Custom Home Building

THB Completes Newest Getaway in Big Sky

December 1, 2011

Teton Heritage Builders is excited to announce the completion of its newest custom home in Big Sky, Montana. Located on the beautiful southern aspect of Lone Peak in the heart of the Yellowstone Club, this rustic cabin features some of the finest craftsmanship in Southwest Montana.

THB Finishes Rustic Cabin in Big Sky — Rustic Cabin Getaway in Big Sky

A little over a year ago this gorgeous mountain getaway was a mere concept in the minds of a wonderful couple from Minneapolis. After meticulous research and careful deliberation the homeowners along with Faure Halverson Architects chose Teton Heritage Builders to construct their dream. Starting with an empty lot, THB sculpted the site to capture the spectacular view shed while maintaining its forest privacy.

As you approach this home it is apparent that THB has an impeccable eye for details. The custom rustic timber trusses and siding blend perfectly into the stone façade. Above the porte-cochere is a unique tower boasting 360 degree views. We anticipate many oohs and aahs as visitors discover Lone Peak, Sphinx, Helmet, Cedar and Pioneer mountains.

The interior is finished with everything from hand hewn logs and gnarled juniper railings to massive stone fireplaces and intimate gathering spots – this home has it all. Down to the very last detail this is the getaway that our clients imagined. Handing over the keys to ecstatic clients makes this a truly rewarding project and energizes us to help many more folks build their dream home in the Northern Rockies.

Stone Fireplace Across from Kitchen — Hardwood Floors, Custom Kitchen & Stone Fireplace

Q & A With Potential Custom Log Home Client in Jackson Hole. Part 1

February 11, 2011

We are developing a rough budget for our new log home. If we purchase the log package for $250,000 and that includes the log walls, stairs, roof structure, and the labor to erect it on site. What is the approximate cost to finish the home? We would recommend having a budget allowance of $950k and that would cover a medium level of finish throughout the home. This is based on an average of $300 per square foot on a 4000 SF home and in this case minus the log package.

What would be a rough cost per square foot for home construction? We typically tell clients $250-$400 per square foot for a rough budget when they consider building in areas like Jackson Hole, Wyoming and Big Sky, Montana. A per square foot number is dependent on a number factors and one of them is a clients desired level of finish. The level of finish refers to the material choices found throughout the home(i.e. floors, countertops, trim, plumbing and electrical fixtures, exterior veneers and sidings.) The complexity of a homes design and structure as well as the specified Mechanical Electrical and Plumbing Systems (MEP) play important roles in defining a rough cost per square foot budget.

If Brand X does not supply the log shell, can your company obtain the log package and build the shell? Yes. With a set of plans or ideally structurally stamped shop drawings we could accurately bid the log package out, and we always suggest bidding out work to a minimum of three qualified sub contractors in addition to our in-house crews. This process works well in these economic times and provides you the best value for each scope of work.

How is the cost for the project set? We will develop a cost estimate based on the construction documents. There are the questions of interior finishes, heating and cooling system spec.’s, window style, and all the additional material selections that we need to be understood for to us to develop a price or allowance. Once we have determined all the essential elements we like to negotiate a budget, tailored to your design intent.

Fixed project price? Time and materials? Typically we use a contract with a Guaranteed Maximum Price, however we are open to the discussion. We use AIA contracts that can be tailored to the clients desires and situation.

How do you track costs? We use the industry norm Construction Standard (CSI) codes and divisions. We break the project down by division, and track costs, established budgets, and bill on a monthly basis.

What progress reports do you provide? Each month your bill comes with a continuation sheet broken down by cost code and division. We have many methods to track a project and provide updates tailored our clients’ needs and expressed levels of detail and involvement.

What items increase the cost of the project? Usually it is changes to the scope of work during the project or the material specifications or client selections. We can provide a value engineering analysis of your project that can create a baseline budget and then develop cost options for the client to consider.

Check back in to read Part 2 of our Q & A with our Potential Custom Log Home Client

Five Questions to Ask to Ensure Your Big Sky Builder is Financially Stable

January 20, 2011

By Pete Lee, Co-Founder, President & CEO

The home building industry has gone through tremendous turmoil over the last three years, and many builders have suffered tremendously because of it. (The industry was off 80%, high to low, in the last four years and is still off 74%). Big Sky, Montana was no exception to this phenomenon. If you’re about to build your dream home, make sure you don’t become collateral damage!

The root cause of the industry’s problem is debt and financial stability. Too many builders got caught up in the “irrational exuberance” of the housing bubble and speculated in the market. The dance was great while it lasted, but when the music stopped, many builders did not have the financial capacity to carry the debt. Hence this fact should drive your line of questioning in picking your builder today:

1. How many spec homes are you or your company involved in currently? Do you own a lot of land?

Spec home and land “carry” are the biggest killers of residential builders. Many builders served their client’s well, but they took on too much debt speculating and they get eaten alive by the carrying costs. If builders have inventory, confirm that they can carry the burden.

2. “May I have a copy of your balance sheet?”

The builder’s balance sheet lets you confirm whether he has debt, and if he does, how much cash they have on hand to service it. If he has a lot of debt (both on balance sheet, off balance sheet (i.e. in LLC’s) or personally), than the odds are that he will be aggressive about retainers, large billings, and aggressive change orders. Such a builder needs to feed the beast (debt) and you could be his meal ticket. A healthy balance sheet should be an indication of a fair-minded builder.

3. “How much debt does your company have? How much do the key employees have?”

The company may have kept clear of debt, but perhaps the founders have taken on a lot of debt themselves (big houses, big cars, boats, personal real estate projects). If the head of the company has a lot of debt, the odds are high that you’ll run into similar behavior to above.

4. “What are your processes for ensuring the vendors get paid on the job?”

Another surprise for builders (and their clients) is contingent liabilities. And a big one is in paying off subcontractors and vendors that perform work on past projects. The law is such that the land owner (read client) is ultimately responsible for any properly filed liens on a project. Therefore, your may pay your builder, he may pay his subcontractor, but a vendor down the line could file a lien on your property because of your builder’s previous failure to pay on some other project. Ask you builder how he ensures against this problem. There are developed procedures that avoid these headaches (call me any time to discuss).

5. “Will you guarantee your price?”

Finally, don’t get sucked into a great sales pitch only to find that the builder can’t or won’t deliver on his promise. Asking a builder to guarantee a price is a way to flesh out competent and honest builders from the disorganized and shady. Competent builders know what things cost, how to control those costs, and should be willing to guarantee some price. If they will not, why not? You have a right to a straight answer. You want to ensure that your prospective builder has no other costs he want to push into your project. Does he have adequate control systems in place? Has he given you a realistic upfront price?

Bottom line: Don’t be a victim of the home building industry depression. With a little bit of informed spade work upfront, you will be an informed consumer and ensure that you’ll get an attentive builder who will service you fairly during the process and after you move in.

Because his cards will always be on the table, face up.

Use Geothermal Heat in Snow Country

December 28, 2010

By Pete Lee, Co-Founder, President & CEO

Here in the North Rockies (Jackson Hole, Wyoming & Big Sky, Montana) we have “significant” winters (another way of saying l-o-o-o-o-n-g heating seasons!). The plus side: a lot of great skiing. The downside: conventional home heating bills are often high enough to drive a chill up your spine.

But the downside can be avoided by installing a geothermal heating system (also called “ground source heat” or “geo-exchange heat”). Geothermal is a great way to mitigate your heating costs and has become much more affordable & popular.

This is true for three primary reasons:

Uncle Sam gives a 30% tax credit to encourage use of this low-carbon, green energy;
The technology has been making steady improvement and now boasts COPs (see below) of 4.5 to 5.0;
The local heating community has embraced the new technology.

The alternative energy tax credits return 30% of the system costs to our clients. In effect through 2016, the credits are reducing time to recapture your investment from 10 years to an economically viable seven [7] years. Read on, and you’ll see that in some cases, THB Energy Solutions has done even better; one of our systems will pay for itself in 4.2 years—a 24% Return On Investment! Regardless of your political persuasion, you gotta appreciate Uncle Sam helping us wean ourselves off foreign fossil fuels.

Now couple those tax breaks with technological improvements and things get exciting. 10 years ago, a heat pump COP (coefficient of performance) of 3.0 was considered good. Fast forward to today, and units are clocking in at a COP of 5.0. This is huge because the technology has crossed the tipping point of efficiency and cost effectiveness.

Let’s take efficiency first. Geothermal uses grid electricity. So to fairly compare its carbon footprint to fossil fuels (like propane and heating oil) you have to account for delivery. Historically, grid electricity loses about 70% of the fuel energy burned by the time it gets to a delivery point (i.e. your house) due to line loss. In essense, a geothermal heat pump that delivers a COP of 3 has about a 90% efficiency of the actual fuel consumed ((100%-70%=30% efficiency) x 3 COP = 90% actual efficiency). Well, this is comparable to high efficiency boilers burning propane or heating oil. Now, with the improvements, that actual efficiency can push 150% (30% x 5 COP = 150%). There is no way for propane and heating oil to compete and your carbon footprint has been reduced!

Next, let’s think about cost effectiveness. We recently completed a geothermal energy retrofit on a 8,600 square foot house that produced a heating bill of $284 last month. Two years ago, the same bill was over $1,750. The savings for the year will be $11,000; the system will pay for itself in a little over 4 years (a 24% return on investment). Now, that’s cost effectiveness!

Okay, that covers two of the three legs of the stool: finance and technology. The last one is service. And today, that is well represented in the Rocky Mountains. Generally, the Rocky Mountain mechanical community was slow to learn about geothermal heat, but they have caught up quickly. In the last five years, many mechanics have learned all about the systems and there is a wealth of knowledge to tap into (especially out of the Midwest).

All the reasons are here to use geothermal heat in your next Rocky Mountain home. Not only will you be pleased with how small your heating bill is, but it is a good return on investment. And to top it off you can rest assured that you will be well taken care of and that you will be doing your part to help planet Earth.

Get a Contract for Your New Custom Home that Builds Trust Between You and Your Builder and Aligns Your Mutual interests

November 15, 2010

By Pete Lee, Co-founder, President and CEO

In the many years I’ve built custom homes, the question eventually comes up regarding contract style.

Contracts take all forms, but the single most important thing you as an owner can do is ensure that the contract aligns your incentives with the builder’s. If you have picked a reputable builder to begin with, this will assist in mitigating conflict before it happens.

Often in high end custom residential construction, not all the details are worked out. Consequently, the budget may be subject to change. This is a critical time when owners and builders need to work together and when the style of your contract will help. THB uses three primary types of contracts:

Cost-plus with a fixed fee (20% of the time);
Cost-plus with a guaranteed maximum price (70% of the time); and,
Lump Sum (10% of the time).

The first two styles dominate our arrangements because they do the best job of aligning our interests with the client’s despite the unfinished nature of the design. The client can rest assured that our incentive is not to run up the price, but preserve the value for the client.

Cost-plus with a fixed fee is a contract style that should help establish trust between the owner and the builder quickly even though the design is still in process. Cost-plus enables the owner to see copies of all costs incurred by the builder during the design and construction process. The owner will thus know that he is paying only costs affiliated with his/her project. There shouldn’t be any hidden mark-ups. The fixed fee above the costs is the fee the builder receives for providing the services. By fixing the fee, the builder only receives a portion of the fee as the percentage of the construction budget and he has no incentive to run up the cost because he does not stand to gain from the additional cost. However, the downside of this contract style is that the builder is not liable for cost overruns (and only stands to be embarrassed by missing his budget). Under this approach, you may find that that the builder doesn’t seem to spend a lot of time worrying about your budget …

On the other hand, Cost-Plus with a Guaranteed Maximum Price (GMP) eliminates the builder’s afore-mentioned potential lack of consideration for your wallet. That’s why THB makes such extensive use of such contracts. You see, all builders know what it costs to build in a given marketplace. Therefore, I believe they should be prepared to cap the financial exposure to the client for a given scope of work and a given budget. Having a a financial stake in accurately predicting and managing the budget is an important part of his job.

This is why Cost-Plus with GMP is so popular with THB clients. We recognize that many of our clients want to start building before all the design details are complete but they still want to know they are being treated fairly, hence cost-plus helps build that trust. Then we go one step further for our clients by ensuring that we have accurately created a budget. We create a Guaranteed Maximum Price (GMP) for our clients so they can rest assured that they will get the house of their dreams–without a nightmare in their final price No hidden costs. No surprises. No sweat.

These are the broad strokes THB’s two most popular contract styles. There are other subtle topics like GMP contingencies and shared savings that warrant further explanation. I’ll discuss them in future posts.

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