What were the benefits of your time on site?

What was your planned schedule when you started out?

by Mark A. Smith

There is gimmick in the construction business that provides erstwhile owner-builders an "easy way out". It's called a package plan.

This is a way to "owner-build" your house with the help of a company that sells you the materials and provides you a list of recommended subs. One such company "DeGeorge Homes" went down in flames a few years ago in a spectacular bankruptcy. Other well-known companies Landvest Homes, Homestead Homes and Homeworx Partners. In our Forums there's lots of talk about BuildMax and UBuildIt. We counted five of these companies plying the trade at our local Home and Garden show.

When I first heard about one of these plans, I signed up for the free seminar to find out about it. Elaine and I went to a local hotel one evening and joined 15 other people to hear rosy stories of beautiful homes and successful owner-builders. They passed out information packets and we began to see a few problems.

A fellow with a construction background who handled local sales stood in front and started to take questions from the group. We asked one of our questions, and the company president moved up from the back of the room and took a seat in front of us to give us personal feedback. In other words, to keep us from contaminating the rest of the group.

We left with five principal areas of dissatisfaction:

1. Why did they bundle the cost of the land with the cost of construction? Answer: We charge a 10% fee on your whole project for our services. Read between the lines: While the land has nothing to do with construction, we need the extra percentage on that to get by. So we take an extra $3,000 on your $30,000 piece of land, because we need the money.

2. Why do your subs pay a fee? Answer: So we can approve them and make sure they are good. Read between the lines: If a sub wants to play in our market, he has to pay the freight so we can collect more revenues. Naturally, he will get that money back from you when he does work on your house.

3. Why can't I get a sub of my own choosing to use on the project? Answer: So we can approve them and make sure they're good. Read between the lines: We control the subs so we get our piece of gratuitous profit margin.

4. Why do you admit to only a 15% savings on home construction? Answer: That's an average of the savings of couples who have followed our program. My guess: Since owner-builders in my survey averaged 35% savings, the package plan must be making 20% in overhead and profit on the average project. They make $40,000 on a $200,000 house while I do the work.

5. Why do they provide all the materials? Answer: Because we have great buying power and pass the savings on to you. My guess: If they can save more on materials than the average owner-builder, they must be pocketing more than the 20% figured above.

Add to this the fact that you have to use one of their designs, and can't customize in any significant way. They help you get a construction loan, but at a high cost - more profit again. Chapter 11 of The Owner- Builder Book shows how anyone can get a construction loan at a competitive rate.

We decided that the package plan added a middle man to the process and pumped up the cost. What's your decision?