Builder, buyer team up Customer-built: Builders such as Stephen E. Davies are letting homebuyers help build their homes, saving customers money and getting them involved in building their house.

January 07, 1996|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

It's tough butting heads with the competition, but Stephen E. Davies had to compete with the customers too. Potential customers.

Instead of hiring him to build them a house, they would build it themselves.

"Some of my competition comes from somebody who would like build their own house," said the Ellicott City builder, a native of Manchester, England. "They'll be their own general contractor and think they'll save X amount.

"That really never happens," he said. "It takes a six-month chunk out of their life. They can't do their own job. They have to pay more to the subcontractors because it's a one-time shot. Because it takes so much time, it isn't cost-effective."

So the 44-year-old president of Davies Homes Inc. was struck with an idea: Let homebuyers help him build their homes. They could save money and still have a hand in building a house.

About half his buyers -- of a total 65 over six years -- have taken him up on the offer. Mr. Davies now gives homeowners the chance to earn sweat equity through a formal program.

First, he and the customer agree on a price, then the customer checks off the tasks he wants to do: painting, seeding, insulation, clean up, or if a buyer is licensed or knows a licensed contractor, even plumbing or electrical work. Mr. Davies sets the schedule, giving the homebuyer a time frame in which to complete a job. Once the lender inspects and approves it, Mr. Davies writes the homebuyer a check as he would for any subcontractor.

"A lot of builders want buyers to stay away from the house while they're building," Mr. Davies said. "We encourage our homeowners to be on site. It's another pair of eyes. It's their home evolving."

Some customers have saved up to $15,000 on bigger jobs. More typical, though, are savings of about $5,000, the estimate for painting, seeding and clean-up. Buyers often choose to paint, selecting alternatives to "builders beige," saving themselves the cost of re-painting later.

Randy and Maria Parsley bought five acres in Woodbine in Howard County, then shopped for a builder to create a two-story Colonial with a front porch. Potential deals kept falling through when estimates exceeded the family's $150,000 loan amount. Just before they were to settle on their land, the family heard about Mr. Davies.

"He was very flexible," said Mrs. Parsley, a high school Spanish teacher and mother of a 10-year-old daughter. "We wanted to save some money by painting our own house, and we did. If you have the time, it will really save you a lot of money."

They rented a paint sprayer and did the work with help from their nephew. Mrs. Parsley spent time off after school and on weekends painting trim. In June they moved in. They will landscape the yard themselves.

"It was exciting, but it was a lot of hard work," said Mrs. Parsley, who discovered that spackling and sanding came with painting trim, quite a chore in a 3,100-square-foot house.

But by doing work themselves, they got extras such as a two-car garage and a larger soaking tub in the master bath, all for their $150,000 contract price.

The work equity program grew out of Mr. Davies' desire to build custom homes by offering flexibility in design, no matter the price range. In 1989, he had left BBI Homes, a Howard County builder of about 200 speculative homes a year. He sold his share of BBI to his partner and started his own business, borrowing elements of a similar work-equity program offered by a builder in Ohio.

"The market wants complete flexibility without having to pay $1 million for what you'd consider a custom home to be," Mr. Davies said.

He builds 15 to 20 homes a year in the Baltimore region, priced from $150,000 (not including land) to $1 million, reflecting his philosophy: "A custom home is really a process, not a price."

His company will build any house style on any appropriate lot, he said. Typically, he builds on a customer's lot, though the company owns lots in small subdivisions and has options on others.

New incentive

Work equity is a twist on the builder incentives that have become popular marketing tools in a slow housing market. Incentive packages, which can include anything from closing-cost assistance to free options such as fireplaces, have grown in proportion to sales prices as the market has slowed, said Harvey N. Singer, senior vice president of Legg Mason Realty Group Inc., which tracks new home sales in subdivisions of 20 homes or more.

During the third quarter of the year, incentive packages in the Baltimore region averaged $6,297, or 3.3 percent of the average base price of communities surveyed in Legg Mason's quarterly housing sales report.

"When supply and demand goes out of kilter, or the market becomes more competitive, the incentives go up, or the percentage of the sales price," Mr. Singer said.

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