When I began my research process on building my new home I came across a few terms that I’d no idea of their meaning. They are important to understand if you are going to hire a contractor to build or remodel.
Mechanics Lien
A Mechanics Lien is a legal claim placed on your property by someone who is owed money for labor, services or supplies for contributing to the building or remodeling of your home. General Contractors, subcontractors and suppliers of building materials are typically the lien claimants. A mechanic’s lien claimant can sue to have your property sold at auction and recover the debt from the proceeds. This law is in place to make sure everyone hired to build your home gets paid. But you also need to make sure you hire a reputable contractor as you can pay him for the supplies or subcontractors work but if he does not pay them, they can still put a Mechanics Lien against your home. It doesn’t’ sound very fair to me but that is how it works.
Cost Plus
This term means the contractor agrees to supply labor and materials for "x" amount of dollars, plus any extras on top of that. This type of agreement leaves the price open to circumstances encountered by the builder. I did this type of contract and I do not recommend it. This type of contract is risky because materials may skyrocket before you need them and you will get a bill for potentially much more than you budgeted for. In the end your home may end up costing way more than you prepared for. With this type of contract it is almost impossible to know what the end cost will be until the project is complete.
Contractors do prefer this type of contract as it relieves them from losing any money if prices for supplies or subcontractors go up. This also means he will not be 100% accurate in his bid because all extras are passed directly to you.
Fixed Cost
I prefer the fixed cost contract which means the contractor will supply all labor and materials for "x" amount of dollars. If the contractor misses something on the plans and it ends up costing more, he has to pay the extra cost, not you. This puts more responsibility on the contractor to be right on target with his bidding, Missed or miss calculated cost will be the contractors problem as he will not be able to charge you more because prices rose or he missed something on your plans.
Change Order
Everyone changes there mind at some point in time when building or remodeling. You may decide to change a color of a room or move a wall a few feet. Make sure each of the changes are put into writing and signed by both parties with documentation of the changes and how much more the change will cost. What may appear as a minor changes can cost you time and money and a lot of small changes can add up to a lot of extra charges. Get everything in writing before the changes are made so you know the cost and there are no surprises when the job is complete.
Eco-friendly “Green” Products
More and more consumers are looking to save money when they build. Eco-friendly “green” products are becoming extremely popular as they are environmentally friendly and can save money. I added bamboo flooring, tankless water heaters and a geo-thermal heating and cooling system to my new home. The upfront costs are more but what you save monthly on your energy bills more than pays for the eco-friendly products in approximately two years. There are numerous eco-friendly products on the market now including solar panels and numerous recycled products.
Building or remodeling can be stressful. Do your homework, do your research and know your terms!
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