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Builder Asking About Budget on House?
Posted on 3/2/14 at 7:23 am
Posted on 3/2/14 at 7:23 am
Is it normal when soliciting bids from builders for them to ask how much money you're looking to spend? When someone makes a percentage of the total cost of a project is seems like they're going to stretch that to the max. I have a builder wanting to know how much I will spend before he will bid the house.
13
Posted on 3/2/14 at 7:26 am to BeerMoney
yeah im the same boat. my realtor just told me to let her handle the builder
thats where they make their nut
thats where they make their nut
Posted on 3/2/14 at 7:27 am to BeerMoney
How well defined are the features? Like is the type of carpet selected or does he include that on his bid?
Posted on 3/2/14 at 7:29 am to BeerMoney
I wouldn't go with that builder. You should be looking for a flat fee builder. Someone who says I will charge you x amount to build that house. I've never understood the % guys. Why should they make more money just because you picked more expensive hardware or better flooring?
Posted on 3/2/14 at 8:05 am to BeerMoney
quote:
Is it normal when soliciting bids from builders for them to ask how much money you're looking to spend?
yes, it is normal. First, the builder wants to make sure it's possible to build the house you want built with the budget you've set. In addition, he may select a different sub-contractor in certain areas based on budget. He also wants to make sure his time putting together a proposal is worth it.
The key to building a house is to understand that the builder is your partner, not your adversary. The more he knows about your budget, timeline, etc., the better job he'll do. (or she)
Posted on 3/2/14 at 8:41 am to BeerMoney
Honestly, time is money. I grew up in a contracting family. Most established contracting businesses are there not because of screwing their customers, but by taking good care of their customers. If your contractor/developer is well established, has a nice portfolio and you can drive through an area and see the quality of their construction, then they deserve to make a profit for providing you with a partnership in the process. A good contractor will work with you and help you come up with the best value for your money and will be able to help you not make poor decisions.
A good contractor wants to insure that 5, 10, 20 years down the road, your property is retaining substantial value.
If you are soliciting quotes, and don't have experience in determining the best quote (not the least expensive, but you can sometimes be surprised), there are people who can advise you. Contact the local office of the Home Builder's Association and request referrals for a qualified appraisal of the quotes. Good builders do all the right things and marginal builders skip small details, use cheaper materials and cover up mistakes instead if doing things over to be done correctly.
Tell the potential builder your budget. It helps them to know if they can reasonably meet that budget and provide you with a quality end result. You should do your homework in advance to find out if the builder has a good reputation and to view some previous properties they've built to see how they're holding up. If you get good reports on the builder, don't sweat the price. A good contractor is worth the price they quote you, as long as they can stay in your budget.
A good contractor wants to insure that 5, 10, 20 years down the road, your property is retaining substantial value.
If you are soliciting quotes, and don't have experience in determining the best quote (not the least expensive, but you can sometimes be surprised), there are people who can advise you. Contact the local office of the Home Builder's Association and request referrals for a qualified appraisal of the quotes. Good builders do all the right things and marginal builders skip small details, use cheaper materials and cover up mistakes instead if doing things over to be done correctly.
Tell the potential builder your budget. It helps them to know if they can reasonably meet that budget and provide you with a quality end result. You should do your homework in advance to find out if the builder has a good reputation and to view some previous properties they've built to see how they're holding up. If you get good reports on the builder, don't sweat the price. A good contractor is worth the price they quote you, as long as they can stay in your budget.
Posted on 3/2/14 at 9:53 am to BeerMoney
who is the builder?
Posted on 3/2/14 at 1:07 pm to BeerMoney
Cost plus fee is the way to go. That way if you get nicer windows/ lighting fixtures/ floors, etc then he doesn't make more money off of you.
In addition, the builder will not buy the cheapest wood/sheetrock/shingles, etc because it will not affect his profit margin.
In addition, the builder will not buy the cheapest wood/sheetrock/shingles, etc because it will not affect his profit margin.
Posted on 3/2/14 at 1:09 pm to BeerMoney
Not a builder, but if you brought me plans for a 3500 sq ft house and told me your budget was 200k, I'd rather not waste my time or yours. If you told me it was 700k id know not to bid laminate floors and pre fab cabinets when pricing things out. Knowing the budget is really the best way to get the most accurate cost of the scope of the project. The builder knows or should know you're bidding it out, so that will keep everyone in check. Otherwise it's just this time wasting guessing game, and the guy who guesses right, but may not be the best guy for the job, wins
Depends. You've got to know builder materials pricing. Is the average person really going to question 2x4 and Sheetrock cost? No
quote:
Cost plus fee is the way to go
Depends. You've got to know builder materials pricing. Is the average person really going to question 2x4 and Sheetrock cost? No
This post was edited on 3/2/14 at 1:14 pm
Posted on 3/2/14 at 4:12 pm to BeerMoney
quote:
Is it normal when soliciting bids from builders for them to ask how much money you're looking to spend?
I never went through this process, but I don't see why not.
The trick is to tell them the amount you are COMFORTABLE paying, not what you are WILLING to pay.
Posted on 3/2/14 at 5:34 pm to BeerMoney
If you have defined the scope of the project well you are ok
Posted on 3/3/14 at 8:56 am to BeerMoney
quote:
Is it normal when soliciting bids from builders for them to ask how much money you're looking to spend
Absolutely. Why should a builder (and his subs) waste time bidding your plans and meeting with you when you might have unrealistic expectations? I can't tell you how many people think they can hire a contractor and have this $100/sqft price stuck in there head. I've met others that think they can build a mansion for $90/ft. Sure, you can build a decent house for $100/ft, but you could also make the same house nicer for $115/ft or cheaper at $90/ft. It's all in the details.
Proper planning is the most important part of any construction project. The final budget is a major key in planning. How can a builder gauge your needs without knowing your budget?
Advice for selecting a builder:
- don't hire someone you don't trust well enough to discuss your budget
- don't hire someone that isn't reputable (too many fly-by-night guys)
- if possible, don't hire a builder that isn't building other houses near you. they are more likely to neglect your house if it is way out of their way.
- don't let someone talk you out of what you want. most builders don't like to get out of their comfort zone. they don't like doing something that is different from their other houses. If you want something, stick to it.
- avoid builders that will build your house in 4 months. speed allows them to hide imperfections before you catch them. Fast, Good, Cheap... pick two.
- get at least 3 bids and make sure you compare apples to apples. are the allowances and materials exactly the same?
- even if you trust your builder, it's important to stay active in the process. Check on the house regularly and make sure things are done properly. If you suspect something is done wrong, ask a third party for their opinion.
This post was edited on 3/3/14 at 9:53 am
Posted on 3/3/14 at 11:26 am to BeerMoney
I don't know if it's "normal", but I understand his question if he's being paid a percentage.
I'm building now using cost plus. I'll pay the actual cost of everything and a flat fee for the house being built.
The builder gave me a turn key price with the budgets he had for everything.
I joined Direct Buy and I get a quote on what I want and compare it to the builders quote from his usual suppliers.
I then purchase from the one who has the best price, which has been Direct Buy on everything. I am using the same suppliers my builder usually uses.
Right now I'm at about $60,000 in savings on my house using Direct Buy. I will be using the savings to upgrade everything from floors to appliances.
The builder has no incentive to cut corners or draw the process out.
I have 5 draws with my construction loan. The builder receives payment as things are completed and pass inspection.
Even though some of the things I've upgraded will cost more in labor, the savings from Direct Buy will cover the added costs.
On top of all that, I'll be doing some of the work myself. So, I'll be onsite and checking things throughout the build.
I'm building now using cost plus. I'll pay the actual cost of everything and a flat fee for the house being built.
The builder gave me a turn key price with the budgets he had for everything.
I joined Direct Buy and I get a quote on what I want and compare it to the builders quote from his usual suppliers.
I then purchase from the one who has the best price, which has been Direct Buy on everything. I am using the same suppliers my builder usually uses.
Right now I'm at about $60,000 in savings on my house using Direct Buy. I will be using the savings to upgrade everything from floors to appliances.
The builder has no incentive to cut corners or draw the process out.
I have 5 draws with my construction loan. The builder receives payment as things are completed and pass inspection.
Even though some of the things I've upgraded will cost more in labor, the savings from Direct Buy will cover the added costs.
On top of all that, I'll be doing some of the work myself. So, I'll be onsite and checking things throughout the build.
Posted on 3/4/14 at 10:29 am to BeerMoney
It's like anything else. There is an inherent conflict of interest/moral hazard, and the more knowledge you have, the better chance you have of minimizing the moral hazard. We face it dropping our car of at a mechanic, and you face it with real estate agents and all points in between.
This is a huge purchase, so it's wise to get information, or at least and advisor who knows what they're doing.
This is a huge purchase, so it's wise to get information, or at least and advisor who knows what they're doing.
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