I. Introduction

If you are thinking of building a custom home and this is your first time to approach the custom home market or you already live in a custom home and want to upsize or downsize out of your current home Housewurks Custom Homes and Renovations is pleased to present you with this booklet to help you answer some of those questions you may have about moving forward with the process. By no means will this booklet answer all of your questions but we hope it will give a good start in thinking about things you may not have thought of before. Building your custom dream home is a very exciting process and the more knowledge you have about what is going to happen during the process, the more enjoyable the process will be and things will move more smoothly than you would have ever imagined.
II. Before You Start...

Before you start the process of building a home take the time to get yourself organized. Utilize the person in your household who maintains the records and files. All construction projects proceed in a certain order, usually with some logic that is attached at the end of this booklet. By keeping yourself and your records in order, you can stay abreast of each phase as it progresses

1. Dare to Dream

Gather as many different ideas as possible and talk to others who've done similar projects before trying to define what you want in your project. It's much cheaper to include a bay window in the plans than to add it after the project is completed. Also look through magazines and clip out items you like. Keep a journal of different ideas that come to you. Talk to others and get their feedback on whether something will work or not. All these concepts will help you formulate a master plan.
2. Prepare a Master Plan

Before you call an architect or contractor, sit down with paper and pencil and write down what you really want from the project. What do you want it to accomplish? Are you wanting to downsize or upsize because your family situation has changed? Are you looking for more specific details and amenities in a house that you currently don't have with the one you are living in? If some of your goals are hard to define, sketch out the concepts on paper. Later the architect, designer, or contractor will help you develop them. Here are some helpful tips for uncovering your master plan.

  • Talk with your family. Discuss what each of you want.
  • Look at how you live and where you spend most of your time.
  • Reflect on homes you have visited. What features did you especially enjoy?
  • Consider the features of your lot or land. Where is the sunlight the best? Which direction offers the greatest view.
  • Browse through building plan magazines
  • Select exterior style/elevation and finishing details.
  • Determine what your estimated building costs.
  • Choose your floor plan first and your exterior facade second.
  • It is usually best to purchase your land or lot before you select your building plan. The land established the amount of area and the type of terrain you have to build on. Pre-purchasing the land also helps you budget the rest of your project.
  • Be sure to include a budget for landscaping and finishing touches.
3. Architects and Designers

How do you know if you need an architect or designer? And what's the difference? You probably need an architect or designer if the project requires extensive plans that must be submitted for review or if you are not clear about what you want. Architects and designers are skilled at turning general oncepts into reality-all within your budget. If you want, the architect or designer will oversee the whole project, including hiring the contractor.

4. Define the Project Scope

It's easy to say, "I want this and I want that. So the first step is to separate what you need from what you want. Custom made cabinets is a need but would semi custom cabinets work.... I would really like to have granite kitchen counter tops but would another surface top work for less money... I would really like to have a fireplace in my master bedroom complete with a wet bar but would my heart be broken if I didn't get the fireplace or wet bar. As a custom home client you really need to know what your financial realities are. The more desires you eliminate, the more manageable your budget will become.
5. Create a Project File

Use folders to hold and organize all the paperwork that will be generated during the project. Keep the architect or designer's plans/ideas there, along with the contracts, work schedules, payment schedules, warranties, change orders, punch list forms, lien notices, and receipts. Keep phone numbers of everybody involved, from architects to subcontractors, here as well. There are a number of ways and systems to keep yourself organized so find the system that works best for you IE Three ring binders with taps for each phase of the construction process or an accordion/alphabetized file system. But make sure its mobile so you can carry it with you where ever you go.

III. Site Selection

There are a number of things to consider when looking for a community or a site to build your new home. The first area of consideration is location. Do you want to be near your present home or in the same school district? Or would a location further away from suit your commute to work better? Do you want to be in community with amenities or out in the country side?
Access to the interstate system is important if you need to get around Indianapolis. Location to schools, shopping, medical and religious and other facilities should be considered as well.

Once you've thought about the location you desire, the next consideration is amenities, both outside and inside your home. Think about what you want in your community. Is a golf course important? Walking trails? Beautiful scenery, community pool and building?

After you have overlaid amenities and location, you'll be able to zero in on a reasonable number of neighborhoods to consider.

Finally if you have selected a community to build in you should ask yourself the following questions:
  • Is the community "closed" to specific builders or "open" to using your builder?
  • Are there architectural controls that you must build to?
  • What features of a site are important to you? Wooded site, size, sunshine, corner lot, cul-de-sac, walk out basement, proximity to the community building, proximity to major roads or pond.
  • Is there a homeowners association? What are the annual fees? Review the articles and bylaws of the association.
  • What common areas do the homeowners association own and are responsible for upkeep?
  • Are there easements on your lot and can you do or not do within these areas?
  • Does the floor plan you want to build fit well on this site?
  • Once you have selected a lot what type of deposit is required and when is the balance due.
  • After closing on a lot how long can you keep it vacant before you actually build on it?

IV. The Design Phase

The design phase consists of two parts: what you bring to the architect, architectural designer, or design and build contractor and what you get in return. But first, do you need a design professional? Not by law, in most cases, but do check with your local building inspector's office. As for Boone County or Zionsville, which have their own plan offices a custom home builder does not need to be licensed but some of their subs such as the electrician and plumber should be.

Whether it's a sketch or complete plans, the drawings must clearly show what will be done during the project and reflect all code requirements. Any engineering issues in the project will require proof that the structure was checked and approved by a structural engineer or qualified design professional.

But apart from helping you clarify your plans and giving you new ideas, the design professional also ensures that the drawings meet all required codes and specifications for safety and durability. The architect or designer will also help ensure that your project fits with the overall house scheme and within the neighborhood.
1. Do Your Homework

Before you seek design help, do some research. Collect a scrapbook of photos and sketches, and have in mind at least a general idea of what design concepts you want incorporated in the project. The architect or designer will help you refine your ideas. Also, when you visit a design professional, have a good understanding of what you can afford to spend on the project. No matter how well you plan, it will be more expensive than you expect.

2. Do You Want an Architect or Designer?

Both architect and architectural designer may be equally talented, skilled, and full of great ideas. The architect, however, is a university graduate who has served a required apprenticeship with a licensed architect before obtaining his or her own state license. An architectural designer may have worked equally long in the trade but generally is not required to have a university degree and is not state licensed as an architect. Other types of designers, such as interior designers, may be required to be state licensed.

3. What Can Design Professionals Do?

What can a design professional do for you that in most cases a general contractor does not? First, he or she prepares the plans that will be submitted to the building inspector's office for review and approval before construction can start. Architects and designers bring vision, experience, and structural expertise to the job to make sure it fits your goals and your budget. They provide the plans and specifications for the contractor to follow.
4. What Do Architects and Designers Charge?

Architects and architectural designers provide professional services, not products. Their rates are usually based on the time spent on your project. They may charge an hourly rate or a square footage rate for the total construction costs, often in the $1.00 – $2.00 a square foot range for the house you are planning. Discuss how your architect or designer charges in advance and have it specified in the contract what you will receive in return.

Also be sure to ask to see work samples and a list of references for any design professional you are seriously considering. Hiring an architect or designer can save you money in the long run because having clear plans in advance means that you are less likely to change your whole approach halfway through the job, which will increase your costs.
V. Cost of a project.

When talking to a custom home builder the easiest way to equate the cost structure of a home is by square foot unit price. Custom home builders will typically range in price from $100 - $300 (and up) a square foot. So if you have a 4000 square foot home and a builder quotes $100/sq foot you can quickly determine the price for construction will be $400,000. Always be sure to ask the builder if his price includes a finished basement and if the land price is included. It should be noted that the one greatest square foot price that will fluctuate the most in your price will be on the interior finish items. But don't ignore the other "fixed" cost that contributes to building your home. Ask your builder for a material list of what he or she is using to make sure the materials are up to the standards of a quality custom home. Once you become educated with the materials used in building a custom home you will understand the quality you are receiving.
VI. The Contract

A contract is a document that clearly states the expectations and responsibilities of the parties involved in a project and protects each party's rights concerning the project. The signed contract is legally binding, but it should really be considered a statement of trust between contractor and homeowner.

Also understand that in virtually all contracts you should have a specified number of days during which you may reconsider and cancel a contract after signing it. If you do cancel, send written notice by registered mail with a signed receipt requested from the contractor.

In any construction project, both owner and contractor will follow their own agendas to some degree. All have different understandings of how the project should be carried out. The contract is an attempt to clarify everyone's expectations and make them mutually acceptable.
Contracts are generally overly long and written in legalese that is difficult to understand. Before signing a contract, take it home and read it for a day or two. If there's anything you don't understand, find someone who can explain it to you.

Do not rely on oral or handshake agreements.
1. A contract should at a minimum contain the following sections:

a. Scope of work - The contract should clearly define all work that is to be done. This includes the overall scope plus individual aspects such as foundation, framing, plumbing, electrical, roofing, and all finish work down to the color, style, and manufacturer of paint and carpets. If you have architectural plans, refer to them in the scope of work.

b. Contract amount – For the most part there are two ways you can state the contract amount. A fixed amount contract or a cost plus basis. A Fixed Amount contract will specify the exact amount that a contractor will charge to build the home. The advantage is that the contractor is taking some risk in holding prices firm throughout the duration of the contract. The other type of contract is a Cost Plus basis. With this contract the contractor will provide you with the invoices and have a set percentage for gross margins. The risk with this type of contract is with the homeowner and that if prices move around the homeowner will have to absorb the increases or hopefully the decreases

c. Specifications, materials and equipment - Make sure the contract identifies all materials and products by name, style, quality, weight, color, brand name, and any other pertinent facts. Be specific about all details that concern you. If you expect 2-by-6 walls instead of 2-by-4, make sure they are specified. A material substitution policy should be included in the case there are material shortages or something has been discontinued.
d. Schedule - The contract should clearly indicate the date the job will begin. Discuss with the contractor when the project will likely be finished and see if that meets your expectations. Contractors often work on more than one job at a time, so discuss what conflicts, if any, and might arise with your project. Ask for an estimated completion date in the contract. Keep in mind, there are numerous factors that can delay a project, such as weather, change orders, and unforeseen problems. Few contractors will agree to sign a contract with a late penalty clause because many unexpected factors can come in to play. Open communication with your contractor throughout the duration of your project is the best way to determine if the project is progressing on time or to understand what factors have delayed the completion date.

e. Insurance requirements - The contract should state that the contractor will provide proof of all required insurance, particularly general liability and workers' compensation for his or her employees. The contract should also require the contractor to verify that subcontractors have their own required insurance. The builder should also carry the builder's risk policy for your home which takes care of any theft or damage to the home during construction as well as liability coverage for workers who may get injured while working on the job site.
f. Warranties and service policy - Ask that all written warranties provided with any appliances, equipment, or materials used in the project be given to you. Most custom home builders will offer home warranty coverage on the homes they build. These warranties are typically offered by companies that specialize in home warranties. The most typical warranty is a 2/10 warranty. (Two years coverage for problems that arise from faulty craftsmanship, defective materials, and faulty installation of plumbing, electrical and HVAC systems. Ten years for major structural defects) Check with the builders you are talking with to verify the coverages offered with the warranty.

g. Arbitration - All contracts should contain clauses specifying what form of arbitration should be conducted and by whom if disputes cannot be resolved between homeowner and contractor.

h. Cost Overages - The contract between yourself and the builder should have a paragraph that states who is responsible for costs that were not specified in the scope of the project. For example you finally start your project in December and the contractor has to pay for additional winterization costs or the contractor incurred additional excavation expenses for poor soil conditions or unforeseen elevation issues.
i. Construction draw schedule, procedure and terms of financing. - A schedule of progress payments is recommended for inclusion in the contract. The schedule should include the amount of each payment, the date of the payment/the completion stage of the project required before payment is made. If a bank is financing your custom home project, banks will typically stipulate the number of draws to be made during construction and at what stages of the construction. When a builder requests a draw the bank will send an appraiser to verify the work has been completed. Sometimes banks will charge a service fee for draws being made. Progress payments should never exceed one third of the total project price, and ten percent of the final payment should be withheld by the homeowner until all work is satisfactorily completed. Specify any materials that are to be delivered to the site before the progress payment is made. Materials that require special ordering, such as cabinets, flooring, bath fixtures may affect the required payment amount. Any additional expenses that are the result of a change order should be dealt with separately, but in writing.

j. Change Order procedures – During the course of construction you will see things that you will want to change, add, or delete. Be sure to include in the contract a clause that specifies the procedure and how much the contractor is allowed to charge for change orders.
VII. Financing

There are many mortgage companies out there who will work with you during the construction process but you should at least talk to a few different companies and investigate which construction loan will best suit your needs during the construction process. Most builders have relationships with mortgage companies that will assist you in the transition from your current home, to the construction loan and finally to a permanent loan. The most popular loan types in the custom home market is the Construction to Permanent (CTP) loan and Bridge Loan. Not all mortgage companies have the same features and benefits with a CTP or Bridge Loan so be sure to completely understand the loans your are discussing with each of the mortgage companies before you make a final decision.

VIII. Hiring a Contractor Finding a reliable and reputable contractor has always been a homeowner's dilemma. You either heard about one from a friend or neighbor, or drove by a spec house or visited a model and liked the floor plan.
1. How to Hire

Here are some basic steps to follow when hiring a contractor.

  • References Request: Ask for references and call them. Ask the builder to tour previous projects. Ask the references if the project came in on time, if the bid costs were close to the final cost, and if the contractor was easy to work with.

  • Bids: Get at least three bids on your project. When the contractors look at the project, have in mind clearly what you want to do, but listen to their input. Experienced contractors can often point out overlooked and unforeseen problems. Be sure the bids are "apples to apples"

  • Builders Association: Be sure the builders you are talking to our members of a The Builders Association of Greater Indiana (BAGI). BAGI has quality standards and guidelines for builders to follow during the construction process. Ask your builder for the BAGI Quality Assurance Builder Standards manual. The manual outlines 20 different categories of work involved in building a new home.

  • Personality: Look for a builder who understands you and you can feel comfortable with. Chemistry between the builder and you is probably as important as anything else. You will be in contact with your builder everyday for nine months and your goal is to conclude on the project on good terms and you enjoyed the process. If it feels good it probably is good.

  • Accessibility: Make sure your builder will be available when you need him or her. For most people who build the only time they can come by and see the progress of their home is in the evening after they get off of work or on the weekends. Communication is key during the process and your builder has to be accessible when you need them.

  • Options and quality: Do not necessarily accept the lowest bid. Some contractors may bid the job low in hopes of increasing charges as they go. Others may bid it incorrectly and then cut corners on the job. Others may bid it right and still be low, which is what you want. But if someone's bid is higher, consider that contractor's quality, references, and schedule before making your final decision. Always be sure to compare apples to apples.

  • Insurance: Request copies of the contractor's insurance coverage. Contractors must have general liability insurance for themselves and worker's compensation coverage for any of their employees. Your builder should also have copies of their subs insurance declaration as well.

  • Schedule: Determine the project schedule. There should be a firm start date, although there is not normally a firm completion date because construction has so many variables. State when you would like the job finished and discuss the likelihood of it happening by that date. Ask your builder to provide you with a project timeline that outlines the construction phases of the home. This should also be updated as the project progresses to capture changes that have occurred.
  • Management: Ask whether the contractor will be on the job every day or if he or she will have someone else managing the work. If someone else, check that person out as well. It's always wise to select a builder who lives in the area you are building. "You have builders who know how to build and will be with you all the way and you have builders who would like to sell you a house and you wont see them until closing"

  • Material list: Ask your builder for a material list for the products he or she uses. Take time to educate yourself on the materials used for the trade and don't be afraid to ask questions.

  • Sub contractors: Ask your builder for the list of subs he or she uses. Check out subs with the Builders Association of Greater Indianapolis to make sure they are members or with the BBB for complaints. Don't be afraid to ask your builder to verify the workers his subs uses are legally allowed to work in the United States. The INS has been known to visit job sites and gather up the workers who can't show proof of citizenship and there would be nothing worse to see a job site come to a complete stand still.
  • IX. Finally, when you select a contractor

    When you select a contract you should receive a complete set of drawings and a set of specification sheets that identify all the materials that are going to be used in the house as well as the equipment to be supplied. If your contractor knows what they are doing they should also supply you with a ghant chart that specifies the timeline for construction. Typically during the construction phase the chart will be updated to reflect changes due to the weather and or back order of materials or availability of subs at the time they are to be at the project. At the end of the project you should receive a complete binder with all the warranty information concerning your house and the material/equipment in the house.

    1. Job site visits

    As the homeowner you have every right to go to the construction site and oversee the progress of your home. Most builders encourage it. However all precautions should be taken when going to the job site to ensure your safety. It is recommended that you not take small children onto the job site and if you do never let children run freely around a job site.

    Ask your builder for the list of subs he or she uses. Check out subs with the Builders Association of Greater Indianapolis to make sure they are members or with the BBB for complaints. Don't be afraid to ask your builder to verify the workers his subs uses are legally allowed to work in the United States. The INS has been known to visit job sites and gather up the workers who can't show proof of citizenship and there would be nothing worse to see a job site come to a complete stand still.

    In regards to communicating to the subs it is best that if you want something changed you discuss it with the builder. Sub contractors do not have the right to change anything without written permission from the builder. But if you do have questions about what someone is doing you have all the right to talk to the sub contractors.

    2. Inspect the inspection:

    You should always be aware of when your home is going to be inspected by the local area planning commission inspector and get a report for the inspection. Ask your builder to educate you on what the inspector is looking for and do your own inspection with the builder

    3. Any question is a good question

    To be sure that you have the best experience possible when building your new home, it helps to have realistic expectations when you start the process. That means you need to understand, at least in general terms, what is involved in building a house and what a builder must go through to deliver on their promise to you.
    X. Liens

    A lien is a legal claim to real property until a debt is paid and can be made by any sub-contractor, employee of the sub-contractor or supplier who has provided a service or material to the home. If you employ a tradesperson or contractor to work on your home and then, following a dispute, refuse to pay, the worker has the right to file a lien. The lien is a claim on your real property such as your house. Rather than just demanding payment from the homeowner, which might be ignored, the lien makes the property responsible for payment.

    1. Why a Lien?

    In some cases, you may receive a lien even though you have paid the general contractor in full. In this case, it is probable that the general contractor did not pay a subcontractor, such as a concrete company or roofer. Perhaps the general contractor was late making payments or, in a worst-case scenario, has gone bankrupt. Regardless, the tradesperson has a legal right to be paid and has filed claim on your property for the amount owed.

    Having to pay twice for the work seems unfair. The lien law, however, is based on long-held presumptions that the homeowner, whose property value has been enhanced by the work performed, bears ultimate responsibility for all debts incurred.

    If you have to pay twice-once to the general contractor and again to settle the lien-you then have the right to seek legal redress against that contractor. In most cases, however, liens are avoided by dealing with reputable contractors with good standing in the community.

    2. Avoiding Liens

    To avoid a lien after the project is finished, ask the general contractor to provide you with either a conditional waiver and release or an unconditional waiver and release. In the first case, the contractor gives you a conditional release in exchange for payment in full by personal check. The release is conditional until the check is cashed, when it automatically becomes an unconditional release. In exchange for an unconditional waiver, you give the contractor a certified check for the work completed.
    XI. Change Orders

    Virtually all projects change as they progress. If either you or the contractor feels something must be added or removed from the project, a change order should be filled out and signed by you and the contractor. Change orders initiated by you will likely increase the project's cost, and any additional amount for time and materials should be stated in writing. If, for example, the plans call for a 3-foot-wide window and you now want a 6-foot-wide window, which will require different framing, and a change order is needed.

    XII. Punch Lists

    A punch list is standard on all commercial construction and is becoming increasingly so in residential construction. It is a checklist of every item that is incomplete, not done at all, or requires fixing or replacement.

    Homeowners should periodically walk through the project and keep notes on items needing correction. Even if brought to the contractor's attention immediately, they may not be corrected by the job's end. Many things get overlooked during a project, some important, some cosmetic.

    Keep a record and then, when the job is nearly complete, take a walk-through with the contractor to check on items you have seen and look for others as well. If you have an architect, he or she should join you.

    XIII. Communication and Conflict Resolution

    Open communication is the surest means to a successful project. Don't just assume that the other person knows what you are thinking or how you want something done. Spell it out. In a communication vacuum, errors rush in.

    If it appears that the contractor is not performing adequately, address the issue in a nonconfrontational way by explaining your concerns and requesting information. Give the contractor a chance to clarify the issue and, if necessary, rectify the problem. When that is done, express appreciation.

    Unaddressed misunderstandings can lead to suspicion, and this may create a tense and less productive working environment. Calmly discussing issues, however, will often bring quick resolution-or a realization that a problem doesn't actually exist.

    1. Five-Step Problem Solver

    Following are five steps you and your contractor can take for problem resolution:

    a. Define the problem. This may be more complex than imagined because of overlapping issues. If a project is not proceeding on schedule, for instance, where does the problem really lie: with weather, change orders, conflicts with other jobs, personnel problems, money? By discussing all of the possibilities, you can then narrow down the real source of the problem.

    b. Summarize all causes and prioritize the root causes. Don't try to solve the problem immediately, because you may be overlooking deeper issues. Write down all possible causes, however small, and then determine which are the most urgent for you.

    c. Identify all solutions and prioritize them. Brainstorming is a good way to find solutions. Talk openly with everyone directly involved in the dispute and encourage their feedback. Give as much time to listening as you do to talking.
    d. Analyze the potential solution. Once you have identified and prioritized several problems, and done the same with solutions, you can narrow down the entire issue. Now your problem is becoming focused and thus manageable. Is this a problem that affects the cost or the schedule? Is it about cleaning up? Is it a personality conflict?

    e. Select the best solution and act on it. Confirm that the agreement is acceptable to all sides, write it down, and note who will do what and by when. Be specific.

    2. In undertaking problem resolution, follow these guidelines:

  • Do not criticize one another.
  • Only one person speaks at a time; the other listens.
  • Allow freewheeling discussion.
  • Encourage many ideas.
  • Identify ideas that point toward solutions.
  • Always seek mutual encouragement and understanding.
  • 3. Consider Mediation

    Following are five steps you and your contractor can take for problem resolution:

    If a resolution cannot be reached, seek a mediator. If you feel the project should not proceed any further, discuss with the contractor how it might be closed and what payments or refunds remain outstanding.

    When all else fails and if the amount involved is less than $5,000, consider a small claims court. If you must hire a lawyer and sue, however, recognize that even if you win, it might cost you more than the planned project.

    If you selected a builder who is a member with the Builders Association of Greater Indiana you may also utilize their services to seek out a mediator to settle a dispute.

    XIV. After you have moved in

    So you made it through the process of building your dream home and you hopefully made it through without any issues and your contractor is your best friend... What next? Its one year later and things are going well and you have some issues with your house that need to be attended to. Most builders in the custom home market will do a one year walk through so that you can provide them with a list of things that need to be attended due that are the responsibility of the builder. It is the builder's responsibility to take care of these items in a timely manner and if the builder's subs need to be brought in their schedule should be coordinated with yours. But in the search of a builder be sure to ask about their service policy after construction. Be sure to include a service agreement and warranty statement in your contract. Some builders will extend their warranties to go beyond what is standard in the market. For example a problem surfaces three years after you have moved in and the problem is a result of a craftsmanship problem and it took three years to show up.