standard. He says a home building contract should be very specific, laying out a project schedule and terms of payment. Once construction beings, the consumer should be provided detailed job cost reports and expect weekly project status updates along with receipts for money spent.

Marfa says she’s paid about $80,000 to Steel Dragon Construction Ltd., which is not a licensed builder. Her old house has been demolished, and plans were purchased and submitted for permitting of the new home, but Marfa has been given no receipts for the work that has been done.

“I have no proof of anything of what [the company] has paid and what [the company] has done with the money,” Marfa said.

“If you look at my scope, my scope is going to be hundreds of pages,” says Clay. He offers homebuyers, signed agreements to make sure that workers are paid. Ten percent of the money is held back from subcontractors and kept in trust to protect the consumers from liens. He says only 10 percent of builders offer holdback accounts, but it’s worth requesting.

As for Marfa, she will likely have to go to court to get out of the contract and recover any used funds.

That’s why real estate lawyer Paul Roxburgh highly recommends that anyone building a new home get their own representation before entering into a contract.

“It’s, I think, dangerous for the unsophisticated non-lawyer public to be signing documents like this without some form of representation,” Roxburgh added.

In addition to checking out a builder’s license, check how long they’ve been in business and ask about their background and try to verify their credentials. You should also follow-up with references and ask whether they allow onsite inspections of the project.

Story courtesy of Ross McLaughlin on your side  CTV 

 

Get It In Writing

Let me start with a true story. I met a lady selling a lot and she started to share her story. Their plan was to subdivide, build a custom home on the one side and sell the other lot to pay for the cost of building their dream home. They would be mortgage free and could coast into retirement. A wonderful plan; one we would all like.

They found a contractor who had solid references and had many years in the industry. He was the kind of man who was a man of his word and his word was his bond.

To the homeowners, he was a remarkable find. He charged less than other contractors. In addition, they could save additional money since he was willing to do cash deals, and was willing to deceptively build the home under the owner builder exemption and save the 2/5/10 warranty fees. By hiring this experienced, character contractor, they would receive a quality house for less money. Who wouldn’t like that.

Sadly, the story did not end well. When I met her, the house was 85% complete and they had moved into the home. They had fired the contractor and were finishing it themselves. They had given him several hundred thousand dollars but he could account for a little over one hundred thousand dollars. There was no record of cash purchases. Sub trades and suppliers were knocking on their door and asking to be paid. Explaining that they paid the builder did not sit well and they received numerous liens. Lawyers fees were quickly climbing. In the end, they didn’t save any money, they had no warranty, hated the build and they didn’t sleep at night.

Is the risk worth the cost savings? We all look for value and want the most quality for the least amount of money. Price is important.

What competitive advantage does a professional builder have when they have already lost on price?

There is good news.

Protect yourself from inexperienced or unscrupulous contractors by getting it in writing. Demand to see the following seven items: budget, contract, permits, schedule, specifications, warranty and insurance.

A quality builder will build your home in such a way to protect you by providing those seven required items. Let’s look at each of those areas in a little more detail.

1.Budget
Whether it be a fixed price contract or a cost plus contract, keeping track of costs and change orders is critical. An experienced builder with solid business systems will be able to track costs and change orders so that you always know where you stand financially.

2.Contracts
The contract sets the parameters for the build and details your agreement. In the event the relationship goes sour, lawyers can quickly assess responsibility making it less expensive to resolve. And who doesn’t want to save money.

3.Permits
Your work will be done under city permit and inspections. In the event you sell your home, you will need to declare any improvements. If not done with a permit, it will not only hurt your selling price but you may be liable if something goes wrong.

4.Schedule
An experienced builder will give you a schedule so that you know when to make decisions. You can track the progress of the build and plan your move in date.

5.Specifications
There should be no question about the specifications for your home. You will not enter a build and start to notice inferior materials on your home.

6.Warranty
When you have your home built you will receive a 2/5/10 warranty. One year on everything; That will cover nail pops, floor squeaks, smells, and the like. You will receive 2 years on mechanical, 5 years on the building envelope or water ingress and 10 years on structural.

7.Insurance
A professional builder will have commercial general liability insurance, course of construction insurance and Worksafe insurance. In addition, he will make sure his sub-trades have the appropriate insurance. You could be liable if there is an injury on site and the builder or sub-trade does not have insurance.

Before I close, I would like to share a story.

Farmer Fred was looking for a farmhand to help with the chores. He interviewed several young men. He asked them why he should hire them. One of the young men replied, “You should hire me because I can sleep at night.” Farmer Fred ended up hiring this young man and was always stuck by his answer, “I can sleep at night”

Several months later Farmer Fred was woken up by thunder and lightning and a gale force wind. He ran to the barn to check on the animals. The cows were securely tied up in their stalls. The chickens were calmly perched on their roost. The tractor was parked in the barn. The pasture fence was securely fastened as was the barn door. Lastly, the farmer checked in on his helper who was fast asleep and it was then the farmer understood what the young man meant when he said that he could sleep at night.

Let me finish with a second couple who also built a house. They found a builder who was a member of their local home builder association. The builder presented a budget, contract, permits, schedule, specifications, warranty and insurance. They also received weekly financial reports, daily updates on the progress of the build and a warranty.

The couple went shopping every day, loved the build process and slept every night.

Radon Gas – The Good, the Bad and Ugly

The good news is that radon gas is generally not a problem in the lower mainland. The bad news is that is does still occur in some locations in Metro Vancouver and the ugly news is radon gas is the second leading cause of lung cancer in Canada.

 

In the Metro Vancouver area, radon gas has been known to occur in one house but not the one next door.  Radon is a radioactive gas that is formed naturally by the breakdown of uranium in soil. As a gas, radon is slowly released from the ground and will build up concentrations in well-sealed buildings.  Radon gas is colourless, odourless, and tasteless.

 

If radon gas is found, there are steps that need to be taken.  An upgrade to a more rigorous sub-slab soil gas barrier is one option.  A 6 inch layer of gravel promotes the breathability and movement of gases under the slab.  These gases are then drawn through a pipe in the floor slab that vents through to the roof.  A mechanical fan could be added to increase the draw of the gases.

 

For each home we build, Clay Construction performs a free test to determine if radon is present.  If we find concentrations during our testing, we can take the above measures to mitigate the radon gas.  If radon gas is not an issue, the homeowners have piece of mind at no cost.

The Perfect Wall

Your choice of wall assembly will not only affect the energy efficiency and the longevity of your home but will also affect the air quality through the presence of moisture and mould in your wall. A small investment into this wall assembly will provide benefits to not only the operating costs but more importantly the air quality and longevity of your home.

The wall assembly is comprised of the cladding, framing structure, insulation and air/vapour barrier. When considering the best wall assembly for your home the following issues need to be addressed: how do you prevent water from getting in, how do you keep air from getting out, how do you establish insulation levels as high as possible and how do you construct the wall assembly to increase its ability to dry out in the event water gets in?

One challenge of our traditional wall assembly is that almost ¼ of the wall is comprised of wood that has an R-value of 1.5/inch thus degrading the effectiveness of the R-value of the wall. This leaves only ¾ of the wall to shove our insulation into. The framing lumber acts as a thermal bridge. Since we are limited by how much insulation we can shove between the wood studs, the next generation of wall assemblies will involve moving insulation to the outside of the wall. This will greatly reduce the thermal bridging and moisture in the wall assembly whilst increasing the energy efficiency, longevity and health of the home.

Most of us are familiar with the poly plastic sheeting placed between the insulation and the drywall. This traditional approach has the poly performing two functions: the air barrier and the vapour barrier. Unfortunately, this poly can trap moisture inside the wall assembly. A better approach would be to move the air barrier to the outside of the home sandwiched between the plywood sheathing and exterior rigid insulation. Removing the poly will allow any moisture that penetrates the wall assembly to dry to either the interior or exterior. Since moisture promotes mould, a wall assembly that remains dry will be healthier for its occupants. Cutting edge builders embrace positive change.

Joe Lstiburek a world-renowned building science expert has coined this wall, the “Perfect Wall.” Any builder familiar with building science will be able to advise you on the best wall assembly for your current and future needs.

vapor

Effective vs Nominal R-values

The City of Vancouver has recently implemented their new Vancouver building code. One small change affects the insulation of exterior walls. Previously, exterior walls needed to be at a nominal R22 insulation level. The new code requires effective R22 insulation levels. What difference does this make?

Nominal insulation is the R-value of the insulation batt we stuff between the wood studs. This is the R-value we see printed on the bag. Don’t be fooled, this is not the R-value of the wall. Wood has an R-value of R 1.5 per inch and makes up approximately 23% of a traditional framed wall. A 2×6 stud will have an R-value of 6 while windows range from R2-R5. Relative to the insulation property of fiberglass, wood and windows are poor performers.

What will it take to achieve Vancouver’s R22 effective insulation values in exterior walls? Here are three options.

1. The traditional 2×6 wall insulated with R22 batt will achieve R17.89 effective. Fail!

2. A 2×8 wall insulated with R28 batt will achieve R22 effective. Pass!

3. A 2×6 wall with R22 batt and 1” exterior rigid insulation achieves R22 effective. Pass!

There are many variables at play to achieve R22 effective. Make sure your builder considers the many options and doesn’t default to what is easiest. There is one wall assembly considered by the world experts to be the perfect wall assembly. Check back for my next blog post on the “Perfect Wall” and its many advantages.

Cost Plus Contract versus the Fixed Price Contract

by Larry Clay

In the residential custom home industry, there are two contract types; fixed price and cost-plus. Homeowners need to understand each type of contract and decide which one best fits their needs.

Cost Plus
The cost-plus contract charges the cost of all materials and labour plus an agreed upon percentage applied to all costs of the construction of their home. With a cost-plus contract the homeowner assumes the risk of unexpected expenses and cost over runs. It is imperative that a thorough budget is complete and costs are tracked weekly. This is the value an experienced builder will bring to your project. In most cases, the cost-plus contract will cost you less since the builder and sub-trades do not need to pad their prices for the unexpected or unknown.

Fixed Price
The fixed-price contract guarantees the price you will pay for your home plus change orders. This provides peace of mind to the homeowner and for some, this is critical. The builder will assume the risk of the unexpected and unknown but will need to pad some prices to cover the possible surprises. You will pay more for the peace of mind.

Best of Both
Can you get the best of both? Can you receive the lower costs of the cost-plus and the peace of mind of fixed-price? Yes, this is entirely possible. An extremely thorough budget will allow you to adjust the features and finishes before the start of construction to fit within your comfortable spending limits. Weekly invoices allow you to make mid-course corrections in the event an unexpected cost occurs. Few builders have the experience and business systems to accurately deliver a thorough budget and timely reporting to keep homeowners sufficiently informed.

Choosing a builder that can deliver what they promise will make the difference between a nightmare and an enjoyable building experience. Choose wisely and have fun spending!

custom home construction budget

Apples to Apples – The Myth of Construction Cost per Square Foot

When clients begin researching a builder for their custom home, most often the first question asked is – “What is your price per square foot?” Most people believe this is the best way to get an idea of what it will cost to build their home. The other misconception is believing a builder can give them a ballpark price based on another home they saw on the builders website – because the square footage is similar.

Unfortunately – this isn’t the right question to ask a builder when starting that relationship. They won’t tell you this but every builder feels the same way. What is really happening is the builder (who has most likely been cold called by the prospective client, sight unseen of any drawings or specs) is forced to give a starting point to at least capture the lead or clients confidence, only of which then erodes like a melting ice cream cone in the hot sun once the builder sees the plans and begins giving true costs (which can often be higher) and the client is still stuck on the original price quoted as if it were gospel.


The REAL Factors That Make Up Price Per Square Foot

Will your house cost $150 per square foot, $200 per square foot or $300 per square foot? It’s impossible to say based on a builder not seeing any finished house plans, not having any idea of interior or exterior specifications etc. Size of the home and property size is not enough to gage a ballpark price per square foot from even though builders will try to give you an idea. This figure will change, and will most likely increase.

If you choose to go this route, you will end up feeling like you’ve fallen for the bait and switch when the builder tells you the initial price per square foot given over the phone has now increased and you’ve just spent weeks in the courtship process. Even if it’s increased by $20 a square foot, multiply that by 3500sf that’s an increase of $70,000! Any builder that gives you a price per square foot over the phone without having seen the finished working plans from your architect or designer, hasn’t met with you, hasn’t walked your property etc, is not providing you with a professional and honest answer. Be prepared for unhappy surprises.

 

All Rooms Are Not Created Equal

Some rooms are much more expensive than others. For example, kitchens contain expensive stuff, like cabinets, appliances and countertops. They often have more electric lights, power hook-ups, gas and plumbing connections, and tile backsplashes. Bathrooms contain a lot of plumbing piping and fixtures, tile floors and walls. Kitchen and bathrooms are usually the most expensive rooms in any house.

The lowest cost rooms in your house will be the rooms that are built within the roof structure, i.e., the attic, garage or basement. The shape of a roof over a room with a flat ceiling creates an attic space that is going to be constructed whether you finish off the attic or not. Because most houses have a sloped roof, an attic is the by-product. The steeper the roof, the greater the volume of space created within the attic. Finishing off attic space that is already there is very economical to do. This is also true with a basement space. If your site or climate dictates that you build a basement, adding heat and air conditioning, an electrical system, drywall, paint, and a floor finish can often be done for a much lower cost than the average cost per square foot of the rest of the house.

There are several other things that affect the construction cost of your home without actually adding square footage. The type of construction, the exterior wall surface materials, the appointments, finishes, and equipment within the house, and the building site are big factors.

  • A house built with a poured concrete basement, 2×6 stud walls, a slate roof, and a high efficiency heating and air conditioning system will be a lot more costly than one built on a concrete slab with 2×4 stud walls, an asphalt roof, and a basic heat pump.
  • A house built with radiant heat, wood windows, slate roof and copious cabinets will be a lot more costly than one built with a basic forced air furnace, vinyl windows, asphalt roof and a minimum of cabinets.
  • A house with a full stone exterior is a lot more expensive than one with composite siding.
  • A house with a Sub-Zero refrigerator and granite countertops will cost more than one with a basic free-standing refrigerator and laminate countertops.
  • A house built on a steep slope will cost more than one built on flat land. All of these houses could be exactly the same square footage, but the constructions cost, and their cost per square foot, would vary wildly.

 

Different Builders Might Calculate Square Footage By Different Methods.

Usually this is an innocent difference in opinion of how square footage should be calculated. But sometimes the builder’s purpose is to make his bid look lower and more appealing than those of his competitors. For example, some builders will include the areas of the garage and decks into the total square footage, while others don’t. In these cases, the total cost of the house would be divided by a greater number of square feet and the “cost per square foot” would be considerably lower.

The best way to calculate an effective cost per square foot is to make sure you are comparing apples to apples. Otherwise, the cost per square foot information you get is useless. No matter what method you use, make sure that you are comparing things equally when you’re looking at different bids and different builders. And don’t fall into the trap of estimating the cost of your project based on a cost per square foot estimate alone. You won’t have an accurate price until you have an accurately calculated price.

 


Clay Construction is a luxury custom home builder, building and renovating quality residential homes in Metro Vancouver since 2004.

Are you thinking of building a custom home in Metro Vancouver? Call or email Suzanna today and ask for the Clay Construction Welcome Kit, our free information gathering tool you can use and share with the Clay Construction team to help plan and organize your custom home project.