Most people assume that a bidding war among home builders will get them a better price. But that’s often not the case.
Over the last several years, home builders have had to become leaner and meaner than ever to compete in a struggling marketplace. The builders that didn’t tighten up no longer exist because they weren’t offering the value that customers demanded.
So it’s pretty safe to assume that most builders today are offering their most competitive prices. They have to if they want to survive.
So why is it that when a home is “bid out” there can be such a big difference in price?
The easy answer is to say that some builders are just more efficient than others. However, while this is important, it’s not a complete explanation — overhead expense typically accounts for about 4% of the total price, which is not enough to explain big differences.
What generally accounts for these larger price variations is actually the bidding situation itself.
In a bidding war, builders know that the deciding factor is price. So how does a builder keep his price down? He bids the bare minimum of what is required on the plans and specifications.
In other words, what typically accounts for a lower price is less house.
Your plans may call out for a steel garage door, but do they say it should be insulated? Your specifications mention electrical outlets, but are there enough to meet the minimum code?
A good home builder will be able to spot these missing details in your plans and specifications. But will a builder, who knows that the lowest price wins, bring this up or increase his bid to include these items?
Custom homes have over 20,000 parts. It’s not practical for a home designer to call out every part in the plans and specifications. If they did, the plans and specifications would cost more than the house itself!
This means that, in a typical set of plans and specifications, many areas will likely be interpreted with the lowest cost in mind. But the lowest cost can add up to a big number later on.
You’re better off selecting a builder based on reputation.
Working with a trustworthy builder and getting exactly what you want — instead of the lowest bid — will result in a better experience and a better value overall.
Need help choosing a builder? Check out our free guide “13 Tough Questions to Ask When Selecting a Builder.”
Inside, you’ll find a step-by-step guide to picking the perfect builder for your project.
Estes Builders is an award-winning design build firm that specializes in custom homes in Western Washington. We have earned more than 130 customer testimonials and a reputation as Western Washington’s most trusted custom home builder. We build custom homes in Sequim, Port Angeles, Port Townsend, Port Ludlow, Bainbridge Island, Kingston, Silverdale, Port Orchard and surrounding areas. Contact us for a FREE Project Analysis to discuss your project.