Episode 91: Pre-construction Services Agreements
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- Опубликовано: 26 май 2023
- On this week's episode of The Build Show Podcast, Matt and Jake go deep into pre-construction services agreements.
What is a Pre-construction Services Agreement? Why use a PSA? What should you include in your pre-con agreement? How can a PSA act as a litmus test for your clients? Should you charge for it? Refund it?
Listen in as Matt and Jake share the stories that caused them to adopt pre-construction services agreements. They'll share insight into their processes, thoughts, and focus points, and review how and when they present the PSA to their clients. Matt and Jake will also share whether they refund or credit the pre-con fee.
Learn from Matt and Jake's mistakes and successes, and remember to keep your Zoom camera on.
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Matt, would you ever consider putting together a “build show home builders checklist” that would be comprised of a high Level set of things to tell you want your builder to do / think about when he is building out a quote and starting his job. I’ve tried to save various videos in a YT playlist to build out my own notes (framing technique requests, air vapor barriers , type of insulation, etc) but would really appreciate your professional summary. We want our builder to incorporate some things and also want him to know what we’re looking for so he can plan on appropriate material and labor costs.
Working in construction at a much bigger level than him, I would have to say that even at his level it's not easy. I would have to convey to him to start a Patreon as a list like that with all aspects of HVAC, Roofing, Electrical and more and the options and even where in the regions it makes sense with colder weather as opposed to warm regions and what works best there. It would be a lot of work!
@@ITIRICI that’s helpful, thanks for adding in your thoughts and expertise. This is probably a case of “you don’t know what you’re asking for” but if there is even something remotely close to that to get people on the right track, I’d be very grateful.
I'm a realtor and I refer this video to clients every time they tell me they want to build or remodel a home. great content!
Got my wheels turning. Love pre-cons. What a life changer, and they are SOOO easy to sell. They solidify relationships, they are great indicators for how the project is going to go as well. Great episode, thanks for covering this!
PSA = GENIUS you guys - SO MUCH added value. (Btw - I’m a home owner - not a builder, prepping to have a house built. Just wish I was in your area(s)). Thank you. Appreciate you 💯
I love the long stories! Details make all the difference! :)
Seriously could listen all day long.
I just had my inflection point last month (35 years old) PSA...ALL THE WAY brothers and sisters.
I have learned so much from all your broadcasts, THANK YOU
I’m in the skilled trades, and I have no doubt you’re a good, responsible builder, but I’ve never met one. I’m in homes every day of my life, 3 years to 30. I sat in an upstairs loft type great room alone writing notes in a windy day. 25 feet away from me the curtains inside the house were fluttering. I see half ass “first cost” construction as the standard. The big tract builders are the worst. A friend of mine does this work for prices that are demeaning. You DO get what you pay for, so when you turn trade after trade into rental hands, it cascades throughout the project. It’s a different world. You could do 15 jobs in a row for these guys, and on job 16 they’ll sell you out for $500. (And keep in mind the 15 were criminally low) Most homes are not “do it right”, (other than a happy coincidence), but rather, “do it cheap.” The homeowner is in trouble long term. Now private equity is involved. There’s no bigger “throw a coat of paint on it” group than private equity.
Matt, if you could upgrade 10 or so items when building a house what would you do? Like your drywall upgrade to 5/8. That would be a good video.
We have been doing this for a while now. Another benefit is that it weeds out the tire kickers! Serious injuries only, basically.
I’ve built 11 personal homes over 30 yrs, w/ custom home builders that owned the lots we wanted to build upon, I’ve always Q/A the subs, the standard of build, the builder references (both given and trusted RE agent and/or architect, plus a +/-15% overage contingency… getting a PSA like this is just like engaging an architect - you are paying for their know-how and expertise
No way would i put up with you quizing my subs on my lot. I wouldnt allow a guy like you to step foot on the job without an appointment.
Very much looking forward to "Performance on a Budget". With costs going crazy, too many clients are skipping building altogether because they would rather not spend the money on an inefficient house (which is smart). Hopefully you guys can provide some good tips for that.
Fantastic conversation. Thanks guys.
Great insights, thanks, keep up the good work.
Thank you for the awesome content guys.
Can you provide a discussion on Schluter-DITRA. It is a polyethylene uncoupling mat designed to reduce breakage and stresses on tile.
Just watch Sal DiBlasi
Fantastic podcast, guys!
Some build to remember...some build to forget.
Matt my problem with the “no credit on PSA and we work against that deposit” thing is… it sounds a lot like a lawyer retainer.
So as a customer you pay big $ and the professional “works against that”, the problem is (and I have seen this play out with lawyers twice now) their costs magically balloon to absorb the retainer. Suddenly they spend hours upon hours double checking and “getting partner approval” etc etc and your retainer goes poof.
In one case I even had the opposing counsel in a prenup agreement hire ANOTHER lawyer to review the agreement and try to bill the original retainer. That was a mess, but it’s a great example of how the retainer structure is broken.
Essentially, you’re a good builder and trustworthy. The problem is the model has perverse incentives and less trustworthy builders can now inflate their costs to eat that $ inefficiently. In fact, the more inefficient they are the more money they make! (Sounds like a government contract to me haha)
I don’t have a good answer here, obviously all parties want to make money/get the most for less.
Is there a better way to align incentives?
This context contains known deliverables: specs, plan review, sub contractor bids. It's geared toward cost plus contracts because you are revealing everything up front. The client can own that data and not move forward with the contract. Big difference from opaque legal services.
This episode is worth 10 how to sessions!
Whoever started the whole “Free estimates” thing in construction should be made to sit in an attic for all of August.
What gets me, is that clients dont know how much a finish schedule can impact the budget. Most people have not heard of a finish schedule, the designer has a huge task in front of them if they want a GMP/Fixed
Yes PSA and contract should be given to client upfront before investing any time together. Clients should know the legal risks involved in construction.
Great content Matt. I'm not sure if you are in your new house build one year yet. It would be great to see your performance expectations of your build compared to the reality.
Please look into doing some content on your findings.
Thanks
What an interesting video to watch by the prospective homeowner. Currently under contract review. Brought it to my attorney for review and it's certainly all one sided, purposely made to not only be painted into a corner, but making it costly for the homeowner. As a matter of fact the builder's general manager won't even return my attorney's calls. True to their word, the General Manager made it very clear that "Nothing will change in the contract." I sincerely want to be a good client, and I will be, but I'll be going 100% in with all we have. I need some assurances. What do you think about clients bringing in an engineer as a building inspector? I'm a construction idot!! Wish us luck :-)
Don't walk, run from your proposed builder!
Is there a Buildshow version of the angies list? Of top builders, subs, GCs ect across the USA?
Construction management from the start of the project to the finished project.
AIA vs TAB ... could you do a followup on your critique of the AIA A series contracts. Interested to hear specifics on what's worked and what doesn't and how the TAB contracts resolve those issues. From an architect's point of view, we usually see client's lawyers recommending AIA contracts to reduce legal fees reviewing custom construction contracts. Had mixed success with AIA, tends to come down to their complexity and misunderstandings over the detailed terms etc. For similar reasons, we typically don't use the AIA B series either.
Sir. Can you spray open cell foam over closed cell foam? I'm building a barndominium with 12'' thick wall's that have an 8'' cavity.
Any help would be appreciated.
How come Matt doesn't do projects that are
I have heard the typical fee structure used by a custom builder is costs + 10% profit + 10% overhead. Is that correct, more or less?
With your cost plus, would you be willing to share your percentage? Here in the Bay Area we charge 14% on smaller projects ($500k - $1.5M) larger projects we usually lower it to 8% - we are a family business so we don't have huge overhead.
What kind of price should be budgeted for 3 bids or per bid? I'm looking at building a house with a total budget of $250k up to an absolute max of $350k I expect to start building in 13 to 15 months, I haven't got a location yet but the land will have to come out of the budget also.
I was completely unaware that construction companies charged to give a estimate.
Minimum from a good builder is $1000 each for detailed bids that include grade packages, not specific choice packages.
To be honest, the PCA sounds a bit scary, I don't mind to paid someone for their services but i do scare of lawyer up grifters !
second!
Must be nice to be in a time of huge demand for new building. It's not fair for the homeowner to put up front money to basically commit to a builder without knowing the costs. So if a builder signs a homeowner to pay up front it means they can bid high and not have to worry about being underbid and take advantage of the homeowner.
You want people to work for you and teach you for free? Super fair 🙄
@@lordaleksandre That's called consulting sale.
They do know they’ll cost. He said the first thing that he does for free is give them a rough price range. If that range is reasonable they move forward. Have you ever done an estimate for a whole house before? It’s impossible to do without plans and takes weeks if not months. Definitely worth being paid for it.
@@possiblymeish That's the cost of doing business.
@@rockys7726 "Cost of doing business" We get it dude, you think people should work for you for free. Many people do not want to work for others for free.
First?
I assume these guys are OK but builders are cocky now and want big money for just allowing you to speak. Give us 10k or more and you not getting it back. We call it different names and its all for us and you take all the risk not us. Plus if it costs 100k more its your problem not ours. That is if they don't just stop or run off with the money you gave them anyway. Its so bad in some places some states created laws they cannot touch the money, its all in escrow. But builders just word it different and fix it and then yeah, like this one said if some lawyer sends it back and we say no way, then too bad we not building. Way to many really bad builders around to just hand out money. Better be sure they have enough worth to attempt to sue or whatever and not hidden behind 20 llc's.
Yeah, the LLC shell game is classic.
Exactly
PSA or PCA? PSA equals prostate specific antigen in the rest of the world.
Public service announcement in the rest of the rest of the world
@@danielwoodard680 😂for real
Why do you think they are doing something wrong if they only have their video on when they are talking? Are you that much of a creep?
50 pages of drawings and 70 pages of specs? Lol. Thats not a GOOD set! Thats a waste of time and massive amount of extra stupid work. Id prefer a napkin drawing.