The following applies to mortgages called “jumbo” or over the standard Fannie Mae size that you hear adds for such as “rocket mortgages”.
If you are in a position of considering a refinance to help you purchase a home you most likely know someone who has gone through this process already. If you have then you probably know that refinancing (especially with a “jumbo” mortgage’) is going to be painful. In this blog I am going to give you some details that many don’t learn about until they are knee deep in the process. I am hoping that I can pass on this information to forewarn you of the difficulties you may encounter so that you may be able to prevent them.Read More
Over the next few weeks I will be publishing a series of articles on practical applications of what has come to be known as “Building Science”. Yes, there is such a term. “They don’t build them like they used to” is quite true, but in a good way, we build much better now.
We have learned so much since the days of the log cabin in the real old days, and Sears kit houses which symbolized the emergence of fast and efficient building techniques after WW2. Every year there are new products offered by an industry that has a world wide market.
In North America we build primarily with wood because that is a resource we have available. In more Southern countries cement and masonry are the dominant building materials. High-rise buildings are made primarily of steel.
The concepts of preventing moisture infiltration, of creating healthy and comfortable buildings is similar in all. What is important is a thorough understanding of how to combine materials so as to prevent holes. Holes that allow water to enter or air to both enter or exit uncontrolled.
In the evolution of building techniques we have both improved our buildings in terms of energy efficiency, and at the same time created some flaws such as trapping moisture. We have made our buildings more comfortable but at the same time sealed in some very harmful chemicals.
That is where building science comes in, it is the well studied concept of best practices. It is how to have an energy efficient comfortable and healthy building. Topics this series will cover:
- We will address what constitutes a high performance building or home.
- We will learn how to avoid the pitfalls of moisture build-up and mold creation.
- We will learn why we now split insulation into both inside and outside the wall to create what is called CI or Continuous Insulation.
- We will learn why we want to think of a building enclosure, and not building envelope.
Due to the horrific fires suffered by so many residents of California in the last year, we will also cover ways of lessening vulnerability to fire. For example, we are finding fire often entered attics through vents and started burning the roof structure from the inside.
In the next issues you will find information on:
- Thermal movement control in homes (heat and cold)
- Water barriers and rain screens that allow the building’s skin to breathe but repel water
- Various new products that are worth considering in new construction
- Fire prevention measures
I am listing below tasks that I have found are critical for creating a smooth running home construction project. These are all tasks that an experienced Owner’s Representative, (a.k.a., Project Manager) should either initiate or ensure are accomplished during the design and building process. Ideally the Owner’s Representative/Project manager is to be the person in charge of managing these tasks listed below.
- Budgets: Create budgets that are realistic at various times during the process in order for the owner to be confident that the project is proceeding within the financial comfort zone. This budget should be comprehensive including all associated costs and wish list.
- Budgets ideally are created:
- Early in the conceptual design phase and verifying as the design progresses that the original budget is still realistic.
- Prior to the construction drawings being drawn.
- Prior to construction starting
- Once a month during the construction. Keep owner apprised of Predicted Final Cost.
- The design team is the clearing house for all design related communication, unless otherwise requested. We don’t want random people making design decisions that may not have the overall design direction in mind.
- Offer possible solutions to problems prior to announcing the problem. Always consult with Design team first, then after agreement, notify owner of the problem with options for solution.
- Consolidate questions (RFI’s) into a list and then communicate these to the appropriate entities with as much lead time as possible. Avoid panic phone calls. Identify which party is responsible for answering each item: Architect, interior designer, owner, contractor.
- Arrange questions to be answered into groups by date needed in order to continue an orderly pricing/ordering/construction process.
- Expect that some answers will come as building takes shape. In a true custom home some selections are best made when the building is taking on character.
- Send weekly updates to design team and owner apprising them of tasks being worked on each current week as well as planned for the following week.
- Plan ahead on critical times for owner and design team to visit the site; such as electrical wiring time, to avoid future surprises and changes.
- Make client feel as much an informed participant in the process as they wish to be.
- Schedule site meetings with all key subs, and if needed designers, during various stages of the job to coordinate their needs and timing.
- Update budget and schedule on a monthly basis and share with owners, and if desired, the design team.
This is a phone call I get often in my work as an owner’s representative. While it seems like a very dire situation it actually is solvable, and it is possible to reach a positive end result.
The initial fear for most owners is that they have been ripped off by either an unscrupulous or unqualified contractor. But the reasons for this situation are actually more varied. Here are some of the common issues I encounter when I am called in to projects that are well underway but in trouble such as this.
- The cost of the work was underbudgeted by the contractor.
- The contractor let the scope of the work creep to include higher costs but did not properly document change orders or alert the owner.
- The owner had an unrealistically low budget in mind and convinced the contractor to attempt to do all this work for the low budget.
- And then of course there are times when there is the unscrupulous contractor who has sought to deceive the owner by entering into the work with a low initial budget while expecting to make it up on change orders.
- Finally there is the unqualified contractor who took on a project that he could not manage properly. Often this type of contractor has demanded deposits or payments higher than the work done to date.
- So what do we do in these situations?
Cost of work underbudgeted
For those projects that were under budgeted to begin with, a knowledgeable owner’s representative will be able to ascertain what a realistic budget should have been at the beginning. As the Owner’s Representative, I work backwards, and then advise the owner that this is the case and mediate a solution where the contractor can finish up the job at a discounted fee while the owner pays a fair cost to get the work done.
Scope creep and change order misunderstandings
This situation is especially difficult to solve, when the scope of work increased without acknowledgement from the owner. Retroactive charges for change orders are difficult to add to the budget for fair payments. Emotions are high, and blaming seems to be the answer. When there is tension between the owner and contractor, and a mediator is important to keep things clear.
It is typical (and understandable) for owners to only remember a small portion of additions to the scope of work. Of these the owner may remember only the core item but not all the ramifications of that change. Clearly communicating changes and their financial ramifications is one of the key ways an owner’s representative works to bring success to both the owner and contractor.
For example: “We just added air conditioning”
What was not documented was this also meant upgrading the following:
Electrical to supply enough power to the furnace coil and the condenser.
Walls had to be opened to run the copper fluid lines and wires from the fan coil to the condenser.
Walls had to be opened to enlarge the ductwork and move it up high on the walls.
Unrealistically low budget
If the project got started with the owner pressuring the builder to accept a low budget, then we have to start questioning the intentions of the owner. Since the owners can typically control the flow payments to the contractor, the owner really has the upper hand. But forcing a low budget sets unfair and sometimes impossible demands.
An owner’s representative that is knowledgeable and fair can discuss the work with both parties and determine what is a fair payment for the work done.
The contractor who intentionally bids low
If it becomes apparent that the contractor intended to extract more money from the owner after signing the initial contract, then we need to be harder on this contractor. An owner’s representative can authoritatively state what cost should be for the work performed, then show proof that the contractor intended to raise the cost.
Since the relationship will by now be soured, the best option probably is to end the contract and hire a new contractor to finish the work. An experienced Owner’s Representative can take over construction as the Project Manager and either see it through completion, or set it up for a new contractor to take over.
The unqualified contractor
In the case of the unqualified contractor who took a job way over his ability, termination is often the best option, and the sooner the better.
The owner’s representative can advise the owners through this difficult process that requires:
Determining if any sub-contractors or and suppliers still need to be paid.
Getting lien releases from all major subs-contractors and material suppliers.
Studying the contract between the owner and contractor and advising the owner how to follow the procedures outlined in the contract, such as a 10 day notice letter
Give notice to the contractor to stop all work and not enter the site.
Secure all materials stored on site, so that any expensive equipment such as windows or appliances cannot be “repossessed” by the contractor.
The owner’s representative can attempt to mediate a final settlement. If this is not possible then an attorney can be brought in, with the owner’s representative providing all the relevant information to the attorney. Since these cases seldom go all the way to court, the advice of a knowledgeable owner’s representative is crucial in determining an outcome that allows the owner to be able to continue with a new contractor and complete the work.