Sometimes a $20,000 expense will buy you $35,000 of equity. Several years ago, one of my customers received an appraisal on their 2,400 square foot two-story that was $35,000 lower than they were paying us. I was quite surprised by this because most of my customers receive appraisals considerably higher than their cost. I obtained permission from the lender, a local bank that I knew well, to speak directly to the appraiser. What I learned was that she did not know that the house contained hardwood floors and a gas fireplace; I couldn’t tell whether the bank hadn’t told her or she missed the information in her review of the construction contracts. But this only accounted for $15,000 of the appraisal shortfall. The real problem, as the appraiser saw it, was that all of the other comparable homes she had looked had a two-car garage, unlike my customers’ home. My customers had decided to postpone building the garage for two years. The appraiser explained that the absence of a garage reduced the appraisal value of the house by $35,000. Even when I told her that I could build it for $20,000, she held fast to her assessment.

When my customers went back to the bank with this information, the bank qualified them for an additional $20,000 on their mortgage so they could build the garage while their house was being finished. Since the appraisal went up by $50,000 – $15,000 for the wood floors and fireplace and $35,000 for the garage, the loan was approved. I learned two things from this experience. First, appraisers aren’t always aware of all of the upgrades a customer has selected. Whenever I hear of a low appraisal, it’s the first thing I ask about. Secondly, appraisal value is very different from cost. Sometimes, as in this case, spending some additional money can add a lot of appraised value, while at other times, omitting a relatively expensive item can greatly reduce the cost without significantly reducing the value.

When selecting a GC, I recommend that you ask each of your candidates for four customer references. Ask for two who built in the last year and two who built more than two years ago. Ideally, all of the references will have built modular homes.

Do not reject a GC based solely on one unfavorable story, unless the reported incident is egregious. Any GC who has been in business for long is likely to have one or two unsatisfied customers, no matter how well he served them.

Here are some questions you might like to have answered.

(   )   Are you happy with the GC’s work?

(   )   Did he do what he promised in a timely manner?

(   )   Did he hold to his prices? Were there any overcharges?

(   )   Were there extra charges because the GC’s allowances were too low to get you what you wanted and thought you were getting?

(   )   How did the GC respond when you asked to make changes? Were the changes documented and fairly charged?

(   )   How good was his choice of building materials?

(   )   Did he change specifications from what was agreed to or expected?

(   )   How good was his workmanship? Did he completely take care of all of the little details?

(   )   Did he meet his deadlines?

(   )   Were there any surprises?

(   )   What did you think of the GC’s subcontractors?

(   )   How was their workmanship?

(   )   Were they on time?

(   )   Did they follow-up on problems?

(   )   Did they work in a safe and efficient manner?

(   )   Did the GC supervise his subcontractors sufficiently?

(   )   Did the GC have any payment problems with suppliers or subcontractors?

(   )   How well did the GC clean up and get rid of all of the trash when he was done?

(   )   How well has he honored his warranty?

(   )   How well did he handle stress?

(   )   How well did he handle disagreements?

(   )   How available was the GC during the day? during the evening?

After you have completed your initial screening and are waiting for written estimates, consider taking some of the following precautionary steps. You can forgo some of these steps if a GC has been in business for a long time and is widely known to have a good reputation.

• Obtain an insurance binder mailed directly from the GC’s insurance company, since this is the only way to ensure that he has a current policy. See if he has sufficient liability and workers’-compensation insurance; your own insurance agent can tell you what the coverage should be. If the GC or a subcontractor is not fully insured and someone gets injured or there is significant damage to your property, you could be liable.
• Check with the state or local building inspector to verify that the GC is licensed and in good standing.
• Contact the Better Business Bureau and local consumer-affairs office to see if there have been complaints lodged against the GC. If there have been complaints, find out if they were resolved satisfactorily for the customer.
• Ask the state attorney general’s office if there are any civil suits filed against the GC.
• Get references from the GC for his commercial bank, suppliers, and subcontractors, and then contact each one.

You will not need to ask each candidate all of the questions below. Tailor the list to suit your circumstances and each candidate’s background, including whether he works alone or is part of a larger company.

(   )  How long have you been in construction?

(   )  How long have you been working for yourself?

(   )  How long have you been a GC?

(   )  What did you do in construction before you were a GC?

(   )  What is your experience with building new homes?

(   )  Tell me about your remodeling experience?

(   )  Tell me about your experience with modular homes.

(   )  Were you a GC or subcontractor?

(   )  If so, how long ago?

(   )  How many modular homes have you worked on?

(   )  What type of modular homes have you worked on?

(   )  What work were you responsible for?

(   )  What tasks did you do personally?

(   )  Which modular manufacturers’ homes have you worked on?

(   )  Have you ever set a modular home?

(   )  What experience do you have with the type of modular home I am building?

(   )  Have you built the types of site-built structures I need?

(   )  What experience do you have supervising excavation work?

(   )  What experience do you have preparing a site for the delivery and set of a modular home?

(   )  What experience do you have overseeing foundation work?

(   )  Are there construction-related tasks you would rather not be responsible for?

(   )  Do you have other employees? If so, what do they do for you and how will they help me?

(   )  What subcontracting trades, if any, are on your payroll?

(   )  Will you personally supervise my project from start to finish? If not, can I meet the person who will?

(   )  When will you be able to start my project?

(   )  How long will it take you to complete my project?

(   )  How many other projects will you be working on at the same time as mine?

(   )  Will you be directly supervising these projects?

(   )  Do you already have subcontractors in mind for my job?

(   )  How often will you contact me?

(   )  How can I contact you?

(   )  How do you keep track of scheduling?

(   )  If I have a warranty problem after I move in, what do I need to do to get the problem fixed?

(   )  How long can I expect it to take?

(   )  Will you take responsibility for one of your subcontractor’s warranty problems if the subcontractor will not?

(   )  Do you have any partners in your company? If so, what role do they play?

(   ) Do you have a “legalese” section in your contract that states the terms and conditions? Can I have a copy to review?

(   )  How much of a deposit do you require?

(   )  Under what circumstances is the deposit refundable?

Take note of each GC’s personality and see how well it fits with your own. In many ways, your GC will serve as your business partner in the construction of your new home. If you are not comfortable with a candidate, find a gracious way to tell him that you have decided to go with someone else. Do not ask a candidate you have ruled out to complete an estimate just so you can get a comparison price. Not only is this unfair to him, it will not serve your interests. What you need are estimates from candidates that you would consider selecting.

A competent GC requires a different set of skills than a competent modular dealer, and the screening process needs to take these differences into account. Even if you are using the same person for both jobs, look at his competence in each field separately. It is also important to look closely at your GC’s skills even if you have already selected him because he is a friend or family member; after all, you will want to know his strengths and weaknesses. If you are assuming the role of GC, shop for subcontractors using the same advice offered here.

When shopping for a GC, complete the following steps:

(   ) Select the candidates

(   ) Have the GC help you design the site-built structures, such as the garage and deck

(   ) Have the GC help you determine the contracting tasks required to complete your home

(   ) Have the GC help you select your preferred building specifications

(   ) Obtain a detailed price estimate

(   ) Assess each candidate’s craftsmanship, price, and customer service, including warranty

(   ) Make the final selection

Begin the process of selecting a GC as soon as possible, since it can take many weeks or even months to identify candidates, verify credentials, and receive and review estimates. Obtaining a GC’s estimate almost always takes longer than obtaining a modular dealer’s estimate, since GCs need to solicit bids from each of their subcontractors, which will take time. After obtaining estimates from all of the candidates, negotiate and sign a contract with the one you select. This will allow the GC to schedule commitments from his subcontractors.

If you do not already have a GC picked out, the best way to identify candidates is from recommendations, especially from your modular dealer or people you know and trust. Other sources include your local chapter of the National Association of Home Builders, building inspectors, banks, realtors, and attorneys who serve the real-estate and construction industries. Lumberyard employees usually know which GCs have the best reputation, and subcontractors usually have an opinion about which GCs are the most competent. You can also talk with people who are currently building or have built recently; since the information is a matter of public record, the building inspector may supply some names. The yellow pages and the Internet can also produce candidates, but with these blind leads you will need to spend more time checking credentials. Ideally, you should select at least three candidates.

Check out some of each candidate’s work. Try to visit homes that the GCs are currently building. If you do not like what you hear and see, move on to the next candidate. Use the checklist ((near here)) to guide your interview with each candidate.

The next step is to arrange a sit-down meeting with the candidate. The primary purpose of this meeting is to give the GC the information he needs to generate a written estimate documenting the scope, specifications, and price of the work.

The GC has many difficult and time-consuming jobs on a modular-home project. Here are just some of the more important ones:

• Obtain competitive bids
• Help determine the scope of work
• Help determine the building specifications
• Select subcontractor candidates for each area of construction
• Review written proposals for each subcontractor candidate
• Select each subcontractor and sign a contract detailing the scope of work, building specifications, and price
• Create and manage the schedule for materials and subcontractors, including the sequence of each subcontractor to maximize productivity and reduce conflict
• Ensure the job is ready for each subcontractor before instructing him to begin
• Revise the schedule weekly to adjust for inevitable delays, such as weather, inspectors, and illness
• Ensure that work is done to accepted industry standards as well as to the customer’s satisfaction by completing on-site inspections
• Ensure that any warranty problems that occur after the job is done and after each subcontractor is paid are taken care of to the customer’s satisfaction

As you can see, the general contractor (GC) has a critical list of responsibilities and duties. That’s why I strongly recommend that you hire a professional, experienced GC. He (or she) is able to call upon a number of subcontractors to obtain competitive bids for each construction task. He is able to get them to perform in a timely fashion, which is no small task in the building trades. He can command a fair price and a timely response because they depend on the work he provides. He knows which subcontractors to avoid because of a history of poor workmanship, unreliability, and unethical pricing. When problems occur, as they do on every job, a professional GC solves them quickly. Better yet, he anticipates problems as a matter of course and heads them off before they become a threat.

Having an experienced GC on your side is also helpful when navigating the approval and permit steps that must be completed prior to beginning construction of a new home.  A licensed GC knows the building codes, which is important not just because following them is the law, but because they protect your health and safety. An experienced GC will have the necessary insurance to protect against something going wrong on the building site, such as an accident causing a serious personal injury or significant property damage to your home. This insurance is very important in limiting your potential liability as the homeowner.

You may save a little money up front by hiring a GC without professional experience, but you could lose the savings and your sanity once the work begins.

When selecting a modular dealer, I recommend that you ask each of your candidates for at least four customer references, and then contact each of them. Most people are happy to tell you about their experiences with the dealer, good and bad. If a dealer builds with more than one manufacturer, ask to speak to customers who had homes built by the manufacturer you are considering. Ideally, two of the references will have built in the last year and two will have built at least two years ago. Recent customers will be better able to tell you how effective the dealer was during the sales process, while past customers will tell you how well the house held up and the dealer honored his warranty obligations.

Do not automatically reject a dealer based solely on one unfavorable reference, unless the incident is egregious. Any dealer who has been in business for long is likely to have a few unsatisfied customers.

Use the following checklist below as a guide when questioning customer references.

(   )  Are you happy with your home?

(   )  Did the dealer do what he promised in a timely manner?

(   )  Did the dealer hold to his price? Were there any overcharges?

(   )  Were there extra charges because the dealer’s allowances were too low to get you what you wanted?

(   )  How did the dealer respond when he was asked to make changes? Were the changes documented and fairly charged?

(   )  How good was the dealer’s choice of building specifications, such as windows and framing?

(   )  Did the dealer change the specification from what was agreed to or expected?

(   )  How good was the manufacturer’s workmanship?

(   )  Did the manufacturer take care of all of the little details?

(   )  Did the dealer meet his deadlines?

(   )  Were there any surprises? If so, did they cost you more money?

(   )  Did the dealer help you prepare your site for the delivery and set?

(   )  What did you think of the dealer’s set crew and crane companies?

(   )  Did they do all that you thought they would do?

(   )  What did you think of their workmanship?

(   )  Did they work in a safe and efficient manner?

(   )  Did the set crew or dealer clean up the site and get rid of all of the trash when the set was done?

(   )  How well did the dealer honor his warranty?

(   )  Did the manufacturer provide prompt service?

(   )  Did you have any disagreements with the dealer? If so, how were they handled?

(   )  Was the dealer easy to reach while your home was under construction?

(   )  Would you buy another home from the dealer?

Finding a dealer who will sell and deliver a well-built modular home is not a difficult task. Finding one who is committed to providing a full range of services beyond that can be more of a challenge.

To order, deliver, erect, and service a modular home requires a significant effort by many people. It also requires someone to coordinate these efforts. Consider that each of the following has responsibilities that must be coordinated to build a home:

• The dealer’s staff – to design a floor plan, select building specifications, and price the package
• The manufacturer’s sales and engineering departments – to ensure the dealer’s order is understood and executed correctly
• The realtor – to find a building site
• The building inspector – to issue the required permits and approvals
• The lender – to provide financing
• The general contractor – to oversee the construction
• The installation crew and crane – to set the home on the foundation
• The manufacturer’s service crew – to complete the warranty work
• The dealer’s service crew – to assist with the warranty work

Because of the complexities involved in selling and building a modular home, most manufacturers do not, and will not, act as the dealer or general contractor. They know they cannot provide the direct assistance and local coordination required. They usually are too far away, and they have neither the staffing nor the retail and construction skills. Recognizing their limits, they insist on selling through regional dealers, who are responsible for providing the necessary customer services.

What is so different about modular homes? The simple answer is that modular homes are not self-starting or self-installing. You cannot turn the key and drive away, or plug them in and use them.

Like home building in general, modular construction is a complicated business. Today’s modular dealer rarely sells a fully pre-designed product. In fact, most modular homes are custom designed, with most of the design work done by the dealer and most of the engineering work by the manufacturer. With customers, dealers, and manufacturers continually pushing the envelope, customization puts a premium on an experienced sales, design, and engineering staff. Since you will be unlikely to obtain the necessary modular expertise or secure a manufacturer’s engineering assistance on your own, you will need the assistance of a competent dealer.

Not only is the dealer not selling a fully designed product, he is not even selling a finished product. To make a modular home into a finished product, a general contractor must orchestrate the “button-up” efforts of carpenters, plumbers, electricians, heating contractors, and others. Now that most modular homes are custom designed, the finish work has increased in complexity and requires substantially greater construction knowledge and time to complete. The problem would be manageable if the manufacturers always created fully documented assembly instructions specific to each custom plan. But this seldom happens, and the dealer is obligated to help the GC figure out what is required. This makes it necessary to select a dealer who understands both modular design and modular completion. If your dealer cannot provide this service, you and your GC can get in deep trouble very quickly.

Selecting a modular home dealer takes some time.  You’ll need a few meetings with each candidate to learn enough about his building specifications, craftsmanship, price, and customer services to make a decision. During this time, look into each dealer’s background, modular experience, and company size.

Here is a list of questions to ask modular dealers you’re considering. You don’t need to ask each dealer all of these questions.  Pick only those questions that apply to your specific situation. If, for example, you have a friend who has built a house with the same dealer, you may already know quite a bit about the dealer’s experience and reliability. If the dealer has also functioned as a general contractor for a number of years, you may not need to grill him about his GC experience, but you will want to ask him if he is experienced building the specific type of home you are considering.

(   ) How long have you been selling modular homes?

(   ) How many homes do you build a year?

(   ) What type of homes do you mostly sell?

(   ) Will you build a custom design, if I bring one to you?

(   ) Will you help me create a custom plan?

(   ) Do you have other employees? If so, what do they do? How will they help me?

(   ) Will you personally help me from start to finish? If not, can I meet the person or persons who will?

(   ) Which modular manufacturers’ homes do you sell?

(   ) How long have you been selling each of them?

(   ) How do they compare in terms of:

(   ) Quality?

(   ) Standard building specifications?

(   ) Optional features?

(   ) Warranty service?

(   ) Price?

(   ) Production lead time?

(   ) Are there other differences of note between the manufacturers?

(   ) Which manufacturer would you use if you were building for yourself?

(   ) How long do you anticipate it will take before we are ready to put my home in the manufacturer’s schedule?

(   ) Do you anticipate the manufacturer’s lead time changing between now and the time we put my home in its schedule?

(   ) What experience do you have as a general contractor?

(   ) What experience do you have with helping customers prepare a site for the delivery and set?

(   ) Who sets your modular homes?

(   ) How can I contact you in the future?

(   ) Cell phone?

(   ) Work phone?

(   ) Home phone?

(   ) Email?

(   ) Fax?

(   ) If I have a warranty problem after the home is delivered but before I move in, how do I get the problem fixed?

(   ) How long can I expect it to take?

(   ) Will you take responsibility for the manufacturer’s warranty problems if the manufacturer does not?

(   ) If I have a warranty problem after I move in, what do I need to do to get the problem fixed?

(   ) How long can I expect it to take?

(   ) Do you have a “legalese” section in your contract that states the terms and conditions? Can I have a copy to review?

(   ) How much of a deposit do you require?

(   ) Under what circumstances is the deposit refundable?

Throughout each meeting, take note of the dealer’s personality and how well it fits with your own. If you do not feel comfortable with the dealer or do not like his answers to your questions, find a gracious way to tell him candidly that you will not need his services.

After completing this initial screening of dealers, and while awaiting written estimates, have each dealer’s insurance company mail you an insurance binder. Make sure the coverage includes sufficient liability insurance and workers compensation insurance. This will protect you if the dealer or one of his subcontractors is not fully insured and someone is injured on your property, or there is significant damage to your property.

While waiting for the estimate, you may want to investigate the dealer’s credentials. First, contact the Better Business Bureau and local consumer affairs office to see if any complaints have been filed against the dealer, and if they were handled satisfactorily for the customer. Second, ask the state attorney general’s office if there have been any civil suits filed against the dealer. Third, ask the dealer for the names of his commercial bank, suppliers, and subcontractors. If he is in good standing with all of them, he should not object to you checking the references.

When I first starting selling modular homes I had a difficult time convincing customers they needed to have a bulldozer on set day unless the need was obvious. That changed after one nearly disastrous incident.

My customers were building a two-story home made up of four modules shipped on four carriers. I asked them to have their excavator assist the delivery crew on delivery day, and they complied. It turned out that the bulldozer was not needed because the ground was dry and firm. This enabled us to position two of the modules next to the foundation and crane on the property with the other two modules stored in a staging area over night. I reminded my customers that they needed to keep the bulldozer on site for the next day’s set, but they said they didn’t think it was necessary. I pointed out that if it rained that night, we almost certainly would have a problem. My customers responded that it would cost them $500 for the second day, and they thought it was a waste of money. When it began raining that night, I called them at home to again suggest they supply a bulldozer. They refused.

The set started off well. We got the first module onto the foundation quickly. While we were setting the second, we delivered the third to the site. But the transporters could not get the modules close enough to the foundation no matter what we tried. My customers called their excavator, who arrived two and one-half hours later. While we were waiting, a thunderstorm hit hard. My set crew climbed on the roof, in spite of the lightning, and tried to cover the two modules with tarps. They did OK, but while trying to position the tarp, one of the crew slipped and pushed his foot and part of the tarp through kitchen ceiling.Allof the water that had pooled on the tarp while it was being installed poured onto a row of cabinets. Fortunately, none of my crew was hurt and the damage was repaired. But that experience taught me that I had to explain to my customers all of the things that can go wrong if they do not provide the proper equipment. It also taught me to delay the start of a set if the equipment is not on site.

When your dealer tells you to provide equipment on delivery and set day, remember that he isn’t just protecting his interests; he is also protecting your house.

Sometimes a general contractor with limited modular experience can turn a “couple of hours” fix into a “couple of days” project. I had a customer whose master-bedroom ceiling was not level at the marriage wall. My set-day supervisor should have noticed this and told the customer that we would come back to fix it. But he missed it, and my customer, who was acting as his own GC, decided to fix the problem on his own. He ended up tearing down half of the bedroom ceiling before he contacted us for help. The problem, we discovered, was that the ceiling framing on one of the modules was hung up slightly on the other module, preventing the first module from settling all the way down.Allthat needed to be done was to free up the first module, which we were able to do in two hours. When we finished, the ceiling framing was even, but my customer now had to replace a lot of drywall.

It is very important that you and your GC understand that they should not attempt to fix any warranty problem without first contacting the dealer for authorization, at least not if you want to take the right corrective action and be compensated for your efforts.