Building the Owner-Contractor Relationship

So you've committed to build your dream house and it's time to start bidding and finding your general contractor (GC). The cost of home building may be the largest purchase of your entire life so it's important to get it right without leaving anything on the table. But being too pushy and nitpicky can have negative effects because GCs can deprioritize your work and be incentivized to hide quality issues or even seek legal action if you push too far. You have to decide how to navigate this complex relationship in order to thread the needle between maintaining high quality and maintaining your positive working relationship.

First we'll start with two affirmations to repeat to yourself:

1.) All houses have minor imperfections.
2.) All houses eventually degrade and need to be maintained, repaired and replaced.

Which Hills are Worth Dying On?

As an owner, you have power to withhold inspections, sign-offs and funding draws if things are not up to standard but home construction contracts are written imperfectly and lack the detailed 1000+ page specification books that often come with larger commercial projects. So when you are not happy with the quality, your only practical recourse is to ask your GC politely to 'make it right'. You have a finite amount of political capital here so it's important to prioritize issues that need to be fixed and deprioritize issues that aren't that big of a deal in the grand scheme.

Our recommendation is to apply the following means test to decide if it's worth spending your limited leverage:

"Will this negatively effect the value of my home."
 

Put yourself in the shoes of a prospective buyer who was coming to do a professional home inspection of the finished house. What structural, mechanical and building envelope issues would be flagged? What aesthetic issues would you first notice? You need to prioritize the issues that would be obvious problems to a prospective home buyer and de-prioritize issues that would be unlikely to come up. Let's take a look at some examples:

Category Issues to Prioritize Issues to Deprioritize

Foundation

 Drainage, Reinforcement, Waterproofing, Frost Depth Minor cracks, Lack of Smoothness, Out of Level
 Framing Header Sizing, Truss Integrity, Fire Blocking, Nailing Patterns Minor Chips or Checks in Lumber, Missed Nails
Building Envelope Window / Door / Roof Flashing Minor aesthetic issues with siding, caulking imperfections
Mechanical / Electrical / Plumbing Pressure testing, Pipe / Duct / Wire Sizing, Code Compliance, Joist Integrity Ugly routing, excessive hole cuts
Flooring / Casework / Millwork Underlayment, Waterproofing Minor Scuffs, Minor Aesthetic Issues

Temporal Considerations:

At the Beginning:

Every contractor has a different way of tracking issues. It's important to have a discussion at the onset about how issues are tracked and how transparent they are. Many may have online portals that can track issues in real-time with due dates and punch lists. Others may be more old school and track them on pencil and paper. Wherever they fall on that spectrum, make sure to encourage them to be transparent because it allows you the peace of mind to know that problems are getting fixed and helps you avoid unnecessary confrontation that does not add value.

In the Middle:

It's important to remember that houses always look bad when they're partially complete. There's no need to burn your relationship with your contractor by attacking them for sloppy looking drywall before the drywall is fully taped and mudded since all drywall universally looks pretty rough before taping and mudding. Note that there is a balance between waiting for something to be complete and waiting too long and causing the contractor re-work.

Towards the End:

At the end of the contract your leverage grows as the GC simply wants to finish the job and get paid as fast as possible. Target using the final walk-through inspection to clean up easy to remedy aesthetic issues but don't bring up things that could cause significant rework.

Change Orders:

Change orders are changes from the original contract construction drawings and specifications. Often times, as you walk through your framed house you get inspired to make a change which is great. From a schedule perspective, change orders should be minimized to prevent supply chain related delays but from a relationship perspective change orders are neither bad nor good. It really depends on how you navigate them. We have three rules for navigating change orders to ensure that it doesn't degrade your relationship:

  1. Plan Ahead - Inform your contractor as soon as you know that you want to investigate a change so that you can minimize delays and re-work.

  2. Get it in Writing - Yes it'd tedious but it should go through a formal contract process which may include revised construction drawings, specific shop drawings and/or new specifications.

  3. Set Expectations & Negotiate in Good Faith - Once you're in the middle of construction, you are unfortunately a captured market and cannot bring in different contractors without a legal battle. The GC will likely use this as leverage to over charge you for change orders. Feel free to get a second opinion or ask for a more detailed breakdown of the materials and labor to try to use pressure to get a fair price.

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