If you’re building a custom home on Hilton Head Island or in Bluffton, you’ll want to carefully weigh just how current market conditions can impact one of the most costly investments that you’ll ever make.  This blog is a follow up to the one I posted this past Saturday at 8 a.m.

In looking for a great value there are some pitfalls that you will want to avoid.  The most important is don’t fall prey to the old adage of “you get what you pay for.”

Construction costs on Hilton Head Island and in Bluffton are very attractive right now and for good reason.  The foreclosure market on existing homes is making sure of that, putting an immense pressure on contractors to cut profits just to stay in business.

Let’s look at a couple of examples.

43 Dune Lane, a foreclosed second row home in Forest  Beach, just closed for $1.4 million.  This 5,000 square-foot-plus home was built in 2006 and was sited in such a way that it availed fabulous ocean views from the second and third floors.  The home included heart pine floors, crown molding, granite counters and other obvious quality features.  While it probably needed $100,000 in renovations due to items that the previous owner took out of the home, the purchaser of this home can rest assured in an excellent purchase.  This home, even in today’s competitive construction market, would easily cost $225 per square foot, or $1.125 million.  In the case of this home, someone building today would have to pick up a second row lot in Forest Beach for $375,000 in order to come out whole.  Even in today’s depressed prices finding a lot at such a price just isn’t going to happen.

Another example is a 3,900 square foot home in Colleton River at 4 Double Eagle that just closed for $460,000.  The math on this property would cause any contractor cringe.  While the property suffered severely from deferred maintenance, $250,000 would easily fix what ailed this home.  Even with its deficiencies this home was a quality property built in 2003.  Suffice to say, there’s no way this home could be rebuilt in today’s market for $182 per foot ($460,000 + $250,000) and that doesn’t even include putting a value on the lot.  Prior to the housing market crunch no home on this street had sold for less than $1 million.

In light of these types of bargain values the issue becomes just how badly a consumer wants to build their dream home in this market.

While this may be painfully obvious, there is no way a general contractor on Hilton Head Island or in Bluffton can compete with the values of homes being purchased in the foreclosure market.  Still, many of them are doing whatever they can to price their bids as competitively as possible.  Some contractors are going one better – that is they’re pricing homes so that there is no profit at all.

And that is what the consumer needs to beware.  A contractor who is building at no profit can’t make money, and if he isn’t making money he’s not going to stay in business.   Certainly, any sane person looking for quality can’t expect to squeeze blood out of a turnip.

My suggestion is that when you put your home out for bid you get at least three quotes.  If one quote is amazingly low, be skeptical.  You may not have found a diamond in the rough but a snake in the grass.  It’s not unreasonable to expect people who are working for you to make a profit.  On the contrary, a healthy economy builds its strength on businesses being compensated commensurate with the quality of their work.  In the long run, the whole system suffers when reliable and honest businessmen are driven out of work by those who are in it for a quick buck.