Madison Area Builders Association

Home Building 101

Construction Contracts

The contract for the purchase of a new home is usually a collection of documents. These documents vary in form, length and content and may differ depending on the way your house is being built.

Nonetheless, all contracts generally have certain standard elements: names of the parties, dates of transaction, identification of the property, price, financing provisions, statement of when construction will commence and be completed, plans and specifications (including blueprints, a specification list, color selections, options and other items), information about change orders, ownership of the plans, procedures for site visits, inspections and site clean up, information about warranties on workmanship and materials, homeowners association (if applicable) and settlement procedures.

The contract is a legally binding agreement for what is probably the largest purchase you have ever made. As such, you should have an attorney read through it so that you can be more informed about what you are signing.

Costs

Since so many variables make up the cost per square foot, such as lumber prices, amenities chosen, time of year, etc., there is no "standard" cost per square foot. When comparing bids, consumers should be sure they are comparing "apples to apples."

For example, prices will vary tremendously if one builder is quoting an estimate for a kitchen with hickory cabinets and ceramic tile and the other is quoting cherry cabinetry and oak flooring.

Consumers should also be wary if the contractor is submitting an unusually low-priced bid compared to others. It's a dangerous situation if the contractor collects from you but cannot pay the suppliers from whom materials are purchased.

Dispute Resolution

Each MABA member agrees to abide by the Association's Code of Ethics when they apply for membership. The Code of Ethics is the guiding principle for members' professional conduct. If the Association receives a written complaint against a member company, on a quarterly basis, any complaints are reviewed by the Executive Committee. The Association will send letters to both the complainant and the member, encouraging resolution of the issues to the mutual satisfaction of all parties. While the Association cannot resolve complaints, knowledge of customer satisfaction levels allows the Association to monitor issues and, if necessary, take action regarding a company's membership.

In addition, the Association endorses Construction Arbitration Services (CAS), an arbitration/mediation service. CAS is a private, non-profit organization created to foster alternatives to litigation for dispute resolution. Arbitration is submission of a dispute to one or more impartial persons for a final and binding decision. Mediation involves an attempt to solve a dispute with the help of a neutral third party. The mediator's role is purely advisory and the dispute resolution rests with the parties themselves. CAS is headquarter in Dallas, Texas (214-638-2700), but provides arbitrators/mediators trained in the construction industry within Wisconsin.

Housing Facts & Figures

On the average, more than 1,500 single-family homes are built annually in Dane County, along with more than 300 two-, three-, and four-family units worth more than $208 miilion to the local economy.

Nationally, the construction of 1,000 single-family homes generates 2,448 jobs in construction and construction-related industries; approximately $75 million in wages and more than $37 million in federal, state and local tax revenues and fees. Although it is highly decentralized and made up primarily of small business people, the collective might of the housing industry is huge - accounting for about 4 cents of every dollar spent in America during a typical year.

Locally, the construction of 100 single-family homes in Dane County in one year generates more than $10 million in local income, $6 ,000 in local taxes and 181 local jobs. Additionally, the recurring impacts of building 100 single-family homes in Dane County account for nearly $2.7 million in local income, $647,000 in local taxes and 60 local jobs. These are ongoing, annual local impacts that result from the new homes being occupied and the occupants paying taxes and participating in the local economy year after year.

For instance, housing's economic impact doesn't end when the home is sold and the new owners move in. In the first 12 months after purchasing a newly built home, owners spend an average of $6,500 to furnish, decorate and improve their homes.

How Important is Homeownership to Americans?

According to a nationwide survey conducted in 1996 by the Federal National Mortgage Association, 91 percent of Americans would rather own a home than drive a better car, 67 percent would put off retirement for 10 years to own a home, 85 percent would forgo an extra two weeks of vacation a year to own a home and 81 percent would rather commute a long distance and own their home than rent closer to their jobs.

Typical Home Profile

The typical single family home built in Dane County in 1997 had about 1,800 square feet of space, three bedrooms, at least a 2 1/2 car garage, a minimum of two baths, family room, formal dining area and central air conditioning. The average value of building permits for single family homes from January to November 2006 in Dance County was approximately $248,000.

Publications

A new home is one of the biggest investments a person can make. With so much at stake, you, as a consumer, owe it to yourself to plan carefully. The National Association of Home Builders (NAHB) has publications available to give you specifics about all aspects of building and remodeling.

Carol Smith's Building Your Home: An Insider's Guide explains in detail what all buyers should know about the home building process. Building Your Home provides tips on choosing a builder, selecting a location, participating in design, and much more. Smith's book is an extensive guide filled with definitions and explanations that will ease the anxiety of the new home buyer.

Dreams to Beams: A Guide to Building the Home You've Always Wanted And Understanding House Construction, published by the National Association of Home Builders, provides consumers with comprehensive definitions of building terms and insights into the building industry.

Carol Davitt's Remodeling Your Home: An Insider's Guide covers topics such as how to find a trustworthy remodeler, how to minimize the disruption of a remodeling job and the importance of an explicit warranty. This remodeling guide is one of the most thorough books on the market because it includes cost charts, project checklists and sample warranties.

To order publications from NAHB, please call the Home Builder Bookstore at 800-223-2665.

Warranties

Warranties vary from builder to builder. Consumers should check their building contract for information on warranties. Although it is not mandated, many builders establish a one-year warranty period.