Why You Need Construction Insurance
Here’s a risky way to save money building a modular home. Select a modular dealer and contractors who are not properly insured.
Imagine that a neighbor’s child is seriously hurt when he falls into your cellar hole before your modules are set on the foundation. Imagine that one of the trucks delivering your modules strikes your neighbor’s car causing serious damage. What if the crane company drops one of your modules rendering it unusable? What if a member of the set crew is seriously injured or killed when he falls from your roof? Or what if the plumber fails to securely connect a pipe, which causes severe water damage before the leak is discovered?
Accidents and mistakes can happen when building a home, regardless of the type of construction. Since the right insurance can mitigate the damages, you need to ensure you’re thoroughly covered.
Require Everyone to Obtain Construction Insurance
This is best done by requiring everyone involved in building your home to have insurance. (Here’s a previous blog that elaborates on the insurance you need.) Making this a requirement won’t prevent disagreements about who is responsible for coverage, but it will increase the likelihood that one or more of the insurers will take on this responsibility, which is a lot better than you being saddled with the liability.
Verify Construction Insurance Coverage
Making insurance a requirement, however, isn’t enough. You need to verify that each party has a current policy with sufficient coverage. To do this you need to insist on receiving a “certificate of insurance” directly from each party’s insurance agent. Getting a copy of the certificate directly from the insurance agent will protect you against being duped by a dealer or contractor whose policy has run out, since it is not difficult for someone to doctor a photocopy of an expired certificate. You might be surprised how often this happens, mostly because builder insurance is expensive. There will be no sympathy from the insurance company, however, if you file a claim against a policy that was not renewed. After receiving the certificates, you should ask your own agent to review the coverage. They should be able to determine if the coverage includes sufficient liability insurance and workers compensation insurance.
Secure Your Own Construction Insurance
Since you need to have coverage from everyone working directly on your project, you also need to follow the same procedure with any subcontractors you directly hire. In addition, you should obtain either a “builder’s risk” policy or its equivalent for yourself, since this will provide better coverage against theft and vandalism than an ordinary homeowner’s policy.
For more information about modular home construction insurance during its construction, see Selecting a Modular Home Dealer, Selecting a General Contractor, and Financing a Modular Home in my book The Modular Home.
Installing a Foundation for a Modular Raised Ranch
In my last post, I talked about the advantages of a modular raised ranch. Now I’d like to discuss what your general contractor (GC) needs to do to “button-up” one.
Let’s start with what your GC needs to do to create a “split” entry at the front door. Since this requires that he elevate the main floor above “grade” (ground level) at the front of the home, he will need to install a 4’ tall concrete foundation below grade and a 4’ tall wood framed “kneewall” on top of the concrete. This will make the total height of the foundation 8’ at the front door. When the set crew places the modules on top of the 8’ wall, the main floor will be 4’ above grade at the front door. This will leave the basement floor 4’ below grade and place the entry halfway or split between the main and basement floors.
The foundation walls for the other three sides of your home will also be 8’ tall from the basement floor to the bottom of the modules. Depending on the lay of the land, the top of the foundation for each of these walls may be set at grade, 4’ above grade, or elevated a full 8’ above grade. Any walls 8’ above grade can either be concrete or wood framed. Either way, they will sit atop a 4’ concrete “frost” wall that will be installed below grade, making these walls 12’ tall. Since the basement floor is at ground level for these 12’ tall walls, the GC can install full sized windows, which will brighten any rooms finished in the basement. The GC can also install an exit door, which is why these walls are known as “walkout” walls. If you build a drive-under garage in your basement, the foundation walls will also be 8’ above grade.
Completing the Split Entry of a Modular Raised Ranch
The completion of the split entry of a modular raised ranch requires a bit of work on-site by the GC. After cutting the temporary rim joist installed by the modular manufacturer to strengthen the home for delivery, the GC must build the entry landing, install the front door, and construct the stairs up to the first floor and down to the basement. The walls framed on each side of the stairs, combined with a door at the bottom, will close off the first floor and stairway from the basement. This step is required by the building code, unless you immediately finish the basement. You will have to instruct the GC whether you want him to finish the split stairwell with a railing or half wall. If you select a railing on the first floor overlooking the foyer and the manufacturer does not install it, the GC will have to do so.
The electrician must wire the foyer light so it can be turned on from the top of the stairs, the front door, and the bottom of the stairs. He should wire the front-door light to be turned on from the top of the stairs and the front door. The modular manufacturer should wire the home to facilitate the electrician’s work with both lights. The electrician should also add a receptacle at the landing, and the HVAC contractor will need to bring some heat to the foyer.
Completing the Exterior of a Modular Raised Ranch
On the exterior of the home, the GC will need to install the siding on the kneewalls and walkout walls. If you cantilever the top modules over the basement, the GC must insulate and cover the exposed area under the overhang. Non-perforated vinyl soffit can be used as the cover.
For more information about building a modular raised ranch, see Designing a Modular Home, Modular Home Specifications and Features, and The General Contractor’s Responsibilities for Building a Modular Home in my book The Modular Home.
My First Home – A Raised Ranch
My wife and I bought our first home a year before I learned about modular homes and became a builder. It was a raised ranch built in the 1960’s. It had everything we needed: three bedrooms and two bathrooms on the main floor and a drive-under garage, family room, and third bathroom in the basement. It also had a lovely yard framed by an attractive stone retaining wall.
What is a Raised Ranch Home?
A raised ranch is a one-story home built with a split-level entry on top of a raised foundation. It consists of two levels separated by stairs. The upper level contains the bedrooms, kitchen, living, and dining rooms. The lower level is a finished basement.
In our home, the entry was “split” in that it was built halfway between the first floor and the basement. A platform at the front door connected two sets of stairs, one going up to the first floor and one going down to the basement.
To make the bi-level design work, the foundation was elevated 5’ above the finished grade at the front of the home. The back of our raised ranch had a wood framed walkout with a slider and some full sized windows.
Why You Might Want a Modular Raised Ranch
There are several reasons why you might want to build a modular raised ranch. Elevating the foundation out of the ground can solve problems caused by a high water table. It is often easier to minimize excavation costs on a sloped property by building a raised ranch. Also, if the property has sufficient slope, the low side of the basement can be used for a drive-under garage, which is considerably less expensive to build than an attached or detached garage.
In addition, a raised ranch with a Cape Cod design that has an unfinished second story, offers you a chance to affordably expand your living space. The raised foundation allows you to finish the basement with larger windows. In addition to providing good natural light, the larger windows allow you to build bedrooms in the basement while meeting the building code requirement for egress.
In designing modular raised ranch floor plans, you will need to decide whether you want the front of the house flush with the front of the foundation or cantilevered over the top of the foundation. A cantilevered home, which is often preferred for its look, will have a foundation that is a foot or two narrower than the main floor, which means it provides less usable space in the basement. You will also have to decide if you want the front entry to be flush with the front of the house or recessed. An advantage to a recessed entry, in addition to its appearance, is that it provides some overhead protection from the weather for anyone entering the front door.
When thinking about the basement floor plan of your raised ranch, pay attention to where the split-level stairs are located. This is particularly important if you are building a drive-under garage, since the stairs should not intrude into the garage.
Modular Split Level Homes
“Split-Levels” are usually T-shaped ranches that are composed of a ranch on one leg of the T and a raised ranch on the other leg to create a tri-level design. They offer some of the advantages of a raised ranch, although they do not work well on a flat lot with a high water table unless the ranch wing of the house is built on a crawl space. As with a raised ranch, split levels can also be built with either a flush or a cantilevered front and a flush or a recessed entry. And they can often accommodate a drive-under garage.
For more information about building a modular raised ranch, see Designing a Modular Home, Modular Home Specifications and Features, and The General Contractor’s Responsibilities for Building a Modular Home in my book The Modular Home.
Oral Representations Often Lead to Disagreements
Now that Daylight Saving Time has arrived and spring is two weeks away, many customers are ready to start building their home. Other customers are getting ready to select their modular builder. With interest rates predicted to rise by June and housing starts to increase to their highest level in several years, getting started soon is a wise move. Here is some advice about ensuring that your modular home contract includes what you expect.
Experienced modular builders have lots of stories to tell about the types of problems that cause disagreements with their homebuyers. One type of problem involves misunderstandings about items that were never discussed or documented because one party just assumed what the other party intended. Another type of problem involves misunderstandings about things that were discussed but not included in the builder’s contract. It might surprise you that more frustration, anger, and stress are generated by issues that were actually discussed – but not documented in writing – than by those that were not discussed.
These situations typically involve complaints by the homebuyers such as, “I told you I wanted raised panel maple kitchen cabinets and not picture frame maple cabinets.” The builder might come back with, “Don’t you remember, we did talk about your preference for raised panel maple cabinets, but the additional cost put you over your budget.” The problem is that the modular builder and homebuyers had talked about this on two occasions, going back and forth about which would be included, but the final contract just said “maple kitchen cabinets” and now both parties remember the discussion differently.
The Cost of Relying on Oral Representations
The cost difference between the picture frame and raised panel maple cabinets would be substantial enough on its own. But usually this misunderstanding doesn’t get discovered until the cabinets are already purchased and at least partially installed. It will cost either the homebuyer or builder (or both) a bit of money to make the change. The alternative is no better. If the homebuyers accept the picture frame cabinets, they will likely be unhappy with their modular builder and forever disappointed in their kitchen. The relationship between the two parties will now be fractured by distrust, which will make it more likely that small disagreements will become antagonistic.
Agree to Make Oral Representations Null and Void
The last thing you want to do is to rely on your modular builder’s or your own memory of what you’re getting. That’s why it is better for modular builders to include a clause in their contract that states that “It is mutually agreed that any oral representation made by either party prior to the signing of this agreement is null and void.” This clause serves to limit and place boundaries around the scope of either party’s representations and warranties. Even if an item is discussed and agreed to verbally, it has no legal validity unless it’s documented in the contract.
Replace Oral Representations with Detailed Written Representations
My suggestion is that you share responsibility with your modular builder for documenting all the details by taking notes during your meetings. You should be concerned if your builder is not also taking notes. If you then compare your notes with the builder’s contract, you are more likely to avoid contentious and costly disagreements.
For more information about oral representations in your contract with your modular home builder, see Selecting a Modular Home Dealer and Selecting a General Contractor in in my book The Modular Home.
Six Clauses in Your Modular Home Contract
Three years ago I outlined what should be included in your Modular Home Contract. I recommend that you take a look at that post before you read today’s entry.
Here are six clauses you may see in your modular home contract. Their purpose is to document standard construction industry practices that you, as the Homeowner, might not know. When put in writing, they help eliminate potential areas of disagreement between you and your modular builder.
Modular Home Contract: Changes, Deviations, or Omissions
This clause states that you agree to accept the minor deviations that sometimes incur in construction as long as the work is substantially the same as described in the contract and within accepted industry tolerance. Many builders don’t include this clause because the types of changes covered are usually so minor that you are unlikely to notice them. The reason this clause is sometimes included is that a few homebuyers have been known to get very upset when there is a change of ¼” in the size of a bedroom.
The builder may also include a similar clause that refers specifically to materials and products. Building code requirements, product availability, and design improvements may compel the builder to substitute material similar in pattern, design and quality to that listed in the plans and specifications. When possible, the builder should consult the customer when this occurs.
Modular Home Contract: Access to Your Property
As the Homeowner, you will at all times have access to your property and the right to inspect the work. However, if you enter the property or invite others to enter the property during the course of construction, you all do so at your own risk.
Although your access to the property is ensured, this clause points out that you cannot interfere with the work or the modular builder, his employees, or trade contractors. In addition, you will need to communicate directly with the supervisor assigned to your project rather than other employees or contractors on the site.
Modular Home Contract: Work Performed by the Homeowners and Their Trade Contractors
This clause speaks to your responsibilities when you perform some of the work or directly hire contractors other than your builder to complete some of the work. In that case, you are responsible for ensuring that you and your contractors have liability and workers compensation insurance. You will also be responsible for coordinating this work to avoid disrupting or interfering with the work being done by the builder’s team. Needless to say, you are responsible for the quality of this work as well as whether it complies with the building code. In addition, you will need to take care of any warranty work.
Modular Home Contract: Unused Materials
Builders often have unused materials after they complete their work. Sometimes this is intended, since it’s easier to return the excess than to leave the job in the middle of the work to fetch what’s missing. Keep in mind that you have only paid for the materials your builder has used. This clause states that the builder owns these unused materials. However, most builders will leave you some extra siding, shingles, paint, as well as some other materials, if they have them.
Modular Home Contract: Signage and Marketing
Most modular builders will want permission to display a sign on your site until their work is completed. They will also want permission to invite their prospective customers to walk through your home while it is under construction. This clause will allow the builder to do these things, but it should also state that prospective customers visit at their own risk.
Modular Home Contract: Building Code Compliance
Your modular dealer is responsible for ordering the home so that it complies with the state building code current at the time your agreement is written. Modular manufacturers are required to build their homes in compliance with the code in effect at the time they build your home. This clause states that when changes happen to the state code, you are responsible for the additional material, labor, services, and other expenses required to comply with the changes. It also states that you are responsible for the costs associated with complying with local building codes when these codes exceed the state code.
For more information about modular home contracts, see Selecting a Modular Home Dealer and Selecting a General Contractor in my book The Modular Home.
