Developer Vs Builder: Roles and Responsibilities

Property buyers purchasing new homes in Washington State sometimes wonder about the roles of developers and builders. Do the responsibilities of these two real estate professionals differ? How?

Check Records Carefully

In some cases, a development firm will undertake the task of new construction. During previous decades, for instance, these situations happened frequently. A developer typically located attractive parcels of land, purchased acreage for a proposed subdivision, performed necessary legal work and then erected homes constructed by the firm or by its subcontractors. Known as “vertical development” or “vertical marketing”, this process gained popularity during decades when environmental and planning regulations did not require a lengthy approval process.

Today, developers and home builders often perform completely separate roles in the process of creating subdivisions and new residential homes. Yet some vertical development does still occur. A closing agent seeking information about decisions entering into the construction of a particular residence sometimes obtains useful background information by visiting the courthouse and checking whether or not the same company (or closely related holding companies) platted the property and filed for construction permits.

Developers Impact Custom Homes And HOAs

In some neighborhoods, developers have platted subdivisions and sold lots directly to home buyers, who then bear the primary responsibility for retaining a builder. The specific arrangements may vary widely even within a single neighborhood. In some cases, home buyers prefer to purchase a lot and then work with an architect to create a custom home, for example.

Home buyers who select lots in developments governed by Homeowner Associations must ensure that their homes conform with specific rules established by the HOA. They may discover that only a few local builders possess experience in constructing homes in compliance with their local HOA stylistic guidelines. Perhaps for this reason, numerous purchasers choose to buy newly-built residences that already conform with HOA requirements.

The Developer’s Role

With the caveat that exceptions always exist, for the most part developers today perform a role analogous to policy makers and planners. They typically select and acquire raw land for new developments and liaison closely with government agencies to zone, design and plat new construction. Some developers will purchase tracts that have already obtained a desired zoning designation. They then either sell lots directly to prospective home buyers, or to builders. They may spend substantial amounts of time raising funding and shepherding proposed projects through the administrative approval process. Developers usually retain an engineering or architectural firm to help design a master planned community or building. They may showcase the architect’s drawings and scaled models during the process of seeking approval from government agencies. Developers hoping to place buildings or other new construction on raw land may need to retain the services of a consultant to assess the full environment impact of proposed construction. Sometimes the process of obtaining approval for a new development requires literally years of work.

Developers who envision planned communities spend time and money laying out streets, parks and other public facilities with the assistance of planners. They may oversee the work of building contractors who install the infrastructure for services to lots in the area. Although public utilities may perform much of the final project, a developer usually coordinates closely during this process. Their work often involved very sophisticated and complex interactions with a myriad of regulatory agencies. Many developers create tools for enforcing the objectives of a planned community by establishing the framework for a Homeowners Association or Condominium Association and drafting its initial policies and rules.

The Role of Builders

By contrast, homebuilders typically complete assignments more analogous to the practical “nuts and bolts” work of an administrator. They perform a host of mundane tasks necessary to construct buildings and other projects. They follow established policies and architectural design parameters. Builders frequently interact with government agencies, too, since they must obtain building permits and obtain approved site inspections as a project progresses. Some builders work as project managers, hiring subcontractors to complete different aspects of the construction. A builder may provide “in-house” services, or contract them out to local companies responsible for specific aspects of the project.

Many builders lay the foundation and perform basic framing, then hire subcontractors to complete plumbing, electrical work, roofing and painting, for instance. A large builder may even hire a number of other smaller construction firms to work on different individual projects within a large development. Some builders work directly with homeowners who have purchased new lots for home construction, or who seek the renovation of existing properties. Just as the specific work performed by an experienced development firm varies widely based on individual circumstances, the work of one builder may differ significantly from the projects carried out by another.

Development Projects Impact Prospective Home Buyers

Buyers considering purchasing new homes in Washington State enjoy considerable latitude in selecting their best course of action. They may choose to buy a lot outright in an area where planning and zoning officials have approved the establishment of residential properties, for example. Sometimes home purchasers select tracts in developments which offer the services of specific approved builders. The builder may work closely with them to tailor house construction to meet their goals in conformity with a development project’s specific guidelines.

Real estate customers usually benefit by working closely with an experienced real estate broker to make sure they locate a property meeting all the requirements for their intended usage. Planning agencies typically designate one tract of land for recreational purposes, another for new residential construction, and yet a third for commercial development. Changing regulatory restrictions and zoning in the future for an individual parcel of land may prove challenging or even impossible. So much advanced planning typically enters into the process of reaching a zoning designation that regulatory agencies may resist granting last-minute exceptions for specific unplanned uses.