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Rodrigo

IT HAPPENED AGAIN: DISINFORMATION ABOUT BUILDING COSTS AND LETDOWN

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Hello everybody.

 

I would like to share a kind of testimony about a situation is becomming unfortunately more and more usual nowadays.

 

The topic is about building costs and the expectations that an owner of a property in Costa Rica has about his/her project.

 

I will talk about about a real case. I won´t share the name of the customer, in order to respect her privacy.

 

This lady, from North America, contacted me in order to give her a quotation about my professional fee for inspecting and maybe building her new house in the south of Costa Rica. The design and blueprints were done by another professional. Indeed, it is an architectural company.

 

When I gave her my first quotation, she thought it was not adequate according to her expectations, because she understood the price should be lower. After explaining her the reasons, because of the size of the house, its costs, the time for getting the house done, and the time for inspecting it, she realized we were talking about different budgets for the project.

 

She asked other builders to know about optional quotations and found out that two of them were offering a price three times the estimation given by her architect. The price I calculated was two and a half her first budget.

 

In conclusion, she realized her architect gave her a very very low estimation. Indeed, at the beggining, she asked to her architect for a 200 M2 (around 2153 sf) area house, but after discussing the project, the design was for a 340 M2 (3660 sf). She was, in her own words, inconsolable. The architect told her that kind of project would need an investment of 100 thousand USD. I commented it would be necessary from 230 to 250 thousand USD to get it done. So, her architect´s first price was not realistic.

 

In the case I am commenting, she understood that if she and her husband try to go ahead with this project the size it was designed, they would be at the 50% of the house building process and then they would have a huge problem, because they wouldn´t be able to finish the house and the only solution would be getting a loan they wouldn´t afford. Doing it at a retiring age, 60, would obligue them to work to the age of 80.

 

I understand, even she is upset and disappointed, she is reconsidering to do her project in a different way in a close future.

 

I think she was lucky to find out how problematic the situation would have been and she stopped the process in an appropriate time. But this is not the situation about other people.

 

I would like to know how a similar experience has been for other investors.

 

I think that certain builders, even some professionals like architects and engineers, are using a not ethical method to close a deal. These kinds of people are creating false expectations in the investors just for getting the job, without consideration to the problems their customers could face.

 

It is different when a professional gives numbers for real. Even it is discouraging sometimes, it is much better to have the feet on ground in order to go after a realistic project. Then, if the client decides to increase the size of his/her house, or if he/she asks for more expensive materials and finishes, or if the materials prices rise, it is reasonable to adjust the budget according to these factors, and the situation would be under control if the customer knows it just on time to make appropriate decisions.

 

One of the problems here is that, naturally, people is trusting in other people. It is good, but some irresponsible people are taking advantage of the well will of the investors.

 

What to do about this situation ?

 

In my opinion, first of all, ask for many different opinions about your project, about the size, prices, even you can ask for pre-quotations, in order to understand which costs are for real. Then, you can check it with a professional, discussing all the terms and factors involved, before makig a deal about a design. Once you have the design, ask again for quotations. Be careful about cheap quotations; usually, if you accept those kinds of offers, you should be prepare to invest the money to meet the average quotation. This piece of advice applies for buying properties, too.

 

In other words, be careful. Keep your dreams alive, but don´t take the apparently easy way without asking yourself how reliable that solution could be.

 

Good luck about this topic.

Edited by Rodrigo

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Unfortunately Rodrigo it is currently not much different even here in the US right now due the sagging economy! I am in the design and construction industry and what I see everyday are reputable companies being severely undercut by bad and downright dishonest companies both in consultant design fees and in contractor bids for construction projects in addition to the problems you have brought up.

 

Quality standup companies that tell you up front what all the costs will be are going out of business because they cannot compete with these people. What’s worse is who gets hurt in the end are the clients who end up getting an inferior product in an extended timeline and in many cases end up spending more with fees, change orders and other charges that were all included in the quality bids they rejected.

 

All I can say is there are people willing to do things the right way and pay for it and if you don’t compromise your integrity they will gravitate towards you. Keep on the right path and educate the clients as you go!

 

(Note - I’ll be the first to admit that the people always searching for the cheapest option are not always the people you want to work for anyway. But right now, with the current climate the way it is I’m taking all jobs I can get…)

 

Tim

 

p.s. - Not all architects are bad! ;)

Edited by timothy

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Unfortunately Rodrigo it is currently not much different even here in the US right now due the sagging economy! I am in the design and construction industry and what I see everyday are reputable companies being severely undercut by bad and downright dishonest companies both in consultant design fees and in contractor bids for construction projects in addition to the problems you have brought up.

 

Quality standup companies that tell you up front what all the costs will be are going out of business because they cannot compete with these people. What’s worse is who gets hurt in the end are the clients who end up getting an inferior product in an extended timeline and in many cases end up spending more with fees, change orders and other charges that were all included in the quality bids they rejected.

 

All I can say is there are people willing to do things the right way and pay for it and if you don’t compromise your integrity they will gravitate towards you. Keep on the right path and educate the clients as you go!

 

(Note - I’ll be the first to admit that the people always searching for the cheapest option are not always the people you want to work for anyway. But right now, with the current climate the way it is I’m taking all jobs I can get…)

 

Tim

 

p.s. - Not all architects are bad! ;)

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Hi, Rodrigo, Tim others

When we were negotiating the cost of "Under The Key house", we checked with a few companies and

knew that "American style house" will cost us ( to build on our lot) betweem $650-$900/m2

depends on how many up-grades you want to have. We negotiated a fair price for complete progect,

so we don't have any "extras" expences during the construction. Also we had architectural design done by the architect who works for this constraction company, so it was less expensive then do it separately.

Also, we adjusted our architectural design to our budget( downsized 1 extra bedroom).

Initial floor plan was finalised in 2 month, final project( planos) was done about month later.

We checked the architect, engineer licences, saw 3 houses they have built recently...we did our homework.

Now we are building with them, getting reports/photos every week, our lowyer also checks each phase...

We been in Cr many times before we decided were to live, what to build, have read many books,info from forums.

So far, we are confident that we found right company to deal with. They are local people, have great reputaion,

easy to comunicate( speak English), we maintain very open communication by e-mail, phone, we go to Cr every 2-3 month to check on a prgress. So far we have no problems with people we choosen to work with.

Lavender

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Lavender,

 

It looks like you have done your due diligence and have found someone you are happy with. Good luck and please update this thread as to how your home turns out. I'd personally like to keep track of good companies down in CR so if you wouldn't mind throwing me some contact names via message I'd really appreciate it. Thanks!

 

Tim

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Hi, Rodrigo, Tim others

When we were negotiating the cost of "Under The Key house", we checked with a few companies and

knew that "American style house" will cost us ( to build on our lot) betweem $650-$900/m2

depends on how many up-grades you want to have. We negotiated a fair price for complete progect,

so we don't have any "extras" expences during the construction. Also we had architectural design done by the architect who works for this constraction company, so it was less expensive then do it separately.

Also, we adjusted our architectural design to our budget( downsized 1 extra bedroom).

Initial floor plan was finalised in 2 month, final project( planos) was done about month later.

We checked the architect, engineer licences, saw 3 houses they have built recently...we did our homework.

Now we are building with them, getting reports/photos every week, our lowyer also checks each phase...

We been in Cr many times before we decided were to live, what to build, have read many books,info from forums.

So far, we are confident that we found right company to deal with. They are local people, have great reputaion,

easy to comunicate( speak English), we maintain very open communication by e-mail, phone, we go to Cr every 2-3 month to check on a prgress. So far we have no problems with people we choosen to work with.

Lavender

 

Hi Timmothy and Lavender.

 

It is glad to know some people are doing the correct thing. I wish you the best, Lavender.

 

I agree with you Timmothy, not all people, or professionals, are bad, but being careful, doing the homework about the company you would hire and what you want to build and its costs, this would help to avoid ugly experiences.

 

Thank you for your contributions to this topic.

 

Keep in touch.

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Hi, Rodrigo, Tim others

When we were negotiating the cost of "Under The Key house", we checked with a few companies and

knew that "American style house" will cost us ( to build on our lot) betweem $650-$900/m2

depends on how many up-grades you want to have. We negotiated a fair price for complete progect,

so we don't have any "extras" expences during the construction. Also we had architectural design done by the architect who works for this constraction company, so it was less expensive then do it separately.

Also, we adjusted our architectural design to our budget( downsized 1 extra bedroom).

Initial floor plan was finalised in 2 month, final project( planos) was done about month later.

We checked the architect, engineer licences, saw 3 houses they have built recently...we did our homework.

Now we are building with them, getting reports/photos every week, our lowyer also checks each phase...

We been in Cr many times before we decided were to live, what to build, have read many books,info from forums.

So far, we are confident that we found right company to deal with. They are local people, have great reputaion,

easy to comunicate( speak English), we maintain very open communication by e-mail, phone, we go to Cr every 2-3 month to check on a prgress. So far we have no problems with people we choosen to work with.

Lavender

Lana (if I am not mistaken),

How do you pay the workers, equally every week, or after certain approved stages?

We are considering to buy a land in the mountains. So far I have heard that construction workers are to be paid every second Friday, not really dependent on keeping up scheduled time line.

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Igor, you must/should make a contract, written up by a lawyer and one you can read, with your construction 'boss' first, determining who will actually pay the crew. It should also contain, what you expect them to do, and an approximate time frame.

You are now responsible for paying CAJA + INS for everyone on your project and must fill out forms every month with workers names and cedulas...because both CAJA and INS will come to check. This will be about $2,000 per month, depending on how many workers.

The money is normally/sometimes/usually paid out in 'quarters' as the agreed upon 'approved stages' are completed, else you could be paying by the week, for months on end....

While I understand that you may feel 'safer' in the mountains away from 'potential crime' you must first check if water is available, else you will not get a permit. Then also look for power and phone access. Just because an agent tells you they are available, you should check further.

We are in the midst of a construction project, and are 're-writing' the next contract.

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Igor, you must/should make a contract, written up by a lawyer and one you can read, with your construction 'boss' first, determining who will actually pay the crew. It should also contain, what you expect them to do, and an approximate time frame.

You are now responsible for paying CAJA + INS for everyone on your project and must fill out forms every month with workers names and cedulas...because both CAJA and INS will come to check. This will be about $2,000 per month, depending on how many workers.

The money is normally/sometimes/usually paid out in 'quarters' as the agreed upon 'approved stages' are completed, else you could be paying by the week, for months on end....

While I understand that you may feel 'safer' in the mountains away from 'potential crime' you must first check if water is available, else you will not get a permit. Then also look for power and phone access. Just because an agent tells you they are available, you should check further.

We are in the midst of a construction project, and are 're-writing' the next contract.

Thanks, Patricia

I have spoken to my prospective neighbour and he didn't mind to branch municipal water and power supplies to my prospective lot. Should I get this in writing somehow?

Does your contract mention possibility of initial budget surpass or delayed stages?

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You must get permission from ICE and your water provider plus your neighbor if the lines are crossing his property, but you cannot just 'hook up to his his'! In writing. Don't sign anything, until this is done. If this is in a subdivision, ask the developer to do this, prior to a purchase and make sure it is in writing before you commit to anything.

With the costs increasing all the time, you can't speculate on the cost of materials and this isn't the concern of your builder, as this is your responsibility. It is different of course, if the builder says the he will build the house for, say, $100,000 inclusive of materials and labor.

Some builders will ask for additional funds for the rental of cement mixer, scaffolding etc., so make sure that this has been discussed and entered into your contract. As should it say specifically who is responsible for the installation of the doors, windows, flooring, plumbing, electrical work as this may not be included in the basic cost.

For delay, especially weather, which is often a problem, you just withhold the a final payment until it is 100% complete if this is written in your contract and specify that you expect a guarantee that he will return to fix any problems resulting from inferior workmanship within a specified time at no additional cost to you.

All in all, you can expect your material cost to be at least 30% more than expected....

Personally, I would recommend, as I have before, unless there is no budget, is that they purchase a completed project including land. The whole building process is very stressful.

And you should be there during construction.

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Hi, everybody

We successfully complited our casa, 4 days before the date specified in a contract.

We are very greatfull to all team: architect, enguneer, crew, kitchen desiner, loyer..

for a great job they all have done for us. We can't wait to retire and move in...

One advice: You have to have detailed contract with all cost included "under the key".

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You must get permission from ICE and your water provider plus your neighbor if the lines are crossing his property, but you cannot just 'hook up to his his'! In writing. Don't sign anything, until this is done. If this is in a subdivision, ask the developer to do this, prior to a purchase and make sure it is in writing before you commit to anything.

With the costs increasing all the time, you can't speculate on the cost of materials and this isn't the concern of your builder, as this is your responsibility. It is different of course, if the builder says the he will build the house for, say, $100,000 inclusive of materials and labor.

Some builders will ask for additional funds for the rental of cement mixer, scaffolding etc., so make sure that this has been discussed and entered into your contract. As should it say specifically who is responsible for the installation of the doors, windows, flooring, plumbing, electrical work as this may not be included in the basic cost.

For delay, especially weather, which is often a problem, you just withhold the a final payment until it is 100% complete if this is written in your contract and specify that you expect a guarantee that he will return to fix any problems resulting from inferior workmanship within a specified time at no additional cost to you.

All in all, you can expect your material cost to be at least 30% more than expected....

Personally, I would recommend, as I have before, unless there is no budget, is that they purchase a completed project including land. The whole building process is very stressful.

And you should be there during construction.

Thanks Pat,

How would you estimate the difference between m2 in construction vs m2 ready on the market, Central Valley mountains?

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I can't say, since I don't live around that area. I would suggest looking at as many real estate websites and FSBO sites, as you can, and see what the prices are, in general. Remember too, that the listed price, is a 'hoped for' and we know not to offer that, don't we... :rolleyes:

 

Just an added thought: At least when purchasing an existing home, you can determine the cost, per m2, immediately, and not have to wait until your construction project is completed, perhaps 6 months later.

Edited by costaricafinca

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I can't say, since I don't live around that area. I would suggest looking at as many real estate websites and FSBO sites, as you can, and see what the prices are, in general. Remember too, that the listed price, is a 'hoped for' and we know not to offer that, don't we... :rolleyes:

 

Just an added thought: At least when purchasing an existing home, you can determine the cost, per m2, immediately, and not have to wait until your construction project is completed, perhaps 6 months later.

Pat,

What m2 cost have you inscribed in your construction contract?

And from your communication with others what was the average m2 cost, budget excess and time delay in their constructions?

Or it's like asking about average temperature in a hospital?

Thanks

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According to all the sound advice on this forum, I have done everything wrong. I came to the area where I now live on my third trip to Costa Rica and simply fell in love with it. Isn't it funny how emotions play such a big role in things like where to live and buying a house? "This house has a good feel to it..." "I just love this place..."

 

While I was visiting the area, I was shown a piece of property and ---- fell in love with it. OK, just to be cool, I waited a few months and then came back. Looked around the town, talked to people, visited the property. And then, I bought it. I moved to Costa Rica four months later, I was alone and 61 years old.

 

I stayed in a local small lodge within walking distance of my property and made a plan of the house I wanted on one piece of paper. The builders were the uncle and his partner of a Costa Rican friend that was, by now, like another son to me. They came to work with their tools in a backpack. There was no electricity. It was the rainy season so it took them longer than expected - two months - but one day, I paid them the remainder of what I owed them - we had a verbal agreement on the price and I paid them as it went along. I moved in. It was not finished. I had not gotten an engineer or architect or building permit. It cost about $6,000. It's 45 square meters, not including the two roofed porches front and back. I already had water and two weeks later, I had electricity. I finished wiring the house, installed the shower, put ceramic tile on the counter top in the kitchen and painted. There were lots of windows so I didn't have much "wall work" to do.

 

In the years that followed, I built two other cottages, using a different person to build the first one and ended up firing the person I hired to build the second one and finished it myself with two laborers. Each of these cost in the neighborhood of $7,000 to build. (I rented them to tourists.)

 

For furniture, I put in a concrete pad and a roof with plastic sheeting on the "rainy" side and used this as a workshop to build all the furniture for my house and the two cottages. I would have something in mind to build, say a bedside table, and just go to the local lumber mill and see what they had to offer. I would just buy the pieces that appealed to me. Then I would look at the wood when I got it home and figure out what to do with it. The night table, by the way, ended up being a slab of cedar on top of some nicely curved cedar legs.

 

So this was my experience. Could you do it today? Maybe but probably not. Depends on what you build and where and your level of experience, etc etc. It would cost more, certainly.

 

I moved from one small town in the US to another in Costa Rica, having spent only weeks in Costa Rica, really. Eight years later, I have sold the original property but still live in and love the town where I settled. Perhaps I am just lucky. I don't recommend it for everyone, but for me, it has worked. You have to really know what you want and not just some nebulous dream. And you have to know what you are willing to give up. And you have to genuinely appreciate what Costa Rica has to offer, warts and all.

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