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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 3/2/14 at 5:42 pm to MikeBRLA
quote:
I agree. The only way I've ever built is a cost plus deal. Of course you have to trust you builder. If you don't do cost plus you are begging to have your builder cut corners IMO as it will improve his bottom line as mentioned above.
What is cost plus? Is it cost plus 12% or is it cost plus $30,000 for example?
If anyone has cost plus builders they know are good in the Baton Rouge area I'd like to hear a name so I can go talk to them.
Posted on 3/2/14 at 6:14 pm to BeerMoney
quote:
What is cost plus?
cost plus is the builders actual cost plus a percentage of that cost...i.e. 12%. He spends $100 on material, you get a bill for $112. Flat fee is a fixed amount regardless of the scope of the house.
The downside of flat fee is you'll quickly lose the builder's interest if the project drags out beyond the target completion date. He'll probably pad his fee some to cover this risk, which means you are paying too much if he completes on time. If there is an architect or interior designer on the job, he'll pad the fee more.
Cost plus typically works with the builder submitting invoices to you every week or two for payment. You require him to submit the invoices he gets from his subs and suppliers, you pay that plus the markup. The challenge with this scenario is typically project financing. Is there a construction loan? Who is taking out the loan, you or the builder? When can draws be made? etc. How does the cash flow to the builder line up with when he has to pay for materials and pay his subcontractors? What is his risk if you walk in the middle of the project?
Posted on 3/2/14 at 6:34 pm to ForeLSU
Thanks for the detailed explanation. I'll have to talk more with the two builders I've spoken with concerning what you pointed out about financing. Based on your explanation they're both offering cost plus arrangements. The one who asked about my budget asked if I'd talked with any financial institutions concerning financing. I have talked with my bank but probably need to go back now that I have a better idea about the cost.
Posted on 3/2/14 at 6:58 pm to guttata
guttata what builder did you use? I ran across another one of your posts in an older thread and it seemed like you had a good experience.
Posted on 3/2/14 at 8:53 pm to MikeBRLA
Cost plus contracts? Let's see? Hmmmm.
Builder buys from supply houses his brother-in-law owns, his friend runs or his fishing buddy manages billing. Nope, no room for fraud here. This is SURE to get you the best deal EVER!
Builder buys from supply houses his brother-in-law owns, his friend runs or his fishing buddy manages billing. Nope, no room for fraud here. This is SURE to get you the best deal EVER!
Posted on 3/2/14 at 9:09 pm to HubbaBubba
quote:
Builder buys from supply houses his brother-in-law owns, his friend runs or his fishing buddy manages billing. Nope, no room for fraud here. This is SURE to get you the best deal EVER!
You missed the part where I said you have to use a builder you can trust
Want me to list the ways a builder can screw you over on a percentage contract? They are numerous a well. Some have already been mentioned in this thread.
Posted on 3/2/14 at 9:52 pm to MikeBRLA
The fellow I used is with Siegen 7. Name is Dale Cobb. He did good with us. From the time he scrapped the lot, till we were in the house was around 51/2-6 months. Did everything he promised and actually finished a little quicker than we thought he would. We ended up 4% over budget which we thought was pretty good.
Posted on 3/3/14 at 12:40 am to BeerMoney
quote:
We basically sat down and discussed every aspect of the house plan. All the materials such as counters, flooring, insulation, veneer, roof. We discussed our property where it would be built, etc.
I was going to say the budget is likely used due to not having a defined scope and idea of the quality of materials/appliances you're looking for, but if you discussed the project in this much detail I'm surprised he asked for a max budget.
Posted on 3/3/14 at 7:11 am to guttata
quote:
guttata
Shoot me an e-mail: ziggy.td@gmail.com
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 9:46 am to ashy larry
Our building experience was pretty simple.
We were given a per square foot price to build without the lot, as we had purchased it in advance.
We worked with the designer on the plan, and the builder gave us a budget for countertops, cabinets, appliances, lighting, flooring, everything.
Everything except lighting, we came in under budget and was able to do some upgrades like an outdoor kitchen, whole home sound system. My wife fell in love with a $2000 chandelier for the main foyer on a $3500 lighting budget, so we had to come out of pocket about $1000 when it was said and done for lighting.
I paid for some home automation things on amazon as well out of pocket.
We were given a per square foot price to build without the lot, as we had purchased it in advance.
We worked with the designer on the plan, and the builder gave us a budget for countertops, cabinets, appliances, lighting, flooring, everything.
Everything except lighting, we came in under budget and was able to do some upgrades like an outdoor kitchen, whole home sound system. My wife fell in love with a $2000 chandelier for the main foyer on a $3500 lighting budget, so we had to come out of pocket about $1000 when it was said and done for lighting.
I paid for some home automation things on amazon as well out of pocket.
Posted on 3/3/14 at 9:48 am to ashy larry
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 there opinion.
Great post.
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 there opinion.
Great post.
Posted on 3/3/14 at 10:44 am to saderade
quote:
Depends on what items you mean. $3/sq wood flooring vs $10/sq exotic wood shouldn't make much of a difference. GE appliances vs Viking/Subzero doesn't make the contractor work any harder. High end marble throughout vs granite etc.
Higher end products/finishes almost always require more work. That's not an accurate statement at all.
At a certain point it probably does max out, but for example installing a GE slide in range with a micro-hood vs a wolf gas range that requires special ventilation piping/blowers etc. is more work.
Posted on 3/3/14 at 11:15 am to ashy larry
Thanks for that post. I hadn't thought about the hiring someone building houses exactly where you are thought. I've been looking at builders in the Baton Rouge metro area but not specifically Prairieville where my property is located.
The price per square foot thing seems to be a useless metric to me. It refers to living area correct? But still it contains the cost for garages, driveways and other non-living area costs. I've already had this first builder come back and say look I think I'd have to bid this project at $125 a square foot so apparently builders think it's worth using.
The price per square foot thing seems to be a useless metric to me. It refers to living area correct? But still it contains the cost for garages, driveways and other non-living area costs. I've already had this first builder come back and say look I think I'd have to bid this project at $125 a square foot so apparently builders think it's worth using.
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 3/3/14 at 12:06 pm to BeerMoney
quote:
I've been looking at builders in the Baton Rouge metro area but not specifically Prairieville where my property is located.
BR to Prairieville may not be too bad depending on the builder. A few years back a friend had his house built by a contractor that lives/lived near Zachary. This guy was building houses in Zachary, Central, BR, St. Francisville, & Prairiville at the same time. In my opinion, that is too much time on the road, and I'd rather a contractor that can check on my house daily. The builder would try to convince you that he could handle it b/c he has good subs, but I'd never let someone stretched that thin build my custom house. Ftr, this builder (far as I know) was a one man band. Some contractors have superintendents/foremen that allow them the ability to spread out some.
quote:
The price per square foot thing seems to be a useless metric to me. It refers to living area correct?
You are correct on both accounts. It is what most people use even though it's a terrible method. The problem is there really isn't a better metric to 'ballpark' costs. This is why detailed bids are so important.
quote:
I've already had this first builder come back and say look I think I'd have to bid this project at $125 a square foot so apparently builders think it's worth using.
It's useful only b/c there isn't a better way to do it, and it's the same language that everyone speaks. When bidding a single project, the price per ft isn't a bad method. The problem is people get hung up on it. Dig through old threads on here and the OT and everyone loves to brag about their price per sq. ft. It's virtually useless when comparing separate houses. My house was about $10/ft more expensive than one of my neighbor's house. Take one walk through each house and you'll understand why the difference: (higher ceiling, better finishes, custom shower, bigger porches, outdoor kitchen, unfinished bonus room, etc).
Posted on 3/3/14 at 4:41 pm to HubbaBubba
quote:
Builder buys from supply houses his brother-in-law owns, his friend runs or his fishing buddy manages billing. Nope, no room for fraud here. This is SURE to get you the best deal EVER!
If you're in a cost plus contract not verifying the prices quoted on an invoice, you probably shouldn't be doing any construction or development then.
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