Once we had final design plans it was time to have a few contractors look at the plans and prepare estimates. From here we would choose one contractor to move foward with. We decided it would be best to get bids from three contractors.
The first contractor we approached was the contractor who works with our architect and who had done the earlier estimate before we finalized the plans. Obviously, this contractor has the advantage of having a working relationship with our architect before, so we know the job will be done as designed. However, this contractor is rather far away from our building site, so we have some concerns about the cost of travel/shipping adding to our cost to build, as well as the environmental impact of that travel and shipping.
The second contractor we apprached is a relative in the contracting business. Being a relative, we trust that this contractor would be more honest with us in his assessment of the plans and about the cost to build. However, we know that working with family can sometimes lead to more problems than working with strangers, so while we definitely want his input and opinion, we are on the fence about working with him.
The third contractor was a local contractor that we had heard about and with whom our architect had worked before. We liked the fact that he was local, knew the area and could hire subcontractors from nearby, hopefully for less money than the two other contractors who were from further away.
All three contractors made their bids without seeing the site first hand, The third did request to inspect the house before submitting his bid, though timing did not allow it. In the end, after waiting more than six weeks, we finally had bids from all three. All three came in over budget, obviously not what we wanted to hear, but all three were also confident that with some minor changes we could get the cost within our original budget.
With the estimates in hand, the next step would be to pick one and sign an contract, but unfortunately, we ran into our first real snag in the whole process - our appraisal came back lower than anticipated.
The loan that the bank promised us was contingent on the completed house being appraised high enough so that the loan was no more than 80% of the value of the house. Because we approached the bank to make sure that the budget we were working with was realistic before we had finished plans, they made the loan offer based on their analysis of what we could afford, not on the 80% of value number. Unfortunately, the appraiser valued our finished project to be worth only the amount we were looking to borrow, thus causing the bank to lower the loan they were willing to give us. Changing the plans to be smaller or less expensive would also change the appraisal, so we now need to come up with an alternative way to make our plans work.
We are currently exploring three possible means of moving forward.
The first, and most simplest, would be to get a new appraisal. The original appraisal, while fair, did not take into account the green and energy efficient aspects of the plans, which obviously add cost, and should add value to the final home. We have petitioned the bank to consider an appraiser that specializes in green valuation.
The second would be to find a new bank and obviously new appraiser, but unless we could get a guarantee that the new bank would use an appraiser who specializes in green appraisals, the results would probably come back the same.
The third would be to get a home equity loan and make the basic changes planned to the existing house. We could then add the addition once we had paid off the home equity loan. This plan, while putting our final house on hold for a while, would allow us to skip an appraisal altogether, and get into our new house faster.
All three options have their pros and cons and carry risks. As we explore them we'll be better able to decide which route to take, at which point we'll have to choose one of the three contractors to move forward with whichever plan we go with.
