following information is from the brochure published by
the Capital Region Builders Association in an effort to
promote public safety and awareness:
of building your OWN HOME? …it could be a mistake.
Is it worth the risk?
of Building your own Home (and More)
It is the American Dream to own your own home…and
many people think they will save an enormous amount of
money by building their own. This could be a costly mistake
financially, emotionally, and physically. Many aspects
need to be considered and the purpose of this brochure
is to help you think about avoiding some of the pitfalls
and what you can do to make this a successful undertaking.
There are several questions you will need to answer. Our
hope is that you will be helped by this publication. Ask
yourself: …Do I really have the time to undertake
a project so time consuming? Is it worth the time? How
stressful will it be on my family? Do I really have the
skills to build a home properly? Do I have the correct
tools for those jobs I plan to do? If not, how much money
will I spend on those tools? Will I use them again once
the home is completed?
home is the single largest investment you will make in
your lifetime. Do you have the expertise to make sure
this home will last you a lifetime?
Arranging and applying for a home loan can be quite involved
and should be one of the first orders of business. Even
if you feel that you have enough cash to do the job, applying
for a home loan to allow for inevitable overruns due to
increased material and labor costs or upgrades is always
advised. Most mortgage companies will not lend money to
cover the unanticipated costs on a home which construction
has already begun. As a self contractor, some lenders
will not lend you more than 80% of the projected cost
of your home.
House plans, specifications and an itemized list of documented
costs and bids must be provided to the lender. In calculating
costs, do not allow for “sweat equity” as
most lenders do not recognize this as a legitimate cost.
IRS: The IRS requires that you send any sub who earns
$600.00 or more a 1099 form at the end of the year. In
the event that you are audited, be prepared to prove that
the sub is an independent contractor – that is,
you did not have to supervise his work and you did not
dictate what time he reported to the job.
Tracking Material Purchases: It is very important to be
on the site or have someone you can trust to document
delivery slips. Returns must be accounted for since inaccurate
billing can run up costs. You will need to check all invoices
and account for all materials. Waste can add hundreds
if not thousands to the cost of your home.
Do not take this area for granted. There is much more
to building a home than meets the eye. Be realistic about
your level of skill and the amount of time you can spend
on the jobsite. Base your decision to put “sweat
equity” into you’re your home on your experience,
skills, available time and the amount of stress you and
your spouse are able to manage. Your ability to handle
long-term disruption of schedules is just as important
as your ability to swing a hammer.
Deposits will be required by all utilities before construction
can begin. Make deposits early as so may take weeks to
get their services connected.
Do you know why builder’s carry Builder’s
Risk, General Liability and Workman’s Compensation
insurance on all of their building projects? Because they
know what their liabilities are and YOU, as a self contractor,
may have to assume the same liabilities.
Risk: The mortgage lender will require this type of insurance
which covers the home materials only (no bodily injury,
etc.). Upon completion of the home and closing of the
loan, you will want to convert this policy to a homeowner’s
policy. Your lender or insurance agent can explain this
Liability: Your lender may or may not require this type
of insurance, but as a self-contractor, the permit purchaser
and the property owner, YOU are responsible for any third
party injuries which may occur on your property. Without
the proper general liability protection, YOU will be held
liable if anyone gets injured on the project, including
children injured while playing on the job site.
Compensation: If you are not in the business of building
homes, you may not be required to carry workman’s
compensation insurance; however, it would be prudent to
require any sub-contractors you hire to provide certification
of their workman’s compensation coverage. Also,
it is important to know that any subcontractor who employs
any number of workers is required by law to carry workman’s
Warning: Do not accept a release of injury in lieu of
a sub having workman’s compensation insurance as
the release may not be binding in a court of law. There
is an issue which has been of increasing concern to property
owners…there is a fine line between being an employer
and a do-it-yourself minded builder. A recent case in
Oregon, ruled that, since the property owner was serving
as their own general contractor and had the right to control
the worker, they were employers and therefore liable for
workman’s compensation insurance. This presents
a legal issue about which property owners should be knowledgeable.
Your attorney or insurance agent can explain this exposure
to think about:
constraints: Be prepared to spend at least 35 hours per
week for probably 5-6 months. This is calculated for an
average 1,500 sq. ft. home. If the home is larger, figure
accordingly. Does your present employment allow enough
flexibility to spend this amount of time away from your
& Scheduling of subcontractors: Remember these subcontractors
have other jobs in progress besides yours. Their loyalty
may be to those builders that give them the most work
during the year. Will they be available to you at the
proper time? For example, do you have the toilet installed
before or after the flooring? One sub cannot do their
work until another has completed theirs. Delays are costly,
frequent, and frustrating.
Expertise: Do you really know how to properly analyze
a cost breakdown? Are you able to distinguish high bids,
low bids and work quality? Are you allowing for all of
the materials you’ll need? For example, everyone
knows to buy tile…what about grout, thin set and
spacers? Is everything that will be needed to complete
the task included in the bid? Do you know enough about
the work to realize if it’s not? Remember, the lender
will require that your cost breakdown be documented and
if you have not projected cost efficiently and run short
of funds, the loan amount cannot be adjusted after it
Expertise: As the general contractor of the home, it will
be your responsibility to hire qualified, licensed, insured
and/or certified subcontractors. Do you have the technical
expertise to oversee if the work is done properly? If,
after inspection, the work is rejected by the Codes Department
(if your Parish requires), who will absorb the cost to
redo the work? While this work is being redone, time will
be lost, and other subs may have to be rescheduled.
& Safety Health Administration (OSHA)
the general contractor of your own home, you can be held
responsible for all sub-contractors who do not adhere
to the construction site OSHA safety requirements. Specifics
such as regulations involving stairways and ladders have
been a major source of injuries among construction workers.
OSHA has set out about 17 detailed rules that govern stairway
and ladder use. Other OSHA standards for a job site include
posting of emergency numbers and instructions in the event
of an injury.
you job site became the target of an OSHA inspection,
penalties for any infractions could be very costly. For
example, in Texas one inspection of a single home under
construction resulted in $20,000 worth of citations. (Source:
NAHB Business Management)
New Home Warranty Act, effective August 30, 1986, and
amended August 15, 2001 requires builders of new homes
to provide certain warranties that extend over periods
of one, two, or seven years, depending on the nature of
If you build your own home and sell it another party,
you will be responsible for any of the legitimate defects
within the given 7-year time frame. In the case of your
death, your estate would be responsible for claims. As
far as the law is concerned, you will be the builder and
responsible for claims brought by subsequent owners of
For a copy of the New Home Warranty Act, contact our office
at (225) 769-7696.
homeowner may build his own home one time per year. But
remember, YOU must actually occupy the home upon completion.
Other than this exception, any person or firm who is the
prime contractor on any residential construction must
be licensed when the total cost exceeds $50,000.
the event any of your subcontractors fail to pay their
suppliers or laborers, a lien can be filed against your
property. A lien is a claim against a piece of property
and can cloud the title or deed to the property. These
suppliers and laborers, if not paid, can file a lien against
your property, even if you have paid the sub-contractors.
permits and periodic inspections (if applicable in your
parish) are required even if you are self contracting.
It can be a tedious and frustrating experience if you
are not familiar with the system and all of the “red
tape” requirements which must be complied with before
commencing work. Mistakes here can be costly and time-consuming.
the property on which you plan to build is located in
an established subdivision, the developer has probably
already had an environmental assessment and has secured
a 404 permit. Failure to comply with the wetlands regulations
could result in construction shut-down and if the Corp
of Engineers should find you in violation, impose severe
fines and penalties.
Region Builders Association
10518 Kentshire Court
Baton Rouge, LA 70810