Imagine this scenario: you sign a deal with a builder who offers an attractive low price.
Everything starts smoothly.
You put up your savings, acquire a big loan from the bank, and eagerly start your build.
The builder pours the slab, and sets up the frame…
But midway through construction, they run out of money. Suddenly, your dream home turns into a nightmare—an unfulfilled project with half-finished walls, mounting financial losses, and unlimited stress.
Unfortunately, this story is all too common.
That’s why, to ensure a smooth, uninterrupted building process, the goal isn’t to pick the cheapest builder – but to find a financially stable builder who charges fairly.
Here’s How to Spot the Difference: Five Questions to Ask to Tell if a Builder is Financially Stable Before Signing on the Dotted Line
Question 1: How do you manage your cash flow and savings?
A builder should be able to manage long periods between payments, without it impacting their cash flow. If they save and plan on a year-to-year basis (instead of a week-to-week basis) they’re more likely to have the reserves needed to handle unexpected expenses or delays, keeping your project on track.
To avoid being put in the awkward position where you’re asked for money before it’s due, request information about their payment schedules and how they manage their finances
Question 2: Do you work on state government projects?
Builders undertaking state government housing projects undergo rigorous external audits, which provide ongoing validation of their financial health. Don’t hesitate to ask builders if they’ve undergone such audits which provide proof of their financial stability.
Question 3: Do you have a contingency fund for unforeseen circumstances?
Ask if they set aside a portion of their budget for contingencies. This is a sign of forward planning and can be critical in ensuring your project isn’t disrupted by financial hiccups.
Question 4: What measures do you take to ensure long-term financial stability?
Understand their approach to financial planning, including how they forecast and prepare for future economic shifts or changes in the construction industry.
Question 5: How do you ensure your projects remain on budget and are not affected by market fluctuations?
This question helps you gauge their ability to maintain financial control even in changing market conditions (like we experienced during COVID), which is a key aspect of forward planning.
Bottom Line: Choose Value Over Price
Investing in a builder who charges fairly—neither too low nor too high—can prevent future financial difficulties and project delays. Also, make sure you:
- Check Online Reviews: Online reviews can reveal consistent patterns in a builder’s quality and customer service. Look for trends in feedback and note how the builder responds to any negative comments, as this can indicate their commitment to customer satisfaction.
- Inquire About Staff Turnover: High staff turnover may signal internal issues. Ask about the average tenure of their team to gauge stability. A steady, experienced team is more likely to deliver consistent quality on your project.
- Speak with Subcontractors: Subcontractors can provide insights into the builder’s reliability and professionalism. Ask them about payment timeliness, communication, and adherence to schedules, as these factors impact the smooth running of your project.
- Verify Licenses and Insurance: Ensure the builder has all the necessary licenses and insurance to protect you from liability and guarantee they meet industry standards.
- Request Detailed References: Speak directly with past clients to understand their experiences and the builder’s ability to stay on budget and meet deadlines.
- Examine Previous Projects: Visit some of the builder’s completed homes to inspect the quality of workmanship and attention to detail firsthand.
- Understand Their Financial Management: Ask for transparency in how they manage their finances, including how they handle deposits, payments, and contingencies.
- Confirm Supplier Relationships: A strong relationship with suppliers can ensure timely delivery of materials and avoid project delays.
- Assess Communication Practices: Evaluate how promptly and clearly the builder communicates, as this is crucial for avoiding misunderstandings and ensuring a smooth building process.
Remember, a financially stable builder will have a solid reputation, a stable workforce, and strong relationships with trades and suppliers.
At Regional Home Builders, we’ve been successfully operating now for over a decade, constructing 50-70 homes annually, including state government projects.
Make no mistake, building a custom home is one of the biggest investments you’ll ever make.
And the more you know about the home-building process, the better off you’ll be when it’s your turn to build the home of your dreams.
That’s why I’ve compiled this free guide to help you educate yourself on the nuts and bolts of the building process: Build with Confidence — 7 Things You Must Know Before Designing a New Home.
Download our free guide today.
Or schedule a Free Consultation to discuss the vision you have for your new home.
For more tips to help you navigate the complexities of home building, download our Free Guide
Build with Confidence – 7 Things You Must Know Before Designing a New Home
