One of the greatest challenges for property developers is finding the right construction company. You’ll need to find a construction company that will superintend and manage every phase of the building project, including the employment and supervision of subcontractors, building permit procurement, working with architects and designers, and scheduling of examinations and inspections. The construction company you choose should be well versed in the following aspects of development:

  • Understand design technology and work well in conjunction with your architect
  • Know how to process, operate, and implement the design
  • Understands the building project scope, your requirements and all design specifications
  • Research what types of projects they’ve done before. Find testimonials from previous clients, subcontractors, architects and developers
  • Find out how the company handles projects similar to yours, what types of materials and resources they use, and what manner of communication they’ll use to keep you up to date
  • Investigate their previous track record. Are their estimates on costs fairly accurate? Do they have a record of altering or exceeding their price estimates?
  • Definitely, check out their references. You’ll need to talk to at least 3 or 4 of their previous clients, and even question the local legislature
  • Pay attention to rumors about the company. Did they complete earlier projects on time? Were there lawsuits or litigation pertaining to their previous jobs? Was the material used of high quality, or was it substandard or shoddy? How did previous collaborators like working with them?
  • Check their licenses and make sure they are licensed to build in your area
  • Examine the company’s safety procedures
  • Can your company bond a project? This will be crucial if something drastic occurs with your funding
  • Don’t hire a construction company that is known to consistently underbid on a project. Your expectations probably won’t be met, and there’s a greater chance that the project will fail
  • You’ll need a definite understanding of every single item that is included in the bid
  • Search for a construction company that has a long history, and has a reputation for fairness and honesty in all of their dealings and pricing
  • A good contractor’s business dealings stay transparent

After you’ve addressed all these issues, how do you negotiate a deal with the chosen construction company?

  • Negotiate passionately. Tell the contractors that you’re far from desperate to get this project completed, and are seeking the highest quality performance at the best price
  • Stop negotiating immediately if their bid comes in either too low or too high. Only realistic bids should be considered
  • Negotiate in person. Your project is too important to handle over the phone. Tell the contractor that you would really like to proceed with your project, but that the quote given to you is more than you expected or can afford. The contractor will usually reduce his original estimate by 10%. Next, tell him that you’ve received bids from 3 or 4 other contractors, and most times the price will be lowered again. Finally, tell the contractor that if the price is right, you will pay in cash, besides doing any necessary prep work. In many cases, your final estimate will come in 15 – 30% less than the original estimate
  • A retention clause is always advised. This is to cover the possibility that the contractor might lose focus nearing the end of the project, and permits the owner to withhold a percentage (usually 10%) of the overall job cost until the project is completed
  • Also included in the negotiation should be a provision for breach of contract. For very large projects, it is recommended that a business lawyer be hired to help to draft a contract that will be explicit about the client’s desires

There are other considerations when choosing the right construction contractor for property development, but the items mentioned above will give you a good idea of how to find the right construction company for property development, and how to negotiate a contract that is favorable to the client and not the contracting company.

finding-construction-company-for-property-developers
Negotiate in person. Your project is too important to handle over the phone. Tell the contractor that you would really like to proceed with your project, but that the quote that was given to you is more than you expected or can afford. At this stage of the game, the contractor will usually reduce his original estimate by 10%. Next, tell him that you’ve received bids from 3 or 4 other contractors, and most times the price will be lowered again. Finally, tell the contractor that if the price is right that you will pay in cash, besides doing any necessary prep work. In many cases, your final estimate will come in 15 – 30% less than the original estimate.

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