Save Money on Lumber When Building Your Own Home
0 Comments | Posted by armchairbuilder in Build Your Own Home, Save Money
You’ve decided to build your own home or new addition so you are looking for additional ways to save money on the project. A typical 2400 square foot two story home has approximately $15,000 worth of lumber in it. With numbers like these, you need to make sure you’re getting the absolute best price or risk having the most expensive home on the block. Over the years, I have developed some simple techniques that will allow you to purchase the lumber to build your own home at the best possible price.
Why should I worry about lumber prices? Lumber prices are constantly changing due to the old supply and demand equation. As demand increases during heavy building periods, the price will go up given the same amount of supply. Supply can change as lumber mills are opened and closed.
Lock Price: Because lumber is typically the biggest project material cost on a new home, you will want to lock in a price for your project with your supplier. Most suppliers will lock in price for a single project for 30 to 90 days. If they will let you lock for a longer period without affecting the price…do it. This will help insure you meet the budget you create at the beginning of your project. If you don’t get a price lock and prices go up a mere 5% (not uncommon for lumber over a short period of time), you will end up short $750 on your budget (based on $15k lumber budget). In late 2009 and into early 2010, lumber prices spiked 80% due to a lack of supply to meet a temporary increase in demand. This type of increase can be devastating to your budget and bank loan.
Lumber is a commodity, so why aren’t prices the same? Because we buy lumber from a supplier or store, we pay a markup for their services. Each store sets pricing differently based on when the inventory was purchased and/or how much it costs to replace. Lumber suppliers that are part of a larger buying group can get significant discounts based on large quantity purchases. They can also get better pricing if they understand the commodities market and buy at the right times. Some supply yards have fixed price contracts that require them to buy a certain quantity of material over a given period and the price is locked in. This can be good and bad, depending on the price they locked into. Also keep in mind, you may be able to get better pricing from a supplier that has excess inventory to unload. The important thing to remember here is prices can vary widely for identical products. So, make sure you bid your project out to a minimum of three suppliers.
How do I properly bid my project out? First, create your best estimate of quantities (a.k.a. takeoff). Be sure to include all items that you want your bidder to supply. You don’t want to award the contract and then find out the housewrap you forgot on the takeoff costs three times what it should be. Also, make sure you include very detailed descriptions of the items you want provided. This would include the grade of lumber as well as the type. For example, I use #2 grade and better hem fir 2×10’s for header material (if this info is foreign to you…check out this lumber buying guide). You want to be specific in the details of each product so you know you are comparing “apples to apples”. If you want a specific manufacturer or product, make sure you list that product. You may want to put a note on the bid that says you accept equivalent substitutes because the particular supplier may not stock a given manufacturer. Just make a note that you must approve the change prior to shipment.
In your request for bid, be sure to include the time frame for price lock and include a deadline for the return of the bid. Be sure to always ask for a delivered price including tax. You don’t want to get your invoice and see an additional $500 delivery charge and a $1200 sales tax.
How can I save money on lumber? Have each supplier bid your entire lumber needs. If they can provide it, have them bid it. You will get a volume discount if you give more business to a given supplier. Insist that each bidder break down the bid into components. I use a bid sheet to accomplish this. Meaning, you want them to break out studs, floor sheathing, floor joists, wall sheathing, roof trusses…etc. It does you no good to have a bid that includes everything as a lump sum. Lumping all the prices into one makes comparison of suppliers difficult. Some companies buy studs cheaper than floor joists. In the end, you may decide to buy some of your material from supplier A and some from supplier B in order to get the best pricing.
Another way to save on lumber would be to ask the supplier for less expensive alternatives for products and materials. They may have a good relationship with a given manufacturer and be able to get better pricing for a similar product. I once saved $2000 on a project because I switched from regular 2×10 floor joists to a manufactured product. Check out this video on subcontracting to see some professional builder negotiating techniques for saving money on your new project.
How do I compare bids? Price is a big part of your consideration, but there are other important items to consider. Ask the supplier about delivery capability. Do they have a forklift to put the lumber exactly where you want it? Will they wrap the lumber to keep it dry from the elements? What is the lead time required for delivery? Next, ask them about the quality of material they provide. What is the moisture content of the material? Do they check this at time of delivery? What if you open up a pack of studs and find half are bowed? Do they set the material up off the ground so it doesn’t get wet? One last important detail to discuss…what are the payment terms? If your project is bank funded, you probably want a minimum of 30 days to pay from receipt of invoice. For more information on comparing bids, check out this video called Subcontracting: The Subcontract.
Lumber makes up the largest material cost component when building your own home. So, be sure to spend plenty of time bidding and negotiating your pricing and terms so you maximize your savings as an owner-builder.
