GC question for Grayhead and friends
- Thread starter UNC71-00
- Start date
Not your expert, but why can't the builder/contractor give you a fixed cost? Are there any unique challenges about your plan or any other things that might reasonably cause cost overruns that cannot be predicted?
Stop asking for weird shit like a giant, steel Jerry Garcia statue that doubles as the weight-bearing column for your foyer.
That shouldn't be the only reason. I'll ask my neighbor (he is a builder) what are normal reasons someone may choose that route. I'm also interested to hear what grayhead has to say. I'm no expert but I have contracted all 3 homes I have had built and not once was I ever asked to do that by the GC. I'd definitely want to dive deeper into the materials pricing as there could be some current market situation regarding the availability/price for certain materials they need to use for your project. I experienced this some when the Chinese started buying up all the material for concrete but my GC knew how to account for this (he just raised the price) in a fixed contract.
My take on a cost plus deal is you might have a little better handle on the quality of materials the contractor is purchasing for your job. If he's going to do cost plus for me, I want to see his purchase invoices. With a fixed price, you may not be able to see where he could be cutting corners. (lower paint quality, hollow doors, etc.)
Usually, a contractor can get somewhat fixed pricing for materials. We also have buffers built in to cover fluctuation in pricing. If changes are made during construction, the change orders are what we use. The change order should always be agreed upon in writing by both parties. I require change orders to be paid immediately upon completion.
If he is asking for material inflation, then it would be hard to prove the change. Cost plus is an avenue for dishonest contractors to take advantage of unknowing homeowners. He should be prepared to show all invoices proving the overage cost.
I only us cost plus on renovation that have unknowns. An example would be a beach house with leaking Windows. It is next to impossible to tell what you will uncover when changing the windows out. If it is absolutely know that there will be rot, I will do a cost plusbof $30 per man per hour plus materials and 18℅ over materials. Otherwise, it's a rider in my contract that gives a fixed cost if we uncover rot or unforseen.
Honestly, if you are clear on your wish list and have covered everything you want for the home, the contractor should be able to give you a fixed contract for the home. The materials are not going to jump that much over the next 4-5 months of building.
He may give you allowances for things like cabinets and any custom items beyond normal construction.
I don't think I could convince anyone to let me build a house by the hour. That fixed price helps you control the speed they would get paid. I would use a bank for the construction loan because they pay based on percentages. Even if you are prepared to pay for the home out of pocket. Otherwise he will submit for draws for more than the amount of work. A contractor should make his money at the end of the house and not up front.
Also, make sure you have good references for the contractor. Asking for cost plus on a new home would raise flags for me. You can also call the licensing board to see if anyone has complaints on that company.
If he is asking for material inflation, then it would be hard to prove the change. Cost plus is an avenue for dishonest contractors to take advantage of unknowing homeowners. He should be prepared to show all invoices proving the overage cost.
I only us cost plus on renovation that have unknowns. An example would be a beach house with leaking Windows. It is next to impossible to tell what you will uncover when changing the windows out. If it is absolutely know that there will be rot, I will do a cost plusbof $30 per man per hour plus materials and 18℅ over materials. Otherwise, it's a rider in my contract that gives a fixed cost if we uncover rot or unforseen.
Honestly, if you are clear on your wish list and have covered everything you want for the home, the contractor should be able to give you a fixed contract for the home. The materials are not going to jump that much over the next 4-5 months of building.
He may give you allowances for things like cabinets and any custom items beyond normal construction.
I don't think I could convince anyone to let me build a house by the hour. That fixed price helps you control the speed they would get paid. I would use a bank for the construction loan because they pay based on percentages. Even if you are prepared to pay for the home out of pocket. Otherwise he will submit for draws for more than the amount of work. A contractor should make his money at the end of the house and not up front.
Also, make sure you have good references for the contractor. Asking for cost plus on a new home would raise flags for me. You can also call the licensing board to see if anyone has complaints on that company.
Hook, that is not true for all circumstances. From the homeowner side, they can do their homework to identify cut corners. Also, the things you stated can be negotiated into the contract. That is why you should do you due diligence in searching for a good contractor. We are out there. Unfortunately, many learn this the hard way
This sounds like a guy I'd do business with. Somebody who just says, "It's for cost overrun" isn't going to win my confidence to start with. One thing I have found when building your home, get a builder/GC you are confident with. Being on the same page helps too. No one likes a costly suprise. Too many times and there goes that relationship, I promise.
I agree Grayhead. Please note said "might" get a better handle. Oddly enough, I just finalized on a major reno at my lake house under a fixed contract that came in at the original budget price including some upgrades I asked for along the way.
I usually run about the middle of the pack in my pricing. I someone is looking for bottom dollar, or getting a ridiculous amount of estimates, then I won't bid the project. I also agree with the trust part. It's really a two way street (insert cliche) for the owner and the contractor. I have been burnt before(insert cliche) by owners who claimed they did not understand the process. I include our conversations by email as binding to the contract as well. Works great in cost plus or change orders. 71, please make sure to cover your basis when dealing with this contractor. He may be using that cost plus to help pay for other jobs.
When the economy went down, my industry took a beating. I have worked heavy on the renovation side over the years and do work many cost plus contracts. When things went south, I was in bad shape financially. It was tempting to pay for other jobs using the cost plus process to double dip on my jobs. But instead, we maxed out our equity and credit to salvage my company. God has blessed me with some major contracts over the last year and a half to pay it all off.
I know several contractor in my area who would take you for a ride ( insert cliche) if given the chance. Do your homework!!!!!
When the economy went down, my industry took a beating. I have worked heavy on the renovation side over the years and do work many cost plus contracts. When things went south, I was in bad shape financially. It was tempting to pay for other jobs using the cost plus process to double dip on my jobs. But instead, we maxed out our equity and credit to salvage my company. God has blessed me with some major contracts over the last year and a half to pay it all off.
I know several contractor in my area who would take you for a ride ( insert cliche) if given the chance. Do your homework!!!!!
Every single GC around here wants a cost plus contract- I have talked to 5 and they are all known and recommended
I should add that it is a stick built house w custom plans
Are the asking to build the home by the hour and cost of materials. Or are they all asking for a base labor price and a material estimated cost which can change?
In my area , cost plus covers labor and material at estimated cost which can change.
In my area , cost plus covers labor and material at estimated cost which can change.
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