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Contracts Are Your Friend When Having A Tiny House Built

More and more people are turning to builders of tiny homes to build their house.  When I first started the tiny house movement everyone was building their own tiny house, but that isn’t the case today.  Over the years I’ve found several really great builders, but I’ve also found a lot of really terrible builders.  My only advice is that buyer beware is the best advice I can give.

contracts are common sense

I felt the need to write this post today because there is clearly a need for people to understand how to protect yourself during this process.  I’ve seen countless examples of people not using common sense when it comes to hiring a builder and so here I am making this P.S.A.

When you hire a builder you need to make sure you have the following:

  1. Signed contract
  2. Build and payment timeline
  3. Detailed set of plans
  4. Process for changes
  5. Plan for when things go wrong
  6. Vetted references

builder contracts

Before I get into what each of these things are, I feel the need to justify the need for these things, not because they require justification, but because people seem to think they’re not needed.  It honestly blows my mind when I hear a horror story of a builder and I always ask, “do you have a contract?” 95% of the time the answer is “no”.

A contract does the following:

  • Gets people on the same page
  • Reduces disagreements
  • Highlights future problems before they happen
  • Can help ward off bad builders
  • Gives you a leg to stand on in court if need be

If you’re entering into any agreement in life that’s more than $1,000 you should have something signed. The bigger the price tag, the more time you need to spend on the contract.  When I am considering whether to put together a document, I ask myself this: “Am I willing to lose or walk away from this money?”  If the answer is no, I draw up a contract.

I need to put a bit of tough love on all of you here, because most people I’ve run into think contracts aren’t necessary.  You need a contract and several other documents when hiring a professional to build your house.  If you don’t, I have a really hard time feeling sorry for you when it all goes bad.  Being a responsible adult means taking common sense steps like drawing up a contract on things like this.

So let’s get into what is involved with each of these things:

 

You need a signed contract:

Before you give over one dollar, you need to have a contract signed.  Why?  Because a contract is simply a tool to make sure everyone is on the same page.  People shy away from contracts because they sound complicated, they could be expensive, they are so formal or too “corporate.”

This is the exact opposite of how you should feel.  I love contracts, seriously!  I know it’s a little weird, but I really do.

The way I like to think about contracts is, they’re a tool that lets me understand the other person.  That’s it!  In life I’ve found that most disagreements happen when I do something when the other person expected something else.  If we can both agree on what we expect, most disagreements won’t happen.

So we use a contract to carefully outline what we want, what we expect, how we are going to go about it, and what the plan is. What I’ve found is we outline these things, sit down with the person and we suddenly find out we were thinking different things.  That’s great because we can align our thinking and fix it now.

A contract is best to be drawn up by a lawyer, but really any good builder should have a template handy.  You can get free templates online and customize to your needs.  Be wary of anyone who seems hesitant to work with you on a contract.  Bad and dishonest builders shy away from contracts. Quality builders love contracts because a contract lets them understand their customer and prevent disagreements.

You should have a detailed timeline:

contract timelines

In addition to the contract, you need a timeline.  A timeline outlines who does what and when.  You should outline when each phase of the build is to be completed.  Break down the build into milestones: Design finalized, construction starts, walls erected, roof completed, siding/windows/doors, interior finishes, etc.  For each of these things have a due date and tie those due dates to payments.

Along with a build schedule I would recommend insisting on a formal update every 2 weeks. Write this into the contract, along with what defines an “update”.  It can be a simple email with photos, but honestly I’d do it in person or do a virtual check in where they Skype or Face Time you and walk around the in progress house.  You want to see your house – actually lay eyes on it, don’t take their word for it!

For updates I’d stipulate in the contract:

  • Summary of work completed since last update (100 words or so)
  • 5 photos included with each updated, showing work that was completed
  • Summary of any delays and actions to fix it
  • Summary of work to be done by next update
  • Any items that need to be discussed or addressed

An important note here is you need to compare the work done to the timeline you’ve setup. Compare the last set of updates “work to be done” with the subsequent updates list of “work completed.” The update list should match. If it doesn’t, the builder should have a plan to catch up and explanation.  You should build in some time for setbacks. Be reasonable because delays happen, but set expectations for how much of a delay is too much.

You need a detailed set of plans:

house plansA set of professionally generated plans are an investment to achieve a successful build.  Plans are an effective way to communicate exactly what you want.

Plans will typically cost $1,000 or more, but it’s something that you shouldn’t skimp on.  You want the plans to include specific dimensions, electrical, plumbing, and other utilities.  The other very important aspect to plans is the materials list.  You literally need to spec out every material in the house along with any mechanical or appliances.

Why so much detail in the material list?  Because it will help the builder price correctly and remove any questions when it comes to what needs to go into the house.   Really shady builders will often swap materials for cheaper versions and pocket the difference.

You need a process for changes:

changes will happen in buildingThis is typically a good signal of a quality builder, they rely heavily on rigid processes and insist on “change orders”.  In your contract you need to specifically state that any changes not signed off BEFOREHAND are not allowed and you aren’t responsible for paying for them.

A change order is simple document that states that you were planing on doing one thing, but for whatever reason something needs to be changed.  It should outline what the change is very specifically and needs to include the change of charges.  Even if there are no additional charges, it needs to specifically state that the cost is $0.00 in the document.

 

Things to require change orders are:

  • Changes to materials, parts or appliances
  • Agreements on delays
  • Changes in build, layout, design, colors or other elements
  • Any additions
  • Any changes to final billable costs or credits
  • Anything that wasn’t planned for

Have a plan for when things go wrong or disagreements happen:

Building a tiny house is a complex and things will go wrong.  It most likely won’t be a big deal, but it will happen.  Both sides need to be reasonable and considerate, but you also need to know when to draw the line.  The best piece of advice I can give here is that things are best resolved through productive conversations and understanding.

Be clear about what is bothering you, calmly state what you thought was going to happen, what did happen and propose possible solutions.  When you talk about issues, make sure you stop talking and listen when they’re speaking and ask for the same respect.  Do your best to keep your emotions in check.

Before you even start building, while you’re putting together your contract, sit down with the builder and say “I want to figure out a good way for us to resolve issues if they ever come up and want to work together on solutions together.”  If you have a specific conversation about this it can prevent a lot of heartache later on.

Often contracts will have a mediation process, where a third party hears both sides and determines what the fair thing to do is.  I’d suggest having the following:

  • Define a process that can help the situation early on
  • Define a mediation process
  • Define the location or jurisdiction for any legal proceedings if it needs to go to court
  • Define who pays for what in mediation and legal fees

Vet every builder with multiple references

First off, if a builder has never built a tiny house, run away as fast as you can.  Even if they were a builder of normal homes, that’s not good enough.  Why would you take the chance?

Any builder you engage you need to talk to multiple references.  In those interviews I’d strongly suggest you going to meet them in person and ask ahead of time to see the house they had built.  Most homeowners are proud of their house and love to show it off.  It will give you a chance to see the quality of the builder’s work and give you a chance to see real world examples which can be useful in your own build.

If a builder even blinks when you ask for references you should walk away.  If they aren’t quick to provide several references, you need to run away.  Seriously.  Why would any good builder not be willing to have you talk to previous customers?  Quality builders love references because their work will shine through.

A really important note: if there is anything at all, that seems not right about any of the references choose another builder. If your gut says something is off, don’t use that builder.  I’d rather be wrong than sorry.

Good builders love contracts, timelines, and references because it improves the outcome and shows their quality work.  Bad or sketchy builders will shy away from these types of things.

Your Turn!

  • What tips do you have?
  • What lessons have you learned from working with builders?
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