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Started By
Message
What % fee do homebuilders typical charge in the BR area?
Posted on 7/21/14 at 11:01 am
Posted on 7/21/14 at 11:01 am
I'm in the process of getting started building a home. This is my first go at this. The builder is charging a 9% mark up. This doesn't sound unreasonable at all. I'm just curious as to what the typical mark-ups are for those who have been through this before.
4
Posted on 7/21/14 at 11:02 am to tysonslefthook
9% markup on a $300K home is $27,000. That's a lot of money. Then again I don't know if the magnitude of that is unreasonable, but it is a lot of money.
Posted on 7/21/14 at 11:05 am to The Sad Banana
quote:
9% markup on a $300K home is $27,000
I don't think a home worth 300k costs 300k to be built though
Posted on 7/21/14 at 11:07 am to tysonslefthook
Cost plus 10% has been around forever. You need to pay all bills have all accounts in your name and let him loose. It's a small price to pay to get good subs to your job in a timely manner and finish the job in 3/4 months.
Posted on 7/21/14 at 11:08 am to The Sad Banana
I wouldn't use a builder than does a 9% markup. If you pick a more expensive light fixture, why should that builder make more money off you than he would for a less costly fixture? Either way, he's hanging a fixture. You should look for a builder who is charging you a fixed fee. You tell him that you are paying him xxxx$ to build your house.
Posted on 7/21/14 at 11:15 am to guttata
There is some truth in this but 9% is a VERY reasonable number. In fact, it would actually make me nervous as that tells me he is not cherry picking his houses...thus he is not in high demand. Have you seen his work? Have you spoken with the owners of the last 2 or 3 houses he has built? Was he on time? How was his quality? Was there a lot of extra materials (thus costing you more money)?
Posted on 7/21/14 at 11:18 am to tysonslefthook
Is it a 9% markup on the final cost of the build, or on the quoted build cost? Find out if when you make field changes (which will happen, no matter how many times you say it won't) if that change will also receive his markup. If it does, tell him that's unacceptable and you want field changes/overages to be at actual cost. If he wants the work, he'll accept it.
Posted on 7/21/14 at 11:21 am to LigerFan
quote:I meant the construction cost, not the market value.
I don't think a home worth 300k costs 300k to be built though
Posted on 7/21/14 at 11:22 am to Crusty
quote:
There is some truth in this but 9% is a VERY reasonable number. In fact, it would actually make me nervous as that tells me he is not cherry picking his houses...thus he is not in high demand. Have you seen his work? Have you spoken with the owners of the last 2 or 3 houses he has built? Was he on time? How was his quality? Was there a lot of extra materials (thus costing you more money)?
He's the best builder in the area. He's actually a 3rd cousin of mine and he's built all of my families houses. I've been in them all and they are well built and none of them had any complaints. He typically charges 10%, but he gave me a 1% family discount, which may seem small, but it is a 10% cut off of what he usually charges. He says he used to get 12-15% markups when there was less competition. I'm not calling bullshite on anything he's saying, I'm just curious about the typical markups.
Posted on 7/21/14 at 11:23 am to SetTheMood
quote:
Is it a 9% markup on the final cost of the build, or on the quoted build cost? Find out if when you make field changes (which will happen, no matter how many times you say it won't) if that change will also receive his markup. If it does, tell him that's unacceptable and you want field changes/overages to be at actual cost. If he wants the work, he'll accept it.
They will be at actual cost. Usually he marks them up, but said he doesn't for family.
Posted on 7/21/14 at 11:25 am to tysonslefthook
The guy I'm paying is 12% markup. However he isn't working out of the front seat of his truck, has an interior designer who's spent 15 hours with my wife picking fixtures/colors/etc and has helped us by drawing plans.(all before signing a contract or paying them a dime)
We tried specing out the house with other builders(9-11%) but their availability wasn't good and they wanted to tell the wife to pick a plan out of a catalog.
My boss interviewed the same builder I'm using and went with a different builder because he bidded it lower. Well 5 years later he's got all these problems and that builder disappeared. Pay now or pay later seems to be common with houses if you're like me and don't know enough to subcontract it yourself or babysit contractors and/or your builder.
We tried specing out the house with other builders(9-11%) but their availability wasn't good and they wanted to tell the wife to pick a plan out of a catalog.
My boss interviewed the same builder I'm using and went with a different builder because he bidded it lower. Well 5 years later he's got all these problems and that builder disappeared. Pay now or pay later seems to be common with houses if you're like me and don't know enough to subcontract it yourself or babysit contractors and/or your builder.
Posted on 7/21/14 at 11:27 am to tysonslefthook
quote:Then, provided the 9% markup is on the quoted cost of the build minus any overages, that is very reasonable.
They will be at actual cost. Usually he marks them up
Posted on 7/21/14 at 11:30 am to SetTheMood
quote:
Then, provided the 9% markup is on the quoted cost of the build minus any overages, that is very reasonable.
Thanks, I was just curious. It seemed reasonable to me. I just wanted to hear other opinions. I know the home will be quality, so even if he were a little high, I'd likely still let him build it.
Posted on 7/21/14 at 11:32 am to SetTheMood
Doing a cost plus % contract is like writing a blank check to the builder. Dont do it unless you know the builder is extremely honest and looking out for your money. So basically dont ever do it.
Posted on 7/21/14 at 1:18 pm to EvrybodysAllAmerican
quote:I agree with this. My builder gave me a lump sum price to build my house with a certain level of amenities. If we changed something along the way that didn't entail more labor than the original selection, our final price went up for the value of the modification, without any markup. We even paid some vendors direct for certain overages.
Doing a cost plus % contract is like writing a blank check to the builder.
Posted on 7/21/14 at 1:26 pm to EvrybodysAllAmerican
quote:
Doing a cost plus % contract is like writing a blank check to the builder. Dont do it unless you know the builder is extremely honest and looking out for your money. So basically don't ever do it.
This. These are so lucrative for the builder that they are actually illegal for public construction contracts. They are not, however, illegal for feasibility and environmental impact studies. Ever wonder where your tax dollars go? Now you know.
Posted on 7/21/14 at 1:30 pm to SetTheMood
9% is cheap.
It's "change orders" every contractor charges overhead and profit on change orders. If you don't like it, tough shite.
quote:
Find out if when you make field changes (which will happen, no matter how many times you say it won't) if that change will also receive his markup. If it does, tell him that's unacceptable and you want field changes/overages to be at actual cost.
It's "change orders" every contractor charges overhead and profit on change orders. If you don't like it, tough shite.
Posted on 7/21/14 at 1:32 pm to guttata
quote:
I wouldn't use a builder than does a 9% markup. If you pick a more expensive light fixture, why should that builder make more money off you than he would for a less costly fixture?
Because by law he has to warranty it. That's why.
quote:
You should look for a builder who is charging you a fixed fee. You tell him that you are paying him xxxx$ to build your house.
I mean if you want someone to do it for a flat fee then just sign a waiver saying you don't expect him to warranty anything for you going forward.
The 10% is there because it's going to cost more to warranty a $300K house vs a $100K house if something were to happen. It's just making it worth his while to take on the added risk. As far as a flat fee goes, why should he take on the risk of building a $300K house and being obligated by law to warranty it when he can make the same building a $100K house?
This post was edited on 7/21/14 at 1:36 pm
Posted on 7/21/14 at 1:34 pm to SetTheMood
quote:
My builder gave me a lump sum price to build my house with a certain level of amenities. If we changed something along the way that didn't entail more labor than the original selection, our final price went up for the value of the modification, without any markup. We even paid some vendors direct for certain overages.
This is how I have always done it. It's more straight forward IMO.
Posted on 7/21/14 at 1:36 pm to kingbob
9% is great. I don't believe many custom builders can stay in business offering that rate to a lot of customers. I don't think the 12% rates are reasonable (on a builder's side) either unless it's building a home that is spec'd out to the max and you absolutely know your costs.
Typically a builder will give an allowance for things like light fixtures and floor covering. His markup is on the allowance. So anything over the allowance is paid directly to the vendor and he would not mark it up.
Typically a builder will give an allowance for things like light fixtures and floor covering. His markup is on the allowance. So anything over the allowance is paid directly to the vendor and he would not mark it up.
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