Differences Between Types of Home Builders
Home building is basically the act of building a property, usually called a ‘house’ by those who would later occupy it. In this sense, home building encompasses any action that involves preparing a structure, whether the home is being constructed for one person or for many. A home built in this context does not necessarily require any single expenditure; the expenses required by building a home may be shared or may be separated. It can involve the payment of a builder’s fee, and/or the payment of the cost of materials used in the home building process, the cost of labor and other employment-related costs, and the cost of insurance on the home. In most states, home building must be done using licensed homebuilders.
Buyers and sellers usually have differing views about what is involved in home construction. Some people consider the construction process to be a relatively simple one, involving little cost, and they are quick to compliment home builders for taking care of such tasks. However, if you are a home buyer or a seller, you too should consider what is involved in this process, as well as what is necessary for safe and successful construction.
The term ‘home builder’ refers to the person who undertakes the task of building a home. This can be any person, but the majority of home builders are individuals working from their own homes. It is also sometimes a group of individuals, such as contractors, subcontractors, or companies that combine resources to complete a particular project. Although the term ‘home builder’ is used to refer to any person undertaking the building process, home builders differ greatly in their experience, knowledge, and ability.
Buyers are most often sourced by home builders for construction loans. However, they may also seek housing finance from other sources, including banks and other lending institutions. Most home builders require buyers to have at least $7500 in cash when they make their purchase, so that funds can be readily committed to purchasing homes. It is not uncommon for home builders to require buyers to provide funds for the building expenses up front, although buyers are rarely required to pay down any financing obligations until the house has been sold. Buyers are also unlikely to be required to meet with home builders when considering financing options, as most conventional financing plans involve the home builder as the lender.
Home builders who build homes for sale can be classified in several ways. There are large chains of individual builders, such as ADT, Armamentarium, and Certain Teed, as well as ‘zoned’ dealers, such as Armamentarium, which sells homes designed and constructed by individual builders. There are also large franchises of home builders that have established themselves as major suppliers of custom home construction and accessories. In either case, there are many different kinds of home builders, and buyers should be sure to clarify exactly what kind of builder they are looking at when approaching a dealer or franchisee about financing. It can be very confusing for buyers if they only know that one type of builder supplies homes for sale.
Zoned contractors, on the other hand, sell and install homes, rather than constructing them. These builders are licensed by their cities to sell and install homes. These are the kinds of home builders who you usually find when you look in your local phone book or on the Internet. Although these home builders may sell more homes than non-zoned contractors, they usually sell fewer homes each year because there are fewer homes available to them to work on. Consequently, it can be more expensive to buy homes from them than it would be to buy one through a conventional lender.
Another distinction between conventional home builders and custom home builders is that production builders construct only as many homes as they can sell in a given time frame. They will only produce as many homes as they can finish in a given calendar year. Therefore, it is reasonable to expect to pay more for custom home builders when you are paying a higher price for the homes they build, since these custom homes are more rare. Conversely, it is likely to pay less for custom home builders if you are planning to build only a few homes in your yard. A large number of home builders won’t be able to produce a consistent supply of houses.
If you are looking for a home builder but know nothing about him, ask for recommendations from a trusted friend or relative, or contact a reputable homebuilders’ association in your area. If you contact a homebuilders association, be sure to ask for recommendations of more than one builder, so that you can make a more informed decision. Some associations have a detailed application form for new homebuyers, which they send to all homebuilders before they accept any completed contracts. Other associations simply allow homeowners to apply to them and then choose which builder they like best. Ask for information about both types of home builders at your first consultation.