Hey there!
In keeping with my Halloween-themed emails, I thought I'd talk about something else scary in homebuilding.
Have you ever had a situation where you encountered more than you expected? Especially when it comes to foundation work on a new home.
Let's say you start digging and you find that the ground was soft - and - you needed to dig down further to get to solid ground. I mean, you can't put a foundation on soft ground if you expect the house to remain standing level.
So, you dig down a few more feet to be the Home Builder that you need to be.
But, now you have additional foundation work to bring the top of the foundation back up to where it should be. These are costs that you didn't expect. Chances are...your customers didn't expect (or plan) for these either.
What's a Builder To Do?
Hopefully, your Sales Agreement with your customer included some type of wording for what happens if or when "unexpected/unknown" site conditions occur.
If you don't have wording in your Agreement, I'd suggest getting it added ASAP.
Below are two parts of the Agreement we used to address this with our customers (but, before you try to use this, I have to put in the "legal disclaimers" that I'm not saying this is the be-all-end-all wording AND you should discuss this with your own attorney to get area-specific wording for your Agreement of Sale). Whew! That was a big sentence - but - that's what happens when you get lawyers involved (sorry lawyers).
This wording should be reviewed at time of Agreement - and - again before you begin construction (Pre-Construction Meeting with a Customer).
It's pretty simple to explain to them. You just tell them that you can't see what is below the ground any more than they can - and - essentially "stuff happens" (keeping this PG-rated, folks).
In the unlikely event that it DOES happen, you should immediately inform your customer. Then, you have to be able to discern what is extra and hadn't been expected - so - you can bill your customers accordingly.
This is one of the reasons you want to have a good estimate from your Foundation Contractor ahead of time. Have them give you an estimate for a "perfect lot" - building the plans as-if there is no extra foundation work required.
If you have that "perfect lot" estimate upfront (and base your bid on that to the customer), you'll have a great base from which to draw the difference.
It's up to you how to bill this to the customer. At cost. Cost + XX%. Or Flat Amount. I personally think Cost + XX% is fairest to all (as long as that XX isn't soaking the customer).
But - make sure you bill the customer. Don't fall into the trap of "we're the professionals and should have known this" (even if that's a line given to you by your customers).
Chances are, you do not have X-Ray vision (but, boy, wouldn't that be awesome!). You won't know what's under the dirt until you uncover it.
Have a different way you handle situations like this - or - have questions on how to best address this with your Agreements and/or customers? You can always reply back and let me know!
Happy Building!
-Brad
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Brad Haubert
Industry Veteran with over 1,000 new homes managed and Consultant to Home Builders all across North America. I can be reached at brad@bradhaubert.com.
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