How to Avoid Common Framing Errors

Simple things can make a big difference. This is particularly true in the home construction industry. It is true that home construction is not a technologically advanced field. We still use more or less the same technologies that we used ten or twenty years ago. However, better building materials are available now and they significantly improve the structural stability and performance of the building.

Here is a quick overview of common framing mistakes that can lead to callbacks and complaints:

Installing sheathing as a single span: Sheathing needs to be installed over 2 or more spans.

Installing strength axis in the wrong dimension: It is generally a good idea to install panels with their strength axis across the supports.

Sheathing that isn't properly supported: If the wooden panels are cut less than 24 inches in width, they will probably deflect over a 24” panel. Since these panels are usually installed on the roof ridges, workers may walk over them during the construction. If the panels are narrower, you will have to support them with edge support clips.

Installing glued laminated timber upside down: These beams tend to be of the unbalanced kind. Generally, different levels of bending stresses are assigned to the tension and compression zones. If you find the label 'Top' on the top lamination, you must ensure that that side of the timber goes up.

Panels that are not properly spaced: When installing panels, make sure you space them properly. Panels made of wood may expand or shrink when there is a difference in the climate. When they are exposed to moisture, they may expand.

If panels are installed with hardly any space between them, expansion will be prevented. This may lead to buckling. To prevent buckling, there should be a gap of 1/8 inches between panel ends and edge joints.

Fasteners that are overdriven: Improper fastening will lead to aesthetic and structural problems. They are the number one cause of call backs.

Inconsistent joist spacing: Make sure that the deflection across the floor is consistent. If not, expect a lot of call-backs from angry customers.

Inconsistent floor gluing

Squeaking is one of the most common complaints about wooden floors. If the floor system is properly glued and nailed there will be no squeaking.

By following the five framing principles given below you can prevent these common mistakes.

·         Wooden panels tend to have a strength direction. If you adhere to this rule, you will be able to prevent most deflections.

·         Since wood has a tendency to expand or contract, you need to ensure that the panels are properly spaced.

·         Make sure that your building practices are consistent. Inconsistent materials, framing and alignment can cause a lot of problems.

·         Most vapor related problems can be prevented by using vapor retarders.

·         The builder or the contractor also needs to ensure that the sheathing is continuous. Continuous sheathing will offer greater resistance against high winds.

Improperly built field notches

If the field notches are made improperly, they may compromise the structural capacity of the framing member.

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Small Lenders to Bear the Brunt of Qualified Mortgage Rules

Small lenders are already struggling with rising interest rates and poor economic conditions. The new mortgage rules will further affect their ability to make a mortgage loan.

The new qualified mortgage rules are designed to fix major problems associated with the mortgage industry. Prior to the housing bust, lenders made loans without properly assessing the repaying capacity of the borrower. Under the new rules, the lenders have a legal responsibility to ensure that borrowers will be able to repay the loan.

Most analysts believe that the new rules will have no long term negative impact on the mortgage industry. However, small lending institutions say the new rules have made them wary of lending because they are afraid of offering loans that do not comply with the guidelines specified by the Consumer Financial Protection Bureau. These lenders are worried that loans that are outside the standards specified by CFPB may be liable to lawsuits filed by unhappy borrowers. Many of them even lament that they can no longer do the loans they did in 2013.

The new 'qualified mortgage' rules specified by CFPB clearly state that the borrower should not have to spend more than 43 percent of their total income on debt. Also the fees charged by the lender cannot exceed 3 percent of the loan amount.

The risks of not complying with these new rules are serious. Even if the lender commits a small mistake in assessing the eligibility of the borrower, they will not be able to sell the mortgage to Freddie Mac or Fannie Mae. This will force more and more lenders to stay within the rules.

The officials at CFPB say that they will closely monitor the impact of the guidelines on the mortgage industry. And if they feel that the new rules have affected the availability of mortgage loans, they will make tweaks here and there.

Large lenders, on the other hand, have said that they will make mortgage loans outside CFPB's guidelines because they have the financial capability to hold these non-qualifying mortgages on their books. These lenders are not afraid of the legal risks of making such a loan.

Many experts believe that the impact of the new rules on the mortgage industry is still not clear. The fate of middle-class borrowers who may fall outside the qualified mortgage guidelines in spite of having decent credit scores is also uncertain.

CFPB officials have made several changes to reduce the impact of the new rules on lending. For example, mortgages made to borrowers whose debt levels exceed 43 percent can still be considered as qualified mortgages if the lender can sell the loans to Freddie Mac or Fannie Mae or get them guaranteed by the FHA. Community lenders who make 500 or fewer loans a year are also allowed to make mortgage loans to consumers with relatively higher debt levels.

Small and midsize lenders have been capturing a greater share of the market as large lending institutions have sort of stopped buying mortgages from brokers. The new rules, however, will affect their ability to dispense loans.

The demand for mortgage, too, has been falling probably because the interest rates are going upward. Some credit unions may also stop making loans in 2014. For a small lending institution the burden of complying with the rules simply isn't easy.

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Is the Construction Industry Gearing Towards a Recovery Phase?

The construction industry has been struggling with recession for a long time. However, now it looks like that the recovery phase is finally here. The Kitchen & Bath Industry Show and International Builders’ Show, which were recently held in Las Vegas, saw large crowds indicating that the age of recovery has eventually arrived. Various global and local factors contributed to the slowdown in the construction industry. The financial meltdown saw many people losing their jobs, lowering their disposable income. All these factors resulted in lower demand across the board and the construction industry was not immune to it either.

 

The industry is definitely showing the signs of recovery. While attending the International Builders’ Show, we decided to check out local communities in the town. We visited various neighborhoods – notably Harmony Homes’ family-oriented Silhouette community. The tour was very comprehensive as we got to witness the polar opposite ends of a spectrum. In January, the NAHB/Wells Fargo Housing Market Index was slashed from 56 to 46, losing 10 points. However, by the time of the trade show in Las Vegas, the sentiments were upbeat again.

 

The contrast between the ends of the spectrum was visible during the show. The higher end of the market held itself up well during 2013 and is continuing to do so. However, the lower end of the market is not so predictable. According to David Straub, Las Vegas division President of Toll Brothers, the company sold 39 properties in the range of mid $500s to mid $600s.

 

The construction industry is now poised for a bounce back, but the indicators are still not clear. We surmise that the industry needs to ask itself certain questions to see where it stands on the recovery curve. It is time for a little introspection on the following lines:

 

The industry needs to predict whether it will see the return of first-time buyers in the market. It also needs to see if the lower end of the market is going to hold itself up steady. The industry also needs to stimulate first-time buyers with more engaging opportunities to avoid high rents.

 

The industry also needs to pay attention to macroeconomic factors. The domestic economy seems to be picking up. However, it is yet to be seen whether there would be enough job creation to see a bounce in house ownership stats. This factor will help shape the future of the construction industry.

Another macro-economic factor to be considered is related to banking and mortgage regulations. These regulations will determine banks’ and mortgage lenders’ willingness to financially back the property purchase decisions.

 

Various states such as Colorado and California are looking to develop master planned communities. These plans will give a boost to the construction industry.

 

Construction industry also needs to scale up. In the past couple of years, the industry has sustained itself by writing down its assets and cost-cutting measures. However, this method is not sustainable. The construction industry needs to see that it will be able to thrive in coming years and retain is profitability. The industry also needs to become more efficient.

 

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Should Investors Obtain a Real Estate License?

Whether real estate investors should get a license or not is debatable. There are arguments both in favor of and against the idea. Many investors start without a license. Some of them obtain it after working in the industry for several years. For many people, the biggest motivation to get a license is that it gives them access to MLS. It also allows them to work more closely on short sales.

The risks are relatively lower when you remain an unlicensed agent. Once you obtain a license, you will be judged by a different standard and you need to follow certain norms. If you are an investor buying a property, you will perhaps just want to remain as an anonymous individual. The risk mainly arises when you find yourself involved in representing the seller(s) in a short sale, although you want to buy the listing. Since you have to follow some fiduciary responsibilities, it is imperative that you act in your best interests. The seller should do the same. This will make the deal less complicated.

Advertising

You will probably have to include your logos and disclosures in your emails. You will also need to follow legal guidelines set by the government. This might cause your mail to land in the trash. If the recipient thinks that you are just another realtor trying to promote their listings, your efforts fail to produce the desired results.

On the other hand, if you are an unlicensed person, you can employ simpler marketing strategies that tend to get better results. That said, there are still ways to advertise your service, even if you are a licensed buyer of properties. However, you will have to ensure that your message complies with the legal regulations.

Alternative solutions

A license will get you access to MLS. However, you don't necessarily have to obtain a license just to have access to MLS. If you are lucky enough, you can connect with a generous realtor who will provide you access to the service through their portal.

If you are trying to list homes, there are several brokerage firms that charge a low fee for adding your listing to the MLS. There are also agents who will readily represent your listing for a fee.

Having a license certainly helps your business and it will not be a hindrance on any of your deals; however, your license can be a burden when you prefer anonymity. On the plus side, if you really want, you can hire another real estate agent as your listing or buyers agent.

In order to figure out whether you need a license or not, you should have a thorough understanding of your business model.  You should decide whether the licensing and accreditation will do more harm than good. Once you get a good understanding of the structure of your business model, weighing your options becomes easier.

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Energy Efficiency Homeowners Care About

Going green has become increasingly popular. Tax credits have encouraged individuals and companies to use more energy efficient products and this has created a giant industry. Add new product innovations that are both energy efficient and cost effective and it is easy to understand the appeal.

Yet consumers are often still confused by industry terms and product effectiveness. What is certain is that, according to the AARP public policy institute, energy costs have increased by over 42% since 2002. As a result consumers are very concerned about their energy costs. Utility bills include electric, gas and water. These costs are often the highest expense for homeowners, after the mortgage payment.

Cost savings are a bigger concern to consumers than saving the planet. If they can make informed decisions that provide a benefit to both, then you have the homeowner’s attention. Consumer promotions like Energy Star ratings are in place to help buyers make financial decisions and home improvements that will lessen environmental impact and save consumers money. Utility companies have even joined the throngs and often offer services that assist customers in recognizing ways to reduce utility bills.

When it comes to home purchases and home sales, energy efficient homes are thought to bring higher prices than homes without energy efficient measures. Items that include energy efficient windows and doors, upgraded insulation and energy efficient appliances top the list of upgrades homeowners find value in.

Other energy efficient measures like solar panels and solar water heaters are associated with higher costs and slower return on investments.  As a result they are less popular upgrades for homeowners. Since they are less available to the average owner, consumers do not have a good understanding about how they operate and how they will save the homeowner money. This impacts buyer interest and willingness to pay for these products.

When marketing a home, it’s important to recognize that consumers are very interested in saving money. While they like the feel good marketing that comes from going green, they are not willing to spend significantly more money in order to reduce the environmental impact. In the end green projects appear to be more about saving greenbacks than saving the environment.

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Buying Apartment Buildings: Look for Larger Units

Investing in a large apartment building is better than investing in smaller units for several reasons.

When you buy a building with a large number of units, you can expect the seller to have complete records. This makes the experience more professional and enjoyable. Also, when the size of the investment is large, you can expect the brokers to guide you through the whole process.

Buying a property can be a stressful experience especially because it involves a lot of steps that you may not be comfortable with. You have to complete several formalities and this wouldn’t be possible without expert advice.

Obvious cost benefits

When the building is large, the cost per unit is relatively low. For instance, the property management fees for larger buildings are relatively lower. Insurance costs may also be lower.

Less closing costs

When you buy a larger building, you pay less money in closing costs. Generally speaking, an appraisal may cost at least 2,500 dollars irrespective of the size of the building. In fact, you will be paying more or less the same amount for both small and large buildings.

The loan doc preparation costs may also be the same for both small and large buildings. The SEC attorney who prepares your legal documents may charge the same amount for preparing documents for units of different sizes. For a building that is worth $2M closing costs may be about 4.5 % of the value of the property. For a much smaller building, the closing costs can amount to 8.5% of sales value.

Better financing

Getting a larger loan is relatively easy. They also have lower interest rates. Better still, large loans almost never require personal guarantees probably because the down payment will be high in this case.

More profits

If you do bigger deals, you will make more profits. So, if you are a real estate investor and your goal is to do 100 units per year, doing one or two large deals is much better than doing ten small deals.

However, there are quite a few challenges that you have to overcome before you can do bigger deals.

The biggest obstacle is convincing yourself that you can do it. Bigger deals might involve more work. Sometimes finding a bigger deal itself can be difficult. But remember that one big deal is equal to several small deals. That means you will have to work many times harder to do several small deals.

You will probably also have to overcome some mental blocks. Many people are afraid of doing bigger deals despite knowing that it is more profitable.

Raising capital

Raising capital can be another problem. In order to undertake big deals, you need more money. You will probably have to borrow money. Actually, this is what discourages many investors from pursuing big deals. 

However, if you are confident and do a bit of search, raising money isn't all that difficult. Many private individuals are willing to offer hard money loans. You just need to find someone with a big enough pocket.

Investing in a bigger apartment building is definitely better than investing in a smaller building. Forget about those duplexes and penthouses. Instead, look for buildings with a large number of units. That is what smart investors do.

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The Basics of Green Building Contracts

Green building opportunities are engaging a lot of attention. This is a result of many factors, such as tax credits, greater regulatory assistance, and increased consumer awareness about environmental conservation. However, green building contracts aren’t as easy-to-understand as conventional building contracts.

What Makes Green Building Contracts Challenging?

For a long time, there was an absence of standard green-construction contracts. As a result, green-building contracts have often been vague, creating a lot of problems for contractors and other involved parties. Being relatively new and still coming to terms with different state-level and national regulations, maintaining uniformity in green-building contracts can be difficult. Recently, this issue has been addressed.

Green-building contracts addressing different types of green risks are now available. The construction industry is still familiarizing itself with this contractual format. Typically, green contracts try to address unique liabilities, responsibilities, and risks associated with green buildings.

We will talk about different aspects of comprehensive risk-management strategy in such contracts. Ideally, the contract should include anticipated/possible risks followed by different clauses and sub-clauses that clarify every aspect of the risks involved. According to the recently-introduced standards, a green-building, risk-management contract should address the following:

Designate responsibilities—establishing accountability is an essential component of building contracts as specific people/departments are designated different job responsibilities. The contract should clearly mention people or parties responsible for failure to achieve green certifications or tax credits. The contract must explain the extent of responsibilities (or risks) of the contractor. Standard and additional risks should be explained. The contract should mention parties responsible for collating and preparing documents for getting green ratings.

Clearly defining green terminology—this includes often-used terms like “green certification” and “sustainability”. These terms don’t have an established, universal definition. Therefore, the contract should define these terms, making them clear for all the concerned parties.

Disclaimer—usually, contractors like to include a disclaimer. This provides more assurance to all the concerned parties. Here, the contractor provides a guarantee for achieving the desired outcomes. The desired outcome can be a green-building certification or the intended energy-efficiency figures. Failure to achieve these outcomes can lead to substantial damages. The disclaimer should state whether the consequential damages will be waived or executed and under what circumstances.

Terms related to project delivery—the contractor should present clear estimates or defined dates by which the green building project will be completed. In the conventional building documentation, contractors often warrant their workmanship. Green contracts are slightly more challenging. Here, contractors can be held responsible for designing flaws that can ruin green-performance ratings.

Liabilities—the contract should clearly address liability in case of a green technology or product failure. The green building niche often uses experimental materials. The success rate of such entities is often not known. Green building systems might even require the collaboration of conventional and new building techniques. The contract should address these challenging issues and assign liability across all the involved parties.

Payment Provisions—the contract should include payment provisions to avoid delays or confusion over payments. Sometimes, the payment schedule is tied to completion of different stages of construction/building. For instance, some contractors might be ready to accept payments when the green certification is received. However, some contractors might not feel comfortable with this clause. It is better to have clear terms about advances, making partial payments, releasing retainage, and final payments.

It has been observed that green building projects that use visual construction often perform better. Key elements of green building modeling are weaved together and then compared with expected outcomes. This makes it easier to gauge the most probable conflicts and create possible resolutions.

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Why Custom Builders Need to Think Beyond their Business Cards

As far as marketing is concerned, word of mouth is extremely important. But if you are a custom builder, you don't really have to wait for your old clients to pass your visiting card to their friends or colleagues. Custom builders don't have model projects to show. They don't have an in-house marketing team either. As a result, most of them rely on their reputation. As for marketing, their business card is their only tool. However, a smart custom builder can use several other promotion techniques as well.

So, instead of waiting for the clients to come to you, you should reach out to them. Try to engage with your community. Understand what people want and try to offer solutions. Try to position yourself as a resource for designers and architects. They are the people who bring business to you.

Create goodwill

You should share your knowledge with people who will benefit from it. You don't necessarily have to promote yourself. Instead, grab every opportunity to share your expertise. Let people know that you are an expert and they will readily seek your service.

Conduct workshops

You should also conduct free workshops for the general public. Such events can be used to discuss topics such as building a green home or undertaking a remodel. The key is discussing a topic that might spark an interest. This requires an understanding of your audience.

Don't expect an immediate return on your investment, but over the time, these people will come back to you and give you business.

Your website

Your website is one of the most potent weapons in your arsenal. You can use your website to differentiate you from other builders. Add useful articles and how-to guides. The goal is to build a relationship with potential clients. Once you build trust, they will readily leave their contact information. Write about how you can solve their problem.

When you promote your business online, you should be willing to provide high quality photos of your products. Good photos of your past projects or computerized images can bring your project to life. 3D images allow you to create multiple angles of the property even before it is fully built.

High quality images will appeal to a buyer's imagination. The home may take one-and-a half years to build and until it is complete, the buyer has no idea how it will look. Using computer aided graphics you can show the buyer what the finished product will look like.

Offer tours

Another technique that many custom builders employ is that they let their prospects tour the project during the construction and just before the client moves in. This gives potential clients an opportunity to assess the quality of the work before hiring the builder. During these tours you can also point out how your projects differ from others.

Remember that when the work is complete, a green home doesn't look any different from other homes. So if you incorporate green features, you should encourage prospects to tour the property during the construction stage itself. This will allow you to point out the structural and functional differences that will make your home healthier and more energy-efficient.

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