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Started By
Message
Avoid turnkey pricing?
Posted on 8/29/14 at 8:12 am
Posted on 8/29/14 at 8:12 am
I've been plodding through the process of getting my 1st home built. It will be custom and I own the lot already. I just had the preliminary plans completed from which I'll get a few bids. In my casual conversations with a couple builders and the draftsman, turnkey pricing was mentioned. Do I have the pros and cons right?
Pros: No price fluctuation, 1 closing, maybe lower interest on the construction loan since it's through the builder, and easier process since I don't have to worry about draws and such?
Cons: I assume they bid a little higher on the said house to cover the risk of the buyer backing out or construction materials going up.
Whenever, I'm ready to get bids should I just ask that they bid actual cost + fixed fee?
Also, the house is like 2200 living/ 3500 total. The couple builders I talked to before I have plans made were estimating $90 minimum x total (they actually started at $100)! $90 would put me at $143 living
. I want a quality house, but that's not the budget I'm shooting for 
. Any tips on how I start the process of specing the rest of the house so I can get a reasonable apple to apple bids? Would each bid be specific enough where I can see where they are deriving price?
I feel like builders may read the neighborhood the house is going in and just bid high. I'm hoping that's not the case now that I have actual plans in hand.
Pros: No price fluctuation, 1 closing, maybe lower interest on the construction loan since it's through the builder, and easier process since I don't have to worry about draws and such?
Cons: I assume they bid a little higher on the said house to cover the risk of the buyer backing out or construction materials going up.
Whenever, I'm ready to get bids should I just ask that they bid actual cost + fixed fee?
Also, the house is like 2200 living/ 3500 total. The couple builders I talked to before I have plans made were estimating $90 minimum x total (they actually started at $100)! $90 would put me at $143 living
. I want a quality house, but that's not the budget I'm shooting for . Any tips on how I start the process of specing the rest of the house so I can get a reasonable apple to apple bids? Would each bid be specific enough where I can see where they are deriving price? I feel like builders may read the neighborhood the house is going in and just bid high. I'm hoping that's not the case now that I have actual plans in hand.
This post was edited on 8/29/14 at 8:16 am
1
Posted on 8/29/14 at 10:31 am to man117
quote:
I've been plodding through the process of getting my 1st home built. It will be custom and I own the lot already. I just had the preliminary plans completed from which I'll get a few bids. In my casual conversations with a couple builders and the draftsman, turnkey pricing was mentioned. Do I have the pros and cons right?
I may be wrong but I'm not sure a builder is going to finance and close on a house where you already own the lot.
Posted on 8/29/14 at 10:46 am to ForeLSU
quote:
I may be wrong but I'm not sure a builder is going to finance and close on a house where you already own the lot.
Just get construction loan. Can go cost plus or turnkey with that route. Then switch to perm at closing.
Most builders cant finance project on land they don't own
Posted on 8/29/14 at 11:20 am to ItNeverRains
DOUBLE POST
This post was edited on 8/29/14 at 11:22 am
Posted on 8/29/14 at 11:21 am to ItNeverRains
quote:
Just get construction loan. Can go cost plus or turnkey with that route. Then switch to perm at closing. Most builders cant finance project on land they don't own
This is what I thought. All of the people I talked with knew I owned the lot. So, in this scenario, the only thing turnkey would be is "hey I'll bid a total price on the high side and guarantee it won't change"? Is this the correct assumption?
Posted on 8/29/14 at 11:48 am to man117
quote:
So, in this scenario, the only thing turnkey would be is "hey I'll bid a total price on the high side and guarantee it won't change"? Is this the correct assumption?
Personally I would never try to do a fixed price agreement, not because I'm afraid that the builder is going to price it high, but because I'd be worried about getting the house I really wanted.
But yes, the builder is going to price in risk, mostly unknowns. Risk comes from many areas including how much of a pain in the arse you may be, how well the money will flow, what decisions aren't made yet, etc. The last thing you want is to find out your plumbing allowance will only get you apartment grade junk.
Personally if I were going down this path, I'd get a price on building the house to the point it's ready to trim out. Then I'd work on budgets for my flooring, paint, appliances, trim, fixtures, etc. That also gives me the flexibility of using a different contractor to trim out if I don't have a good experience during construction.
Also be very clear about work acceptance and performance standards.
Posted on 8/29/14 at 12:21 pm to ForeLSU
quote:
Personally if I were going down this path, I'd get a price on building the house to the point it's ready to trim out. Then I'd work on budgets for my flooring, paint, appliances, trim, fixtures, etc. That also gives me the flexibility of using a different contractor to trim out if I don't have a good experience during construction.
Also be very clear about work acceptance and performance standards.
Wouldn't the allowances part of the bid cover those? So, in essence any bid I get I can get the structure build price by subtracting the allowances?
I have no idea about work acceptance and performance standards. Other than having inspectors come out and to inspect various stages of the build, what should I be doing?
Posted on 8/29/14 at 1:07 pm to man117
quote:
Wouldn't the allowances part of the bid cover those? So, in essence any bid I get I can get the structure build price by subtracting the allowances?
the problem is you won't really know the base cost unless you ask for that bid separately. It's easy to move stuff around to inflate more profitable parts of a project. Just reduce allowances and jack up framing, drywall, etc. to get to the same budget.
quote:
I have no idea about work acceptance and performance standards. Other than having inspectors come out and to inspect various stages of the build, what should I be doing?
The main thing is just be clear about how disputes and resolutions are going to happen. There is going to something that you're not happy with and a sub isn't going to want to re-do it. Or something that's in will get damaged, etc.
Posted on 8/29/14 at 2:49 pm to ForeLSU
quote:
the problem is you won't really know the base cost unless you ask for that bid separately.
Will homebuilders do this or is it only general contractors?
Posted on 8/29/14 at 3:56 pm to man117
quote:
Will homebuilders do this or is it only general contractors?
It would all depend on the builder, someone who is more of a production / spec home type probably won't, but you probably don't want them anyway. In my area I know a few who wouldn't have a problem with it. They typically always build custom for an owner.
Posted on 8/29/14 at 5:11 pm to ForeLSU
quote:
Personally I would never try to do a fixed price agreement, not because I'm afraid that the builder is going to price it high, but because I'd be worried about getting the house I really wanted. But yes, the builder is going to price in risk, mostly unknowns. Risk comes from many areas including how much of a pain in the arse you may be, how well the money will flow, what decisions aren't made yet, etc. The last thing you want is to find out your plumbing allowance will only get you apartment grade junk.
Most builders vendors will guarantee pricing for 60 days, so if shouldn't be an issue. Most builders require those selections within that period. Any changes are usually cost plus 10-20% so you better love that change.
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