Before You Sign on That Land: What Builders Wish You Knew

William Reid (: 00:00

All right, Chad Esslinger is the owner of Esslinger Homes in Lake Oswego, Oregon, and he's the founder of Construction Flow. And he's a second generation builder who grew up on his dad's job sites, earned a finance and marketing degree from the University of Puget Sound, and bought the family business in 2006, right before the market fell out from every builder in the nation. And I was included in those.

In twenty-nine years he built more than a hundred and fifty homes and completed seventy-five plus remodels, additions, and commercial tenant improvements. And also developed hundreds of residential lots, which is a really interesting thing, because that's a whole different discipline. So most of his work comes from architects' referrals. And somewhere along the way, he got tired of answering the same homeowner questions. So he built this application called Construction Flow to walk homeowners through every phase of a build before they're standing in the middle of it.

He also hosts the Construction Flow podcast, which has just recently been launched on Spotify and Apple podcasts. So let's welcome Chad to the show. Chad, take it away.

Chad Eslinger (: 01:15

All right, thank you very much. Thanks for having me. I appreciate it.

William Reid (: 01:17

So welcome to the show. We had our little pre-podcast interview last week and we've just recently met, but boy are we really well aligned and we're kind of cut from the same cloth. We both have been builders for many years, for decades. And there seems to be a common theme that's happening with homeowners. We're both on the same mission. You've got your application called Construction Flow that you really originally designed for just your own clientele, but you, just like I, you notice there's this problem across the entire country. It's a lot of the fundamental problems.

So now you're taking that to the next level. But in our conversation, we got talking about a project of yours where a client actually purchased a lot almost sight unseen. I think they had seen it, but they actually invested a substantial amount of money into a lot before they actually even really truly understood what the scope of work they wanted to achieve and the cost. So this is a really interesting story because I think we can probably guess that's happening right now to thousands of homeowners, whether they're doing a remodel project or a multi-million dollar home. And it doesn't really matter how much money people necessarily have. It's a fundamental problem.

So I was hoping that you could share this story about this particular project. And then feel free to just share all the other ones you got, because I want our listeners to understand how we can actually prevent this ultimately is the goal. So if you could just dig into that and tell us a little bit about that, I would really appreciate it.

Chad Eslinger (: 03:04

Yeah, for sure. So I've got three of them going on right now. So I'll start with the one that you alluded to, and I think they're good because they each represent a different way that this can happen for somebody. So the first one that you alluded to, they did know where the lot was. They live near it or the wife does. So this was a husband and wife coming together in marriage, but the wife lives nearby with her home that was full of her belongings. So the idea was for them to blend their families together in this home and take what she had and then add space in for him, which ultimately ended up in way too large of a home. But they didn't come to a builder or an architect at all before purchasing the lot.

So they purchased the lot. There's money there to do the project. It's not that any of these three people don't have the money to do the project the way that it's unfolded. The problem was they just didn't do enough upfront work with a home builder to know before they purchased the land would the entire value align with what they wanted to spend. So these folks bought this lot. They were aware that they had to extend a sewer to it, but they were also aware that the price that they got, they bought the lot from a builder that he had assigned to extending the sewer was probably low and it was about half of what it needed to be.

But then this lot is also quite a ways off the road. So there's a lot of improvements that they didn't properly take into consideration for extension of the sewer line. I work in the Pacific Northwest and storm sewer is a huge issue. And so they ran into storm sewer design issues that to this day are still not resolved. They've been working on that for over a year. And same with the sanitary sewer extension. The city that this is in has been giving them the runaround for over a year. So they now have been holding this lot for multiple years just trying to get to the point where they could even submit a building permit. But they finally did get a plan drawn and they came and they talked to us about pricing.

We got into it a little bit and I've talked to the wife before on a previous project, and I know the home they live in, this would be in alignment with them, but I asked him what the budget was and he told me it was less than what they paid for the land and clearly not enough to build the home that they were designing. They could have designed a smaller home. There's plenty of room on the lot to put whatever size home that they would want. And we talked about cost per square foot and it's pretty simple math to do, but I don't know the honest answer to why people think that they can somehow make something like that work and bridge the gap between the cost per square foot numbers we're talking about and how big they want the home to be.

But definitely they weren't adding in all the other costs and it got to a point where they've just paused. So the word they used was paused. So they've paused on that project.

William Reid (: 05:35

So let me ask you. So when they came to you, were the plans one hundred percent complete, architectural, structurals, and mechanical, electrical, plumbing? I mean, were the plans ready to be submitted to the county or the city for permit, or was it just in a preliminary state?

Chad Eslinger (: 05:54

No, so I was referred by the architect on this one. So when they sat down to do the first architectural drawings, the architect referred builders to them and they wisely quickly went out and decided to bring me in. So they brought me in at that point. So I was able to comment on the design as they were doing it, but it was not done. So they were doing it in our meetings together.

William Reid (: 06:14

Okay, so you were saying that when the homeowner began the design with the architect, or when they were a certain stage, maybe the very first stage of design is usually called schematic design, where the architect captures everything that they want and gets it into some tangible thing that we as builders can sink our teeth into at least a little bit. So were they at that early stage of the schematic level design when you got invited into the project?

Chad Eslinger (: 06:42

Yep, they were doing that. So they took the architect to the existing home and showed him their style and the size of the home and talked about all the things they wanted. But he hadn't actually started the schematic drawings yet, so it was really, really early, which was good. It gave me the chance to give them feedback. But we found out real quick there wasn't an alignment in that and tried to course correct many times. It's not that they can't financially do it. It's aligning what makes sense, what they value and the total amount and just the lift. I honestly think the reason, well I know the reason they paused was one of the two in the couple wasn't as into the whole process as the other one and it just wore them down before we even got to submitting for permits. So that was a big part of the pause.

William Reid (: 07:27

So this isn't the project where they spent several million dollars on a lot and then, is this the same project that we had talked about earlier? Okay.

Chad Eslinger (: 07:33

Yep.

William Reid (: 07:35

So they really didn't have that significant investment in the plans and the design at that stage before they paused. Is that true?

Chad Eslinger (: 07:44

Well. No. So what happened was

Chad Eslinger (: 07:46

I advised them through the planning of it and said, you know, we're trying to value engineer, yet every meeting as we're value engineering, they're adding more costs into it. And I was trying really hard without being offensive or just quitting on them to say you're going the wrong way, you know, for what your stated budget goals are. And we went through that whole thing. And like I said, they have the money to do it. So we were kind of just shrugging our shoulders saying, okay, well, we'll do whatever you want.

But we got to the end. The plans were 100% done. We had a meeting to hand them to the homeowner. Homeowner receives them, writes the architect a check, and says, by the way, we're going to pause. Finished plans.

William Reid (: 08:20

So they did finish the plans after they were advised

Chad Eslinger (: 08:22

They did finish the plans.

William Reid (: 08:24

After they were advised that they're probably going to be well over their original expectations

Chad Eslinger (: 08:28

Mm-hmm.

William Reid (: 08:29

of the budget.

Chad Eslinger (: 08:30

Yeah. And that one is a bit unique. I mean, it's not unique that one party of a partnership, a husband, wife, whatever, would be more into the project than the other. That's not uncommon. But in this case, that was supposedly the pause for the cause. So that one's a little bit unique. I'll go into the next one, because it's very, very similar. Couple retiring, bought a property next to their son and daughter, so they're moving from out of state to be there. They bought the land again before they went in and did design. They had done none of their due diligence on what's it going to take to put in the utilities, which it's in the country, so it's going to be septic and well. There was a well on the property, but we found out it was 5,000 feet away from the building site, so it was more of an irrigation well. So they didn't really know what their costs were, and their goal was to try to have this new home be at a similar price to the home they're selling in South Carolina.

And it wasn't built to the same standards and specs that they wanted in the new home. So again, they designed the plan. We talked about cost per square foot. We weren't as tremendously off with the overall number with them, but they were locked in on trying to get to a certain price. And so we went through the process of value engineering, because I had a path to get them there. And they also paused, trying to see if they could maybe go shop another builder, which I know that they did, and the numbers came back about the same and they just left it alone. And now they've re-engaged and they've realized from the county that they've got to go through a whole process to show that they can even build on this lot because it's in a farm zoning that's going to take them 150 to 200 days to go through that process. And they also have a finished plan and they also paused, not after we got the plans in hand, but after we got the final numbers together for them. They paused the plan submittal to the county by saying we don't want to turn it in until we know for sure that the numbers are going to align. And now they sat on it for six months before they started that process again and realized they could have been spending this 150-day process six months ago. But they paused the project because of a desire to value engineer and they own the land. I know they're going to do the project because they're next door to their kids, so I honestly don't know where they're at in their thought process. But I've been helping them get through the permitting and get to the point where we can revisit the numbers once they can even get a permit at this point.

William Reid (: 10:42

How long have they owned the land?

Chad Eslinger (: 10:45

Probably a couple years at this point. Both of these people have owned their land a couple years at this point. So of course, either they paid cash and lost the value of investing that cash, or they've got a mortgage payment that they're making every month. So there's a lot of pain there too.

William Reid (: 10:58

So there's a pattern here just in these two projects, right? Which is similar. You know, the personal dynamics are different a little bit, but the

Chad Eslinger (: 11:05

Mm-hmm.

William Reid (: 11:06

the same fundamental problem is folks are purchasing property, and a lot of it probably has to do with the emotional aspect. In this particular case, it's because they want to be near their family. And then I don't know what the situation in the earlier case, but people are buying property because that's a really exciting part of the process, is you find a parcel that you really love or something and you just pull the trigger and say, let's go for it, without any due diligence. And a lot of it's because I think homeowners don't know they need to do that. It's don't know what you don't know again. I keep saying that over and over again, but

Chad Eslinger (: 11:46

Well, honestly, I think that these homeowners are all very smart people and they did do a certain amount of due diligence and they're aware of the fact that they need to know those things. But one of the problems that I see across all these is that a lot of—I wish this weren't the case, but in my area where I build, a lot of these people have, our clients have a hesitancy to fully commit themselves to a relationship with a builder early on. And it's because they want to make sure they're getting as much pricing information, that they're getting a fair deal and whatever.

And so they don't involve the builder early on enough. And if they had brought me in earlier to be a part of the due diligence when they were purchasing the property, then we would have known these things way up front and could have had the conversation. I guess this would be the lesson to the homeowners out there: there is a risk of not bringing your builder on early enough and you're missing a lot of the value that a builder can provide to you in this whole process of building a home, because it starts before you purchase the land. And so when we don't get brought in at that level, then we don't have the ability to give you our knowledge and help with that due diligence process.

William Reid (: 12:46

I think people need to really listen to this, because in some of my previous episodes I talked about the fundamentals of just the design process that people go through: schematic design, design development, construction documents, et cetera, et cetera. And that was to help people understand. But in that conversation that I had about the design process, at least how I would operate my business, is we would have pre-established what we used to call budget checkpoints or budget touch points during the design process. Not to mention finding a lot out before you even buy a lot. I mean, that's even better, but sometimes that's the chicken before the egg. But if the listeners go back and listen to the design process episodes, what Chad's talking about is exactly what I was talking about. And what that is, is during the very first stage of schematic design, you're working with your architect, you may not even know a builder, you may not have any idea who to call. But at a certain stage of stage one, the schematic design, there's going to be a milestone where you say, yes, let's move to the next stage, which is the design development process. And that's where you'll invest most of your time in design, specking out the windows and the doors and the cabinets and the tiles and the stones and everything for the project, the MEP, the mechanical, electrical, plumbing design, and so on. So what Chad's talking about here is exactly the consequence of not having your budget checkpoints, budget touch points. And there's at least two of them in the design process. And if that excitement overwhelms you because you're just seeing this beautiful home come alive in the architect's plans and 3D renderings and all that, and you let that overtake you and you just keep blowing through, you're going to be just like the people we're talking about. And I think Chad even has some more stories that you're going to end up waking up one day with an estimate in your hand that's two or three times the price of what you thought you wanted to spend. And here's a question for you, Chad. And you may have touched on it earlier, but in these two particular cases, when you interact with these people in the beginning, and I go through this too as a builder, and I did a lot of design build coordination.

When they said what their budget was, did they say where they got that information from or what the basis of that or the data that they're using or where did they come up with that dollar amount?

So I wish I had the answer to this. I have a speculation because when I ask people that exact question, the answer that I get isn't that somebody told me it was supposed to be so many dollars a square foot. Other builders will give them that information, but normally they're making their decisions before they've talked to any of the builders. So they're doing all this calculation in their mind before they've even asked a builder most of the time. And what they're really doing, in my opinion, from their own feedback, this is just my best guess, is they look at what are the values of the homes in their area, in their neighborhood. They're looking at what's sold and what's sitting around. They're nervous about overbuilding. There are a few folks who will just say, this is the home I'm going to die in. I don't care. I'm going to do it my way. And that becomes a non-issue. But that's a lower percentage of people. Most of the people are thinking about, what will this thing be worth when I'm done? What I put into it between the land and the home. And so they're working backwards saying, well, I think I got the best value I could on the land. And I think the max value that this thing will be worth based on how many square feet I want to build is this. And then the budget is the difference, basically. So it isn't based on a cost per square foot. It isn't based on all of the variables that we briefly have touched on so far. We can dig deeper into that if you want. But it's purely just based on a very simple mathematical formula. We don't want to go past this point. And the cheapest we're going to get the dirt we want is this. And whatever is in between is our build budget.

Yeah, yeah. Let me ask you this question. How much ownership do you think the architect, the designer of the project should have in helping the homeowner solve this problem in the early stages of design?

I think the good architects will talk in rough numbers to the clients. The architect on actually all three of the jobs I'm going to talk about, same architect. And I know what they say to the clients when they come in is don't assume this is going to be below $400 per square foot. And where it goes from there is the function of all the different things that will go into the design. And they're very aware of the client's budget concerns, but ultimately it's going to come down to a lot of the things that the builder is going to engage in. So it's really, we look at it as a team. So that's one of the reasons I love working with both an architect and a designer from the very beginning is we're looking at it from all three angles of build design, architectural design and then interior design, that we're listening to what they say and we're advising them where what they're telling us they would like might conflict with what they're telling us their budget is. But like I mentioned in the earlier example, that doesn't normally persuade people to go that way. They still want what they want, which they should have, but it ends up being this internal struggle of, am I overbuilding if I do all the things that I want to do for my home?

So don't you think when a homeowner says, you know, it's probably going to be four hundred, five hundred dollars, seven hundred dollars a square foot for what I'm hearing you say, but yet they continue going, right? Which you mentioned earlier. doesn't that from a homeowner's perspective send the wrong message to everybody that's trying to help them?

Yes, it feels like a game and I understand that people will reserve. A lot of times people will have been advised to reserve a contingency as well and so they'll mentally do it but they won't tell us as their team that they're holding back money which I'm sure you've run into this in your career too where people will say cut, cut, cut, get me value engineering near this number for me and then as soon as we start building they add 50% of those things back in which just wasted all our time to change the bid and then change it again and then make those change orders and all associated paperwork with it.

Yeah, I think this is another key takeaway today is a lot of people have a number in their mind of what they want to spend on the project. And a lot of it has to do with how much they feel, not always, but how much they feel like you were saying earlier, how much they want to invest in the property, right? Just regardless of the project, right? I mean, they have this land that they want to buy or bought and they have an idea how much they want to invest in the property. So for those type of people, it's understanding, like you said earlier, what type of homeowner are you? Are you the one that cares about that? About the ROI as far as the resale and you've got this number locked in your head? Are you the type of homeowner that one of your neighbors just did a project and they spent three hundred and seventy-eight dollars and fifty-eight cents a square foot to build their home and you've got that locked into your mind? What I would do is I would have that conversation with people and I would always preface it by saying, how much do you want to invest in this property? Or how much do you want to invest in this project and strike up that conversation that way?

And for the homeowners that are listening, the more transparent you can be, and I know we're not buying a car here, okay? We're buying a high-end Rolls-Royce and assembling it in your living room. Okay. I mean this is a lengthy relationship. You can drive the cost of that Rolls Royce however you want. You could have gold plated handles or you could go with the standard chrome. You know, so you can drive the budget to a certain extent. I mean, you still have to have the same components, you have to have the kitchen and the bathrooms and the plumbing and the electrical and the mechanical, but you can remain in control. And that's a big part of the mission with this podcast is to help you get to that point. Because a lot of people get into trouble here because they don't necessarily know, they're afraid to answer that question, right? Like, well, how much are you thinking about investing? And they're like, I don't want to tell them how much money I have or how much money I want to spend, right? Well, that is really not applicable to this process, okay? Because ultimately you can drive that however you want. But if you don't tell your design professional a rough idea, you know, I want to spend two million dollars on this project. And you play that cat and mouse game, you're going to spend a lot more money on design. It's going to take you a lot longer, and you're going to run a lot of builders and contractors around in circles while you're trying to resolve this conflict you have about talking about finances. So you as a homeowner have to decide how much of a priority.

And for most people it is a priority. Even people that, you know, could pay whatever they want. They still have a priority about where they want to put their money. So this is, you can tell what's happening here is this is a common theme, a common problem, and that's what we're trying to do. And I've got another builder that's going to be coming on next week probably and talk exactly about the same thing. So in the next couple episodes, we're going to drill this through your head and you're going to hopefully come away with wait, don't write the check for the lot yet. Wait, wait, wait, wait. Let's call somebody first.

And don't call your realtor, you know, call a professional designer, construction professional first, before you buy the lot. And if you already have the lot, well, then that's behind you. So all right, what's the next story you got? I'm curious. Yeah.

Well, before I do that, I want to touch on two things that you brought up that I think are super important.

Okay, great.

One of them is that maybe, maybe 5% of the projects I've ever looked at, I'd say 1% of them, did the people actually have a budget that was over what it was going to cost. Maybe

1%. And so that is, I know, the root fear of so many homeowners when they don't want to talk about cost, however they want to say it, whether what I'm going to invest into this or what my budget is, whatever the wording is. I understand that the fear is that if you say a number that's too high to a contractor, that they're just going to say, yeah, sure, I can do that for that amount even though it's not going to cost that and you're going to get taken advantage of. And that's just not a very common thing. It's very uncommon. And if you are going to talk to more than one builder, that may actually give you the ability to separate somebody who's honest from someone who is that kind of a person, who would potentially take advantage of that.

So even if you were that 1%, there's going to be a builder, I would guarantee it, that's going to shoot honest with you. They're not all going to be the predatory types, even if you were that 1% who had a budget that was overly large for what it's going to take to do the project. And then also, as you were talking about, people out there that are listening to this or clients that are going to be building homes with somebody and you're looking at this type of content before you do it, you're in great shape.

Because the reason that I think a lot of people end up doing these things too late that we're talking about is because they are coming through architect referrals. And most architects don't want to start meeting with someone until they have their land, because otherwise you're just talking about the sky, what you like. It's not tangible in any way. So if you're getting referred by an architect, the unfortunate nature of it is that you've already probably bought land.

So whether you just consult, there are people out there who just do straight consulting. A lot of builders will just buy the hour, help you with that, and you don't have to make a commitment to somebody. I would say don't get caught up in your concern about being tied to a builder too early on because maybe that builder doesn't have the best pricing or isn't the best fit. Find someone to help you, even if it's your real estate agent or somebody who's knowledgeable enough to do the due diligence early on and make that its own thing.

A lot of people will do that with pre-construction too, where you can hire a builder to do pre-construction. It doesn't obligate you to build with them. I would say lower the defenses on worrying about whether someone's going to take advantage of you. There are ways to let that prove itself out, and that may be the best vetting tool you have, is to go through a due diligence with someone and see how they perform, how they communicate, and all those things. Just that proactiveness, which I'm assuming if anyone's watching this, you're already that type of person. Huge. Huge.

Yeah, yeah, yeah, yeah. That's the goal. And by the way, before you dig into that story, one of my previous episodes was with Don Healy. He's also in the Northwest. He's in eastern Washington, I believe. He has a company called, I believe his product is called Site Facts.

And there's other companies now that are surfacing right now that provide due diligence reports for properties. So you can log in and create an account. And if you're going to invest hundreds of thousands of dollars or millions of dollars into a piece of land or piece of property, some of these reports can really help you. And it does a lot of the due diligence for you, even as a homeowner. You can at least take that report. And I'll try to put some of those resources in the show notes.

So just so you know, there's more and more services coming out to help you understand the slope and the history of the lot and the setbacks and the floor area ratios and height limitations and that kind of stuff. You may want to build a 5,000 square foot house, you may only be allowed to build a 3,200 square foot house. And a lot of people don't know that till after they buy the lot, and then go see an architect. So all right, yeah, what do you got? What's next?

That's a whole other vector. If you want for your audience, I did a video on that for my own clients. I turned it on private on my YouTube channel, but I can either give you that link or people could reach out to me directly and I could send them some more information on due diligence. It's more of a framing of all the things. You mentioned one of the big ones, which is floor area ratio, because nobody knows what that means unless you've had some education on what you're looking for. Lot coverage is another one. Height restrictions are other ones, which come in many different forms and flavors.

But the third story is one that's actively unfolding. So I don't even know how this is going to unfold. It's a client that came in through the architect and then asked to meet with four or five different builders, some of which they're doing on their own. Some were referred by the architect. I was one of them. And we went through a preliminary pricing. I talked to them because I'd just done numbers. One of the other stories I told was very similar home, very similar size, same architect. So I had a number set to talk with them about.

And I can see all the pictures of what the details were that they wanted and again I know they have the money to do this. But they were the ones who most specifically said they're really worried about overbuilding. I actually have a fourth one that's in that but I won't get into that story too. But I have a fourth one that's also very worried about that and has just paused but we don't know why.

But they are finishing their plans right now. And I was talking to the architect yesterday, and this is what I was sharing with you earlier. They're asking to have more complicated things worked into the plans.

I do not blame the architects for this one bit. When a client is saying what I want, even though we've all kind of told them that this is in conflict with their overall price that they want to be in the project, they're not going to be told no. The architect will draw the things that they want. And the thing is, a lot of people do pop for these. That's the hard part. The stories that I'm telling you right now is very abnormal for so many projects to pause. I think that really it speaks to the larger uncertainties in the economy right now, geopolitical uncertainties. Obviously we're dealing with fuel issues, things that can spike prices as you're building. So there's a lot of reasons right now that I think people are extra sensitive and tentative to do projects. So I should preface all these stories.

But there are many stories, probably 98% of the time we go through build jobs, we'll go through some version of these stories and they'll end up doing the project. We may value engineer it, they may change their design because the structure itself, as you well know, is the driver of almost all the costs that get associated from there on. How complicated is the structure? What type of roof is it? All the things that add up for the big line items. But most of the time we do work our way through this. It's just a very interesting time we're in right now and it's causing a lot of people to just kind of vapor lock.

Yeah. Yeah. Yeah, I just thought of a question for you. When you are called to a, let's just say, you're called to a job site, a lot. Let's say the architect's standing there and the homeowner's standing there, because you were called in early, early on in the stage, like we talked about earlier in the stage of design. No real drawings yet. Maybe some schematic level drawings. How do you know what it's potentially going to cost?

We have to draw, that's a great question. We have to draw on other homes as a starting point. So if I've never designed an architect's plans, that's much harder to do than if I built this architect's plans 25, 30 times. I have a really good idea of what these plans might look like based on the home. But it's very difficult because if it's just us standing there for the first time and no drawings have been done. For instance, the first story that I told, that particular lot had a tennis court in the backyard. It was a big acreage lot and where the house was going to be built was partly in, the tennis court was in a five-foot hole to get a flat lot because of the topography.

And so they had the choice of sliding the lot closer to the road and keeping the foundation out of that hole or pushing it back further which gave them more of a roundabout driveway. And they opted to do that and they ended up with a daylight basement they didn't want and probably I think about $300,000 worth of costs

did an analysis, if we would have just pulled the house forward like 20 feet, it would have saved them about $300,000 in their build costs, and they elected not to do that. And they're not going to build that house, most likely, because of decisions like that.

That's a really difficult thing is that there's decisions that people can make that can affect that so greatly that we can kind of give it a range and say we think it's between here and there based on what you're telling me, where we're talking about putting this house on this lot. So it kind of depends. Is it a flat lot? Is there topography? There's lots of variables that go into that. But pulling from past knowledge. So I will a lot of times give somebody something better than a cost per square foot once I've had that meeting, pulled from other homes with a huge caveat and asterisk that there are millions of decisions you will make that will affect this price.

And then I give them an asset that I created for my clients, which I call Define in a Line. And it goes through the 20 selections that people will make, material selections, and talks about what are the main options, why they cost more or less, and why they may or may not be necessary for their home to help them start to refine that down and pick things like, am I going to do a wood window or a vinyl window? Am I going to do a tile roof or am I going to do a composition roof and even within that is it going to be a presidential 50-year roof or is it going to be something less than that so they can start working through those things early on and kind of get up to speed on what are the things that are going to drive the cost from the very beginning.

That's what I have learned and why I do Construction Flow is that the more we can load all this knowledge into the clients on the front end, the better. It's really in everybody's best interest because this is absolutely a team. And that's why I said not to get so worked up about whether a builder coming in too early in the process is going to be a detrimental thing. They should be a teammate. And if they aren't, they shouldn't be your builder. And the more we can do that together, the better it's going to be for everyone.

William Reid (: 31:53

Okay, yeah. You just touched on something really important, a couple of things really important. One of the things that stuck out for me, you mentioned the relationship you have. In fact, a lot of the projects you're working on are from the same architect, right?

Chad Eslinger (: 32:07

Mm-hmm.

William Reid (: 32:07

And so there's obviously some sort of relationship there. And presumably a strong relationship if they're referring to each other.

Chad Eslinger (: 32:14

Mm-hmm.

William Reid (: 32:14

So one of the things I think homeowners need to understand is when you first engage with your architect, if they are the first point of contact, and usually they are, but not always. Sometimes a homeowner will reach out to a builder first, not knowing who to call first. They know they need both. So you could go through the builder to the architect or from the architect to the builder. And the fact that there's a strong working relationship there can make or break a project, frankly. And it's because, as a homeowner, if you're working with an architect and you're in the very early stages of design, one of the first things you're going to want to be doing is asking for referrals for builders that they work with.

And there's a hidden value there, an unrecognized value there, because the architect and the builder that have worked together a lot can kind of read each other's minds a little bit, especially if there's a deep working relationship.

Chad Eslinger (: 33:05

Mm-hmm. Yes.

William Reid (: 33:08

And when problems arise, whether it's during the design or during the construction, there's like an automatic communication line there, right? And you just work things out. And the homeowner doesn't necessarily have to participate in a lot of things that need to be talked out. I can't emphasize that enough. So if you want to start a project and you start talking to a designer or builder and you end up with a designer, keep that in mind. You think you want to go out and get five estimates from these plans, right? And the longer you work, the cheaper prices. You're always going to find somebody cheaper, maybe, but they may not be providing the level of service that you need or may not fully understand the scope of work that has to happen on the project.

So don't just think you have to go out and get ten different bids on a project, or even more than two or three. Think about the value of the relationship there because I guarantee you if you work with a builder and an architect as a team, you're going to have a hell of a lot less change orders because one of two things happen. One, they figured it out, the builder and the architect figured it out before you broke ground. Or number two, they work together to solve a problem during construction because there will be problems. And it becomes a team and there's kind of a reciprocal relationship there. So I just want to make sure that that point because I just talked about that in a previous episode about how important that relationship is, and you just touched on it.

Chad Eslinger (: 34:30

Well, I'll add a couple things to that because it is so important. I think I should. Number one is above and beyond what you were just talking about where the relationship and you can read each other's minds. A good architect is going to be busy and they're going to have to make decisions on whose calls they answer during the day, who they prioritize getting the details that we need. Sometimes there is an on the fly thing that we need to figure out. And so when there's a good relationship, like I'm talking to this architect three times a week, something like that, I know that I can get answers quickly, which also is a good thing for me.

But then beyond that, I think the team definitely, I would include the designer and all of the subcontractors. And I think this is something that's really important for people to understand, because I get asked all the time, do I go get three competitive bids from all the subcontractors, kind of like homeowners would want to get three from builders. And the thing that I explain is the value of the relationship and the built systems that we have in between each. This is something I don't think a lot of people understand. I'll use a plumber as an example.

The way that I do things as a builder with my plumber is not the same as another builder might do things because I have certain hot buttons that are learned from experience. So you have something bad go wrong, good builder's going to say that's never happening again, how do we put something in place so that that never happens again? And an experienced builder, especially with a long-standing relationship with a subcontractor, will have bled those situations out before they get to your project. So by asking a builder to get a bunch of bids and inviting them to try to get the price down by working with someone new, you're inviting lack of continuity in a lot of those processes.

And the other point that I wanted to bring up was you mentioned that if a builder doesn't know an architect so well, they might not know how to build their plans. A sub might not know how to bid the plans for the builder properly and they're going to miss things and the builder would miss things. This architect that I work with a lot, I'll give you an example. When I first started building his plans, there'd be a lot of built in niches or cased openings where they all wanted to be in alignment with each other. And some of these complex plans and they don't necessarily have a section that shows every single one of those things. So I didn't know to drop soffits on certain areas because I didn't know the intention and the plans well enough and it's hard to have every single detail that people have in their minds on a plan.

And so once you get to know someone and you know those details you're actually pricing it properly which is another thing that I tell people who are having multiple builders bid a plan by an architect is make sure they know that architect's plans.

William Reid (: 36:56

Wow. Yeah. I mean that's important because what you just described, a cased opening or some millwork detail or something, right? And here's the consequence, right? So a homeowner walks into their home under construction and they look up at the coffer ceiling and the box beam ceiling detail just using as an example, and they're like, I had no idea that's what I was getting. I don't like it.

What is this all about? Or they selected the guy that was twenty percent cheaper, and they walk in, they see a hole in the ceiling and no box beams and no detail. It's kind of an extreme situation, but it's like, well, is that all I get? Well, the guy that doesn't have the relationship's gonna go, it's not on the plan, or it wasn't detailed enough on the plan. I didn't understand the plan.

I mean that's a constant battle getting enough details out of the architects and the designers because it could go on forever, right? Drawing these details.

Well, even a box beam ceiling as an example, there are fifteen different ways to do it. So did the builder, in order to get his price down, do the cheapest version that isn't what maybe the architect and homeowner had in mind, especially if the builder wasn't a part of those design conversations and all they have is a set of plans that says box beam. Well, is that a box beam with a three-part crown that build up on the edges of the box beam? Is it stain-grade? Is it paint-grade? There's just so many different things that go into that. And if a homeowner searches for the lowest price, this is one of the, like you mentioned, thousands of places where you might have a differential and as a homeowner, you would very well have no idea based on comparing quotes from several different builders how they quoted doing that particular thing and then what is the quality level, which is a whole other topic of conversation. But when you're comparing builders, even if you think they're doing the same details, there's no way that they are. There's just no way that they are.

The other thing that you mentioned, and we're probably getting close to our time here, but the other thing you mentioned was scope of work. There's these three words, scope of work or work scope, that gets thrown around. And a lot of people don't understand that. I'm not sure even some builders, some inexperienced builders understand this, right? So I talked a lot about that in the previous episodes, but I think what Chad's talking about, I think what you're talking about here is the architectural plans and the interior design plans even can only go so far. You can only have so much information on those plans. Is that where you're, when you say scope of work, tell me a little bit more about what you mean by that when you're trying to understand a project and trying to price it out.

Well, yeah, scope of work is a big topic or a big area to get somebody to understand, because basically it's what goes into every single line item in the house. Early in my career, I did not do as much of a definition of that. And I have evolved it every year that I've been building. I evolve how I display my scope of work, because it's not necessarily something everyone understands. So as a great for instance, as you were talking, one of the things is I have my own internal checklist for this stuff. In plumbing, do we know if we're gonna need a pressure reducer? Do I ever go test the pressure of the water before we tear the house down? Or do you even know if this is a vacant piece of property, what the water pressure is, and whether I need to put a pressure reducer in there? There's the minutiae like that, and then there's the big picture things like, are we all catching where the architect had a little note that said paneled wall? And that may be a very big detail but maybe a very little note on the plan. And I think that's a challenge for homeowners to compare when builders don't do a good job of displaying back to you what they've quoted, which is the scope of work. So this is what we're doing and also the materials that we're using. It should show you both things. If you can't clearly tell what's being priced out, you're headed for a dispute at some point in time. That's the easiest way I can say it. So the more thorough all of this and all the materials that are being used to install the work are what they're going to be, the better. And then also if you can see someone's past home, so if you're interviewing builders, see their product, a finished product, get a tour of their home, do the referrals, talk to the people who live there, that is also the best way because it's hard for anyone to look at a page with a quote and know what those things are. Ideally you would have walked through a similar home where the builder could point out, here's what a paneled wall looks like. Here's what a box beam looks like that I've done in the past. Not that yours will be the same, but you can kind of see the care that we took with this. It's a trick. It's one of the things that I think is the least understood by homeowners when they sign a contract and causes the most disputes in the end by far.

Yeah. Yeah. I think some of the instigators of this missing or inadequate scope of work too is people are in a hurry. They're excited. They want to get started. It takes a lot of time to develop a scope of work. It takes a lot of meetings and understandings to develop a scope of work. And I want to go back to that budget checkpoint thing I mentioned. If you're a prudent homeowner and you're working with an architect and you take the recommendation of an architect, maybe they have more than one builder, and you ask them to join, you as the homeowner, ask the builder to join in the conversations during the design. And frankly, pay them. I mean, you could pay a builder a retainer of several thousand dollars. It doesn't matter if you're building a huge project, right? Maybe if you select that builder, they'll apply that payment to the job, maybe not. But the point is there's a tremendous amount of value. And when a builder comes in at the schematic level and they see the room library and they see four walls and a door and a window. And that's all that's on the plan, because that might be what's on the plan at the schematic level. A builder can, a smart one anyway, because they want to set the realistic expectations, they want to price out the project accurately, they don't want you to walk into the house going, there's nothing in my library. The smart ones are gonna say, what kind of details will we be doing in here? Have you thought about what you want this room to look like? Do you want a cherry wood seal? Do you want, what do you want in here? So it's going to be helpful to me that as much information can get on the plan as possible so that when I'm estimating the project, it's going to meet your expectations. So the budget checkpoint is also kind of a plan checkpoint, right? And that's where I think the smart people, the smart homeowners, the smart builders, even the smart architects, if we can put all those smart minds together, there's a lot more execution happening in the field than designing and ripping out and redoing. So yeah, there's some other value to some of these steps that can be taken.

Well, a builder in a meeting like that can save you $10,000 in one meeting by their feedback. So I don't think that's something to kind of take lightly. And to your point, you could do some version of pre-construction, whether it's a retainer, like you said, they could credit it, they could not credit it. But if you, as a homeowner, could just feel like they are a consultant for you and you're not signing up that they're your person, let them also show you their value in that process. So find the person you like the best, find a way to engage them early on and there are many ways to do that I guess is my point is that you can engage them with a simple retainer. Some people will just help you a minimum amount with nothing and talk to the builder about what their program is. But don't shy away from that because you think you're committing to something that you're not ready to commit on. Look at it differently, look at it as you're missing out on a tremendous amount of value if you don't bring that person in and get their feedback and a good builder will have tens of thousands if not hundreds of thousands of dollars worth of feedback, whether you take it or not, but at least to be factored into that whole process.

Yeah, like moving the house twenty feet so you don't spend three hundred thousand dollars.

Yep.

William Reid (: 44:48

see? So guess what? There's a third thing that just happened.

In this budget checkpoint, in this plan review, plan review input, you're already interviewing builders and you're just starting the design. And even if you do go ahead and have two or three involved here or there during the design process, by the time you get to the end of design development, when everything's kind of specked out, but before the construction documents are finalized down to the letter, it's time to start getting honed in closer bids. You've already started that process in essence. You have some people, some names, whether they're from the architects or not from the architects or both or the designers. You've accomplished a third important thing, and that is vetting contractors, right?

Not only did you know you're not just picking up the phone, checking their reviews, which is one of the worst things you can do, right? You've actually engaged. And you've appreciated their work by saying, look, let's just do, I mean, I don't know, how about a five thousand dollar retainer for, you know, forty hours of your time, whatever, to help me. I'd really appreciate it. And you know, there's a lot of guys that I think would do that, especially nowadays. I think their inner people that have been doing this over twenty years, right, are genuinely interested that when you do walk into the house when you're doing the trim work and they look up and they go, This is awesome, this is exactly what I wanted.

That's what these guys are about, right? That's what true custom home builders are about. It's not about a slam a jamma, get in and out as fast as we can, make as much money as we can. Okay. But we don't want those, you know, those horror face looks when they walk, you know, when they walk in.

Chad Eslinger (: 46:36

Well, any builder who's been doing it for multiple decades also knows that unless you're a psychopath, there's trauma involved in us letting our clients down. That's not what we're here to do. We're here to have happy clients so that they refer more clients because the best way to avoid a lot of these problems is to start with trust and that comes from referrals. So any smart builder is building their business around that fact. And so we are, the good ones anyway, out here to do everything that's in your best interest.

And I do think that's one of those things that it takes a little bit in the beginning for people to feel comfortable with because there are a lot of horror stories. I think people like to hear horror stories more than they like to hear the stories about everything that just went fine. That's just how we're wired as human animals, but you just hear so many of them that people think that's the way contractors are and that's just not the case, especially guys who have been around doing it a long time.

And to your point, too, referrals is kind of a game. You know, people like to do it when they're near the end of the project, when everyone's, you know, excited to be done. I like to do mine later, like years later, once they've gone through warranty and they can really speak to what the process was like. At least referrals that people have been in their home a little bit, you know, not just that they moved in one week ago. But yeah, very good points all of them.

William Reid (: 47:47

Okay, cool. We're hitting our time limit here. Before I get into the recap here of what we talked about today, do you have any other insights that either you want to mention today or also you want to mention that maybe we could talk about in another episode?

Chad Eslinger (: 48:02

Yeah, I do. I have one that I think connects the dots well, and we could open this up because it's a bigger conversation in a future podcast episode. And it is when you are doing this pricing, if you're pricing multiple builders against each other, beyond the fact that they may not be quoting things in the same way, if you are incentivizing everyone to chase the lowest bid by the way you're approaching this, like you're looking for the lowest bid, the other thing that gets lost in this is quality.

Now what we've done in order to meet a number is we've had to make sacrifices. There's value engineering we can do that has nothing to do with quality, like moving the house back 20 feet as an example. But there are many many dials that can be turned that do affect quality. So either the labor that's installing the materials or the materials themselves. But what I find is in the homeowner's mind the quality is not being changed as we're turning the price dial and that's just not true. Of course you get what you pay for to some extent, and sure there are materials that look similar to others that are less money. I think people get caught up in that too much. So like, we can save here, save there. There is going to be a lessening of the quality with a lower priced product.

And a lot of these homes, everything's expensive anymore. So a lot of the projects we're doing are all, you know, multi-million dollars. And so, of course, if you went from a two and a half million dollar budget to a two million dollar budget, you're still expecting a really high end product and you should get it. But those five hundred thousand dollars that were saved, probably many of them do have something to do with lowering the quality of what's either the material being installed or the labor to install it. So when the expectation is still up here and we've moved the price down here and the expectation doesn't come with it of the quality, that creates another big problem and there's very little industry standards or information out there for homeowners to kind of rate that. We don't have like Michelin stars on our quality like chefs have. So that is something to definitely keep an eye on and I would love to talk more deeply about that at some point.

William Reid (: 49:53

I think we should because I pushed back on that when we talked a little bit about that. I didn't push back, I just kind of challenged that and you had some really good feedback. And what I said was, well look, it's the architect's job and the interior designer's job to detail out the plans enough to a high level so that the homeowner can issue those plans to three different builders and price the project per the exact plans and specifications. And the more thorough, the more detailed they are, you know, the more specifications they are, the better.

And in principle, it makes sense. But you had some really good feedback on that. And you talked about, and I don't want to get into it today, because I think we could do, I think we should do a whole episode on your quality, because you've mentioned this several times. And I've experienced this too, but I hadn't thought about it until you brought it up. You've had clients spend, you know, $100,000 on plans, and you've had clients spend $20,000 on plans. And the argument is the twenty thousand dollar set of plans could be as valuable as the sixty thousand dollar plans because a lot of the details and stuff that get put in those plans, nobody understands. I mean the homeowner doesn't understand them. Maybe it hasn't even been conveyed to them, the details to get in the plans, yet they paid for all of that. When there is enough adequate details in the plans, both because of the relationship you have with the architect or the interactions that occur. And that goes back to that plan review, budget checkpoint, qualifying contractor, you know, during the design stage.

We gotta get into that, the quality thing. Because what you're kind of saying is a homeowner could unknowingly end up with, you know, if they went to the builders and said, Okay, you gotta bring down the budget by thirty percent. And the builder might say, Well, let me give it a try. And they do it, and they don't necessarily share every single little step that was made to bring the budget down. Is that kind of what you're saying?

Chad Eslinger (: 51:53

Well, that's part of it. But even back to your point about the architectural plans and what's in it, a lot of times the homeowners just don't understand. Even if it was conveyed and they've reviewed the plans, a lot of the architectural drawings aren't something that our homeowners are looking at every day. So they don't know what that detail really means in real life three dimension when it happens versus on a page. So a lot of times they have read it and they have been explained by the architect. But, you know, we use the box beam ceiling as an example earlier. There's a

different ways you can do that even as a homeowner if you do know what a box beam is and the architect conveyed it and all of that. So it really comes down to how well both the builder and the architect and the interior designer are relaying back what's in those plans and what they picked to the homeowner in a visual way. This is a whole other conversation we're getting into a lot with regards to how AI dovetails into this because the clients are using it as a way to kind of grasp what these things will look like three-dimensionally and then that introduces a whole other level of problems when we do that. But everyone's doing it right now, so we've got to talk about that too. But it's ultimately getting to the point where the clients understand what it is that they've been quoted and what we're gonna install. And to your point, when we start stripping stuff out of that, what does that really look like? What are they really missing? So that later they don't say, don't we have this? As the builder, we don't love being put in the position of saying, well, you stripped that out to get to your budget.

Because we don't want to be accusatory or make our clients feel as though it's their fault, but they were the ones who requested a lot of times to strip stuff out. And then when they see it, that detail that they put in there in the beginning for a reason, which we then took out for budget, becomes known. This doesn't look so good because we deleted some of the detail in the carpentry work or in the cabinetry work in order to get to our budget. And so we really don't want our clients to be disappointed on that level also.

Right. Cool. Cool. All right, we're gonna talk about that next time. All right, so here's what I think we covered today, and you tell me if I got it. So if there's three things you can take away from this, first, a budget isn't real until it's been tested against a real site and a real scope of work. And the cheapest time to test it is before you bought the land or paid for the plans. If you can figure that out, you're in a much better position. And second, getting the price to match the budget isn't necessarily the finish line and we just kind of talked about that. The scope and the quality level have to match also. And that lives in a written scope of work and we'll probably have to have a dedicated episode about what that's all about. Because that's how I operate my business. I had a lengthy documented scope of work by category. And the scope of work can't be in your head. It can't be in anybody's head. It's got to be written out. It supplements the plans. They go hand in hand. They govern the project. And third, you don't need to know the thousand things that can go sideways on a build, right? You're never gonna know that. But you need to know they exist.

That's what we're doing here. And what your decisions are, and that's another thing we didn't really get into today because Chad had some good stuff on that. Some people raise their hands and say, okay, what am I responsible for? What am I as a homeowner responsible for? And the ones that don't even raise their hands are in even worse shape because they just think they're done and they walk off while the home gets built. So that's the big things, the high level things we talked about. And of course we'll have it in the show notes. So I'm gonna have a lot of this information in the show notes. I'm gonna have the links to Chad's website. He also has a free ebook that I think we'll put a link on there too so you guys can read through. There's just a big difference out there. What you're talking to is two guys that have been in the trenches for over thirty years, right? In one form or another. Chad was doing it when he was a kid and then ended up taking over the family's business. And I've been doing it since nineteen ninety or so.

That's what's happening with this podcast. There's a difference. We're trying to address the very early upfront stuff for a project. We can talk about construction and foundations and framing and millwork and maybe someday we will. But if we can accomplish this front end thing, all of that stuff goes a lot smoother. And nobody wants to focus as much. They say they want to plan a project, plan a project. But anyway, that's what we're up to and I'm so happy Chad and I ran into each other because he's on exactly the same mission. So all right everybody, that's what I had today. And as you know, I'm Bill Reid, Your Home Building Coach, and I'm here to enlighten, empower, and protect you.

Let's make it happen.