Building a home: How to pick a contractor

Key takeaways

• Get preapproved for financing and define your budget, priorities and timeline before you start evaluating builders.
• Verify each builder's state license, confirm they carry liability and workers' compensation insurance, and check the local county court clerk's office for pending lawsuits.
• Building a home is a months-long relationship, and how a builder handles direct questions during the interview is a reliable indicator of how they will communicate during construction.

A house could be the biggest investment of your life. Choosing a builder deserves the same level of care you would put into any major financial decision. Here’s how to pick the right one.

Make a clear picture of what you want and what you can afford before evaluating contractors.

Start with your budget. Get preapproved for financing and be realistic about the maximum amount of debt you are willing to take on. Consider whether you would accept less expensive materials, design changes or a longer construction timeline to bring costs down.

Then consider the home. Have a clear idea of size, style, layout, amenities, location and site preferences. Set priorities so you know where you are willing to compromise and where you are not. If other family members will live in the home, make sure everyone is aligned before you begin interviewing builders.

Think about what services you will need beyond construction. Some buyers already have an architect and a building site. Others need a builder who can handle design work, help find land and manage site preparation, including permitting.

Finally, set a realistic timetable. Build in extra time for delays that are common in construction, including material shortages, labor shortages, subcontractor scheduling conflicts and weather.

You can find contractors by asking local Realtors, homeowners who had their homes custom built, and also searching online for local home builders. Always check reviews and references before working with a builder. Before making a decision, I would compare several builders based on the quality of work and also their communication style. The lowest bid can sometimes end up being the most expensive one because missing details, cheap materials, change orders, and poor workmanship can add up quickly.

Start by identifying builders in your market who have the experience and capabilities that match your project. Make a short list, then do the homework to narrow it down.

Verify each builder's state license or registration through state and local government websites. Check whether any builder on your list has had infractions or bonding problems. Confirm that each carries both liability insurance and workers' compensation insurance.

Visit homes the builder has completed. Look at the quality of the work inside and out. Talk to previous customers about their experience, including how the builder handled problems. Talk to subcontractors who have worked with the builder, too. They often have a candid perspective on how a job site is managed.

Ask for a copy of the builder's standard contract and have it reviewed by a professional before you sign. Builders use different contract structures, and the details matter. Read the fine print to make sure the terms are fair.

Once you have done the background research, schedule face-to-face interviews with your finalists. You are evaluating more than credentials at this stage. You are looking for candor, clear communication and good chemistry. Building a home is a months-long relationship, and trust matters as much as skill.

Ask direct questions and pay attention to how they are answered. Vague or evasive responses are a red flag. A builder who is confident in their work will answer tough questions without hesitation.

Here are a few topics to consider about a builder:

• Their policy, in writing, addressing service issues during and after construction
• Their guarantee on the quality of their work
• The size of the service reserve in their bid
• If they guarantee the work of their subcontractor, and the procedure for bringing subs back to the job should additional work be required
• Their procedure for enacting change orders. Scope changes are common during construction, and you need to understand how they are priced and approved before work begins
• The completion date for the project and how it is enforced
• Whether cleanup is included in the bid, and what it includes
• Whether you will receive an itemized statement of costs and how often it will be updated during construction
• Their policy on choosing your own suppliers instead of relying on theirs

End with an open-ended question: What sets you apart from your competition, and why should I choose you? The answer will tell you a lot about how the builder sees their own work and whether their strengths align with what matters most to you.
More on this topic:

• How to choose the right builder for a custom home
• Buying a new construction home in 10 steps
• Building a home? Here's how to begin
• Home building essentials: What buyers need to know