A HOMEBUILDING INDUSTRY PUBLICATION Dallas • Fort Worth | November 2019 WHEN IS BUSY TOO BUSY? IT’S STILL A PEOPLE BUSINESS TECHNOLOGY: EVOLUTION BRINGS SIMPLICITY TRADITIONAL CLASSIC HOMES TAKES TOP HONORS IN THE STAR AWARDS REMODELER AWARDS SHELLY SANFORD AND JERRY PARKS Photo by Vernon Wentz, Ad Imagery3 Building Savvy Are things getting simpler or more complex? Programmable thermo- stats, smart doorbells and door locks and lighting control have indeed transitioned from “nice to have” to “expected.” Our Focus Sec- tion on Home Technology will get you up to speed…for now. I don’t know how you feel about these things, but I would say that things change about as soon I finally garner an understanding of them. Things like Facebook and Instagram and Iphones also continue to change, it seems, as soon as we think we’ve finally gotten them figured out. Headlines report that construction, more than most any other industry, holds the biggest opportunity for technology growth and innovation. They’re talking about technological innovations already proven to increase safety and reduce costs. Certainly, advancements have been made in mainstreaming what used to be complex things and improving platforms so that there is less specialization needed to make things work. But we’re still only part of the way there and staying relevant means plunging in with both feet and just being willing to keep at it until you figure it out; and then start this cycle all over again next time it changes. You’ll enjoy our On The Drawing Board case study which illustrates that YES things do change, but other things always stay the same. Read all about the success of a millennial home builder and his out-of-the-box thought leadership resulting in neighborhoods that sell! At the same time, we cannot forget to slow down and understand where we are and where we are going – or risk learning the lessons, that Paul Evans talks about, the hard way. There’s much to learn from the two award-winning remodeling pros profiled inside, too. We hope that the fall season has been fruitful for you and that you get an opportunity to sit back and evaluate your performance and engagement. Now we’re talking about Lessons Learned in Times of Profound Change measuring your success as a builder… and also about getting behind the wheel to test the capabilities of a new car or truck. Boy oh boy. The parallels between the automotive and the homebuilding industry make for some interesting observations. Stay Savvy! BEVERLY AND STEVE SMIRNIS beverly@buildingsavvy.com steve@buildingsavvy.com (817) 975-7235 [from the publishers]4 Building Savvy Structural Warranties StrucSure 817-726-6880 StrucSure.com Staging Modern Design Staging (817) 825-5599 moderndesignstaging.com Tax Strategy Ed Guerrero CPA 210-490-7100 GuerreroCPA.com Title Services First American Title Company 817-918-2321 firstam.com/title/tex/ dallas-fort-worth Windows and Doors Pella Dallas-Fort Worth 682-223-9110 PellaDallas.com Ceramic & Porcelain Tile DalTile (972) 484-0334 daltile.com Digital Marketing Atomic Design and Consulting 972-668-3867 AtomicDC.com Electrical Contractors Integrity Electric 214-763-9266 IntegrityElectricDFW.com Energy Inspection Fox Energy Specialists 817-546-0160 FoxEnergy Specialists.com Appliances Texas Appliance 817-299-2800 TxAppliance.com Attorneys Brackett & Ellis, P.C. 817- 360-7236 BELaw.com Banking, Home Loans, Insurance Colonial Companies (817) 877-9522 GoColonial.com Brick Acme Brick 817-685-9641 brick.com/DFW Cabinetry Innovation Cabinetry 844-303-5150 InnovationCabinetry.com Industry Associations NARI Dallas 214-943-6274 NariDallas.org Insurance Hotchkiss Insurance Agency 972-512-7755 HIALLC.com Lots and Land The Lansford Group Realty 214- 263-5858 PropertySavvyDFW.com Marketing N2 Publishing 214-727-4103 N2Pub.com Stone, Tile, Sinks, Plumbing Fixtures Triton Stone Group Dallas 214-775-1650 TritonStone.com Fireplaces- Garage Doors Trinity Fireside 972-215-7675 TrinityFireside.com Flooring & Countertops Polyflow Custom Floor Coatings 817-319-9697 polyflowfloors.com Foundation Repair Perma-Pier Foundation Repair of Texas (214) 637-1444 permapier.com Home Technology Dallas Sight & Sound dallassightandsound.com (972) 392-3202 DISCLAIMER: Any articles included in this publication and/or opinions expressed therein do not necessarily reflect the views of N2 Publishing but remain solely those of the author(s). The paid advertise- ments contained within the Building Savvy magazine are not endorsed or recommended by N2 Publishing or the publisher. Therefore, neither N2 Publishing nor the publisher may be held liable or re- sponsible for business practices of these companies. NOTE: When community events take place, photographers may be present to take photos for that event and they may be used in this publication. SAVVY’S A-LIST5 Building Savvy The largest generation to date is Gen Z, making up a quarter of the U.S. population and a third of the world population, reports NAHB. Gen Z members were born between 1995 and 2012 and are beginning to enter the labor market. They may not be as keen on the time and cost it takes to earn a four-year college degree, and this, say some, may hold out hope for solving our indus- try’s skilled labor shortage. Gen-Z members are consid- ering trade schools, certification programs, and other alternative job-training options. Analysts also say they are more interested in job stability than the generation just ahead of them—the millennials who are known to move frequently between jobs. But, says NAHB, they will be looking to work for companies that embrace tech and innovation. The Dallas Builders Association is on it! Nearly 200 students from area high school construction trades programs are expected at the Dallas Builders Show on Tuesday, Nov. 12, at the Plano Event Center. These Gen Z candidates will experience a special education track for the future of the industry, featuring vendor demos and teaching interview skills. Thank you to Acme Brick Company for sponsoring Building Savvy’s newest column. Email beverly@ buildingsavvy.com if you have information or story ideas about other programs working to provide a solution for our industry’s critical labor shortage. We encourage your input! [state of the market] TRAINING TOMORROW’S HOLDING OUT HOPE FOR GEN Z T Windows and Doors 6 Building Savvy Deductibles on BR insurance can be fixed amounts, and of course the higher that amount is, the less the annual pre- mium will be. However, many BR policies will instead base the deductible on a percent of total building value, typically between 1 and 4 percent of the total construction costs, or around $1,000 to $4,000 per $100,000. Even when you have a fixed deductible amount, it is typical for there to be a clause stating that deductibles on hail and wind damage will be based on a percentage; in almost all cases in Texas, the per- centage of deductible for hail or wind damage is more than the percentage paid on other items (the normal 1 to 4 per- cent). It is often called an All Other Perils Deductible (AOP). I’ve seen hail and wind deductibles as high as 5 percent. So, let’s say your building value is $800,000, and your deductible is 5 percent; you’re left holding the bag for $40,000 if your roof is installed when that Texas hail and windstorm comes through and causes damage to it.The real problem here is when there’s partial damage to your roof, as is often the case, the percentage deductible is applied to the entire building value. As you can see, it’s easy to find yourself in a situation where the roof is left “functionally un-insured.” There are a couple of things you can do to protect yourself from exposure to a large deductible. One way is to negotiate a deductible“buy-down.” Another way is to insure your de- ductible with a separate policy. Here’s how it works: You pay an annual premium for BR coverage plus the annual premium We lead the industry in change. No matter the location or complexity of your development, we offer customized services to fit your specific needs, including credit reporting, appraisals, property valuation, flood determination, document preparation, maps imaged data, and more. You care about your customer, and so do we. We even work with you to offer property & casualty insurance, home warranties and other convenient products to your buyer. ©2017 First American Financial Corporation and/or its affiliates. All rights reserved. | NYSE: FAF | 45147780917 CONNECTION PARK 4795 Regent Blvd., Mail Code: 2003, Irving, Texas 75063 (817) 918-2321 SMARTER PROCESSES SIMPLER SYSTEMS FASTER CLOSINGS [best practices] by Ross Conner, Hotchkiss Insurance Agency, LLC INSURANCE FOR INSURANCE? YES! YOU READ THAT RIGHT! Most Builders Risk (BR) policies cover property losses due to fire, lightning, explosions, hurricanes, theft, vandalism and many other risks. Hail damage is typically included, too. Losses due to wind are excluded in some areas, but typically are included as part of the coverage in our area. However, it is important to read the fine print when it comes to hail and wind coverage in your BR policy.7 for a Zero Deductible policy. The cost for insuring over a $50K deductible would be around 7 to 10 percent of the carrier’s “values at risk” annually, based on an av- erage Zero Deductible policy. In return, the policy pays the deductible amount for any claim your BR insurance company pays. If you had Zero Deductible insurance, you would file two claims -- one with the BR insurance company and another claim on the Zero Deductible policy. Once the insurance company covering your BR policy approves the claim, the Zero Deductible policy reimburses you for the deductible. Keep in mind, though, a Zero Deductible policy pays out only for claims above the deductible. If a hail storm caused $2,400 in damage, and your deductible was $2,500, the Zero Deductible policy would pay zero. It also does not pay the deductible for denied claims. A deductible buy-down approach works essentially the same way, it just “buys the deductible down” to a point higher than zero. Here, the charge is anywhere from 6 to 9% of the carrier’s values at risk. Before signing your contract, carefully read through all policy provisions. Double-check all coverages, condi- tions for coverage and the exclusions. Make sure you understand what will and will not be insured should a loss occur and you have an experienced agent to guide you through the process. If this resonates, contact your agent for creative solutions to protect your cash from crazy North Texas hail storms!8 Building Savvy Don’t Find Yourself in the Position of being an Unlicensed Person Acting as a Public Adjuster By Joe Tolbert, Brackett & Ellis P.C. It has been common practice for roofing compa- nies to offer “free roofs” and “waive” deductibles for repairs. Upon completion of the repairs, the roofing company would accept the amount collected from the insurance company as payment in full, and the homeowner would never pay the deductible. The homeowner would request replacement cost (RCV) hold-back without notifying the insurance company that the deductible had not been paid. Critics of the prior system complained that it encouraged roofers to use lower quality products in the repair or inflate the repair bill sent to the insurance company to cover the amount of the unpaid deductible. Now, the Texas legislature has implemented procedures to ensure that homeowners pay the deductible for insurance-related construction projects and have enacted harsh penalties for any violations. One of the new procedures is found in Texas Insur- ance Code § 707.002, which requires a homeowner to pay the deductible when the homeowner receives payment on a claim against their insurance policy. Further, before an insurance company will pay the RCV hold-back, the homeowner must provide the insurance company with “reasonable proof” that the deductible was paid. Reasonable proof of payment of the deductible can be shown by a canceled check, money order receipt, credit card statement, or copy of an executed installment plan contract or other financing arrangement that requires full payment of the deductible over time. It is a Class A Misdemean- or (fine up to $2,000, and up to six months in county jail) if a person violates this law, and both the builder and the insured are subject to potential penalties for any violations. [legal perspective] As a result of new laws, builders must be careful when working on a project that will be paid for, at least in part, by an insurance company. Specifically, a builder that offers to waive an insurance deductible for a homeowner or attempts to act as a public adjuster without proper credentials may be held criminally liable. Similar laws have been in place, but they were ineffective and primarily directed at the roofing industry. New laws clarify what actions are prohibited when dealing with insurance claims, strengthen the penalties for any violations, and broaden their reach to nearly all contractors. THE NEW ROOF LAW9 Building Savvy An additional new procedure is that certain contracts will need to include a notice, in 12-point bold font, that states: Texas law requires a person insured under a property insurance policy to pay any deductible applicable to a claim made under the policy. It is a violation of Texas law for a person or business paid wholly or partly from proceeds of a property insurance claim to knowingly allow the policyholder to fail to pay, or assist the policyholder’s failure to pay, the applicable insurance deductible. (Tex. Ins. Code § 707.004) This notice must be included in any contract that meets the following criteria: • The contract is for a “good or service” • It is reasonably expected the good or service will be paid for with “proceeds of a claim under a property insur- ance policy” • The contract price is $1,000 or more. Not only did the Texas legislature change the laws to require the payment of deductibles in property damage claims, it also clamped down on unlicensed persons acting as public adjusters. Prior law prohibited the unauthorized practice of public adjusting by “roofing contractors,” but now that prohibition has been broadened to apply to all contractors. A public adjuster is a person licensed by the state of Texas who represents the policyholder in the preparation, presentation, and settlement of a home or business property insurance claim. Unfortunately, especially after disasters, roofers and other contractors will go into an affected area and offer to perform repairs and negotiate and settle the homeowner’s insurance claim. This practice— when someone other than a licensed public adjuster attempts to settle a policyhold- er’s residential or commercial property insurance claim—is considered the unauthorized practice of public adjusting and has long been illegal when performed by roofing contractors. Because other contractors, particularly those performing water damage repair claims, were increasingly preying on vulnerable homeowners, the scope of the existing law was broadened to prohibit the unauthorized practice of public adjusting to all contractors. Also, the law makes clear that a contractor cannot use an assignment of benefits or a power of attorney form to avoid this prohibition. Because the consequences of violating these laws include criminal and civil penalties, a Texas builder needs to ensure it is in full compliance with these new laws. If you have any questions, call the attorneys at Brackett & Ellis, P.C. or go to our website at www.belaw.com. JOE TOLBERT is a shareholder at Brackett & Ellis P.C., is certified in construction law by the Texas Board of Legal Specialization and has over 28 years of legal experi- ence in the business of construc- tion. For more information, see www.ftworthconstruction.lawyer, contact Brackett & Ellis at (817) 338-1700, or email the author jtolbert@belaw.com. This article is for informational purposes only and it is not intended as a substitute for specific legal advice.Next >