With all BIG building projects, one of the first questions we get at Camelot Custom Homes is: How many bids should I get when building a custom home? How many bids should I get when remodeling?
As one of the finest Austin area builders, we get this question often and are confident in our answer. You need 2 bids. Two. Yep, that is totally counter-intuitive. We'll explain…
When it comes to a big expense of any kind, the widely-accepted practice is ‘get 3 bids’. Need a new fence? Get 3 bids. New set of tires? Call NTB, Discount, and Costco…3 bids. For projects like new gutters or a deck, 3 bids make sense. Those bids can come back to you in a matter of hours after meeting the contractor. You can get 3 bids for tree trimming on your lunch break.
So if getting 3 bids is smart for small projects, getting MORE bids must be smart for BIG projects, right? People think if an Austin area builder knows he’s being price-checked against several others, he’ll sharpen his pencil and cut the price to earn the job. The more bids you get, the more you save, yes?
Nope.
Home Builders are not sinister, greedy masterminds, waiting for you to show up with blueprints so they can gouge you on price.
They don’t raise their prices if they think they’re a lock for the project. Good builders are craftsmen who love what they do, who want to earn a living building things. They aren’t looking to retire to the islands off one project’s paycheck. Making you happy is important because a happy client leads to the next client, which leads to earning a living building things. Win-Win.
Hiring a builder for your large home project is very different from buying new tires. With general contractors, ‘get 3 bids’ doesn’t work in your favor.
Why is that? Why is MORE information potentially a bad thing for your project?
Reason # 1: Time. It takes 3-4 weeks to get a detailed bid priced up. Whether new construction or remodel, it takes time. The more bids you solicit, the longer it takes to get bids back, the more data you have to compare, the longer it takes for you to make your decision. Analysis Paralysis. Wait more than 60-90 days after getting prices back and those prices change, and they rarely go down. The construction market is only getting more and more expensive, the faster you get bids back the faster you can pull the trigger at the current price.
Reason # 2: Competition. Austin area construction is a small community, and subcontractor overlap is common. Lots of builders of the same caliber will reach out to some of the same subs to get pricing for your project. That will reveal to everybody who else is working up a bid on your project. When a builder knows there is a 50/50 chance of earning your project, he is more inclined to work harder on your bid with the intent on actually getting the job. He’ll sharpen his pencil, get you the best pricing possible. A builder who has a 33% chance of earning your project might throw some numbers at it, giving you a less accurate bid that maybe he can’t stick to. A builder with a 20% chance probably won’t bother bidding at all. Fewer bids does not mean the price goes up, it means the price gets more accurate.
Reason # 3: ‘Scope Creep’. Every conversation you have about your project has the potential to convey different information. After a few builder interviews, the scope of the project ‘creeps’ into other areas. Maybe the first conversation with a builder was just about the new detached garage. Simple enough. Then the second builder comments on possibly connecting the garage to the main house, so maybe you tell him to bid that ‘just to see how much that would cost’. Then the third builder has another idea and now that connecting space becomes an air conditioned mud room. Suddenly everybody is bidding something different, and it happened because every conversation brings in new ideas. Get 5 bids and you'll have 5 wildly different figures with no basis for comparison. What a waste of everybody’s time.
Reason # 4: Relationship. This builder is somebody you are going to be working with for months, maybe a year or more. When you start off the relationship being suspicious that your builder is trying to rip you off, he’ll feel it and you’ll feel it. Why spend the entire working relationship being suspicious that you’re getting cheated? Interview a handful of builders before you show anybody the plans, then whittle it down to only get bids from your 2 favorites. The trust that you are showing those 2 builders is immeasurable. The builder, knowing he’s only up against one other Austin area builder, will fight his hardest for your business. The pencil can't get any more sharp than that. And he’ll want to work for you because you showed trust in him. What a great way to start your project!
Last bit of advice: before reaching out to companies to get your 2 bids, make sure you’re comparing builders of similar size and caliber. You want bids from 2 companies that truly compare: boutique builder vs. boutique builder, NOT guy-in-an-unmarked-van vs. design-build multi-city conglomerate. The whole point of getting 2 competing bids is to compare apples-to-apples, not artichokes-to-aardvarks.