Thread: Owner's Representative for High End Residential ??

Originally Posted by DialM

SMW brings up a great point. You should get trained as a LEED AP, or hire someone who is, to help through the process if someone is interested in building a LEED-certified home.

I am a LEED AP and have built a LEED Platinum home already.

Originally Posted by RAWMEAN

I am going through that process right now, It seems to me like another middle man added to the long list of people that have to be paid. My understanding was thats what you pay the general contractor and architect for. What is the added benefit?

The idea behind hiring a rep is the money they save you more than makes up for the fees they cost. It should be someone who acts directly as an agent for you and is independent of the cost of construction, and has no attachment to the design. Time inefficiencies, cost over-runs, extra charges and wastefulness are avoided using an Owner's Rep. There are many different reasons that make an Owner's Rep valuable. For example many of my clients are far to busy with their jobs, and make a lot more money going at their job than what it would cost them to hire an Owner's Rep to handle their building needs. Then there's the other side of the spectrum where the client just has no knowledge of building and no real way of know if the GC is doing the right thing, charging the right price, selecting the appropriate materials, or if the architect is designing within budget. There's a wide variety of reasons that can make hiring an Owner's Rep valuable.

After years spent in the industry I've come across a huge list of examples of why having someone with the knowledge but independent of cost and design is valuable. Changes, mistakes, time, and extras can be very costly in construction.

Justin, I like your concept, it’s feasible and makes sense, but the issue comes down to selling it, it’s not very easy to convince someone to pay an extra person to save them money, even if the savings pay for the extra person. I went to a talk today from a company that specializes in efficiencies and they look at a company and figure out ways to save them money. His revenue model is that he gets half of what he saves a company for 4 years afterwards they realize the full savings. So if he saves a company $40,000 a month, his company gets $20,000 a month for 4 years, and then the contract is fulfilled. The company doesn't incur any addition expenses, they are just paying $20,000 less then expenses for the first 4 years, then $40,000 from then on. This idea makes sense and any company that refuses his service is ignorant or stupid, but he has trouble selling his service, even though it doesn't cost the company a dime more than they are currently paying.

SMW, thanks for your input. I agree selling it can be hard, and it certainly depends on the market. Obviously my services are not going to someone who can barely afford to build a house. That person is just going to take their chances the GC is doing everything right, and in their best interest. Mostly likely my services will go to those who are to busy to do it themselves. High end homes where my fees are an insignificant cost to the owner. My services aren't 100% about saving money. Equally important is my knowledge of building and being able spec materials, and over see install, and help with technical problems. Some of that will cost a client a premium, but this is the client who can afford a premium to know they are going to get the best finished product possible.

Originally Posted by RAWMEAN

I am going through that process right now, It seems to me like another middle man added to the long list of people that have to be paid. My understanding was thats what you pay the general contractor and architect for. What is the added benefit?

The contractor's financial interests are not aligned with the owner's financial interests. A contractor will VE the plans during construction to capture savings for himself on a fixed-cost contract, or won't VE to keep the cost higher on a cost-plus contract. The architect will rarely be able to design the most efficient-to-build structure, especially as new code is implemented, new materials are introduced, and due to placing design over cost. The owner's rep will also be onsite during construction to hold the GC's feet to the fire. You would be amazed at the corners a GC can cut, the mistakes that can be covered up, and the inefficiencies that can occur which add to lost time during construction.

I mean this is more of business concept discussion, but do you think there is a big enough market to make your business profitable to the level you are trying to achieve. Obviously you can't charge a percentage or charge hourly because like the contractor and architect, the charge model encourages the contractor and architect to drive up cost. So do you plan on charging a fixed fee based on the size of the project. Also how big of a team is the representative business going be, is it just you, are you going to have partners, associates. If your client is expecting someone from your company on the job site everyday, you will have to figure out a way to meet this request. I understand that your skills are marketed toward high end clients, how do you plan to reach these clients, what types of guarantees can you offer, how are you going to document your work for a final report to submit to the homeowner. I realize I am asking a lot of questions, I am just trying to make sure everything is covered and you get different angles and views of your proposed business. If you don't wish to share some of these concepts publicly, feel free to PM me.

Originally Posted by DialM

The contractor's financial interests are not aligned with the owner's financial interests. A contractor will VE the plans during construction to capture savings for himself on a fixed-cost contract, or won't VE to keep the cost higher on a cost-plus contract. The architect will rarely be able to design the most efficient-to-build structure, especially as new code is implemented, new materials are introduced, and due to placing design over cost. The owner's rep will also be onsite during construction to hold the GC's feet to the fire. You would be amazed at the corners a GC can cut, the mistakes that can be covered up, and the inefficiencies that can occur which add to lost time during construction.

100% right. I was going to write this, but I didn't' get it put as clear in a concise reply. On a fixed cost project project the GC's makes money by meeting minimum requirements at maximum price. On cost plus, they simply just push for the highest subs and materials, and find no creative ways to save as it will affect their profit.

Originally Posted by SMW

I mean this is more of business concept discussion, but do you think there is a big enough market to make your business profitable to the level you are trying to achieve. Obviously you can't charge a percentage or charge hourly because like the contractor and architect, the charge model encourages the contractor and architect to drive up cost. So do you plan on charging a fixed fee based on the size of the project. Also how big of a team is the representative business going be, is it just you, are you going to have partners, associates. If your client is expecting someone from your company on the job site everyday, you will have to figure out a way to meet this request. I understand that your skills are marketed toward high end clients, how do you plan to reach these clients, what types of guarantees can you offer, how are you going to document your work for a final report to submit to the homeowner. I realize I am asking a lot of questions, I am just trying to make sure everything is covered and you get different angles and views of your proposed business. If you don't wish to share some of these concepts publicly, feel free to PM me.

There's definitely a market as there are companies that do this, and charge quite well for it too. It's very common in the commercial building industry where companies don't have an individual to represent them. It is less common in residential as the vast majority of residential building the owner represents themselves as the vast majority can't afford to hire someone else. I'll PM you with the more business details. But thanks I appreciate any questions/suggestions you post here as they all challenge me to think out/perfect another aspect of my business.

I've done this a few times for clients. I come on as a consultant for a fee and, like a producer does for a movie, I bring the project together with the help of a GC. I'm currently working on a Vanderbilt estate for a client. It's a knock down on 1 acre prime 30 minutes from Manhattan. We'll be subdividing, getting plans approved, and building 3 luxury homes.

RAW makes a good point...you have to show value to your client otherwise you are just another middle man. Call me if you want to discuss anything. 718.317.0400

Good luck pal.

Originally Posted by Herman@Mecca

RAW makes a good point...you have to show value to your client otherwise you are just another middle man. Call me if you want to discuss anything. 718.317.0400

Good luck pal.

Agreed. And although as you and me both can see there is clearly value to it. The problem like RAW pointed out is a lot of people won't see it, until it's too late. I find no issue with it when I talk to people who have done a construction project before, as they have a good understanding of what happens. It's mostly the new people who have never done anything.

Originally Posted by Justin D

After years spent in the industry I've come across a huge list of examples of why having someone with the knowledge but independent of cost and design is valuable. Changes, mistakes, time, and extras can be very costly in construction.

This is where I would start to build your reasons or selling points.

This sounds interesting and I have to say I want to hear more of what you have to say.

Please try explaining it all here in this thread and use us (The members here) as your feed back and constructive criticism. If someone is being trollish and dismissive of the idea don't fret, consider it a challenge and practice what your response would be when dealing with a real customer.

Like Raw said, I see it as another middleman or payment yo be paid and even the wealthiest people don't always like to just throw money always simply because they have it. You really have to have a really good sell so try to do that here as you never know what you might be able to learn through the course of discussion and feed back in this thread.