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Building house for first time questions
Old 01-05-2006, 11:37 AM   #1
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Building house for first time questions

I am going to meet with a custom home builder on Saturday. The only reason I am looking to use that builder is that he owns the lot that I want to build on so I don't have too much of a choice. He quoted his fee at 14% of the cost of building plus land. The general contractor my family has used in the past always charged <10k to build 200-300k homes. Knowing my family I figure that their general contractor is one of the cheapest out there. What is the normal charge for a custom home builder/general contractor ? When he is quoting as percentage of cost what is his motivation for taking best bids/ is that the normal what they operate?
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Re: Building house for first time questions
Old 01-05-2006, 11:49 AM   #2
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Re: Building house for first time questions

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Originally Posted by boutros
What is the normal charge for a custom home builder/general contractor ?
Eight years ago I paid a flat fee of $20,000 to a general contractor to build a custom house with a construction cost (excluding land and contractor's fee) of approximately $225,000.

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Re: Building house for first time questions
Old 01-05-2006, 12:22 PM   #3
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Re: Building house for first time questions

Depends on how much custom work and handholding you're going to need. Some quote a flat rate, some a percentage. I hate percentage deals as the guy has an incentive to keep the costs up.

About 10-15% for an average build is about right. REW's 20k for a 225k house is about right.

If you want a lot of artisan type work (let say poured concrete counters, "quiet" rooms, acoustic rooms, low energy/high efficiency construction etc), the GC has a lot more work and a lot more finicky people do deal with, so he may prefer a higher fee or a percentage to cover any unforseen time and effort on his behalf.

If I were you, i'd be a little uncomfortable about feeling I had no choice in builder. If I wasnt completely comfortable with this builder and his price structure, i'd find another piece of land.

Ask him to show you a couple of homes he's built. At least one thats nearly new and one thats at least 3-4 years old. Meet the homeowners and see how much crap he doesnt get right in the first place and how much stuff starts falling off the house after 3-4 years. Bring a building inspector with you to look at the homes he's built and give you an appraisal of how much has been done minimum to code and how much has been "done right".
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Re: Building house for first time questions
Old 01-05-2006, 01:50 PM   #4
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Re: Building house for first time questions

I agree with the only one choice of builder comments. I can pay some fee to use another builder. But he hasn't disclosed what that will be. How negotiable is a contract with a small homebuilder?
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Re: Building house for first time questions
Old 01-05-2006, 08:06 PM   #5
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Re: Building house for first time questions

Well at least in our area the lots are controlled by builders. They really don't let the lots go to other builders. If it was me and I spent a lot of time to track down raw land, develop the land, deal with zoning issues, neighbors, etc my fee would be at a minimum the profit from building 1 house. After marking up the lot to market price.

Land is at a premium. That is the gold. The house is an afterthought. Probably would not pay to have a different builder build on the developers lot.

Good advice to look at the Builders portfolio. Couple years old, etc. I would be worried about the process as much as anything. Is the Builder organized? Does he have a schedule? Timeline for product selections? Or is he mainly a spec builder? Meaning, builds the house with no particular buyer in mind. Then put it on the market for sale after finishing it. Spec builders are not neccesarily the best for "Custom" building. They are 2 different animals. Custom Builders are hand holders. Spec Builders are usually Spec builders because they are not good at hand holding, or just don't like to do it.

14% is actually a little low. It depends on what is included as "cost". I would try to negotiate a flat price. With your product selections already picked out prior to construction starting. As few allowances as possible. The more time you put in on the front end the better. It will also allow you to feel more comfortable with the Builder. (or uncomfortable)

But many areas of the country work on cost plus. Just make sure you define cost. Many costs have gone up dramatically. Cement is in shortage. Drywall too I believe. Contractor may prefer to work cost plus to deal with price spikes.
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Re: Building house for first time questions
Old 01-05-2006, 08:21 PM   #6
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Re: Building house for first time questions

Hi butros,

Some possible red flags here. The builder has done this many times. This is your first. Best source of info is other homeowners...his past customers. Typically these guys have all aspects wired. From materials to appliances to funding. How are you financing this? Loans? What about insurance? I'd be a nervous wreck. Forget about DW.

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Re: Building house for first time questions
Old 01-05-2006, 08:35 PM   #7
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Re: Building house for first time questions

You've had some good advice so far. I think profit depends on the area - here in the PNW 12% is pretty typical.

An important point is to find out what that includes - he will of course add taxes, but what about his "general conditions" like equipment rental, insurance, bonding, office overhead... make sure that he's including or at least itemizing these things for you.

Get a copy of his standard contract and have your lawyer look it over. It should include procedures for changes to the contract, including profit on those, and clauses for what happens if either of you chooses to terminate, etc. Before you sign a contract you should have a complete itemized list of costs included. Try (talking to neighbors or the city building department) to find people he's worked for that he may NOT give you as references.

You could insist that he get multiple bids from 2-3 plumbers and electricians, to make sure prices are fair, but he'll probably balk, saying he wants to use people he knows and trusts, and if you insist he'll get prices from others known to be high...

I always have my clients interview at least three contractors before choosing. Usually it comes down to a "gut feeling" about someone you can trust and feel comfortable with...

Who is designing this "custom home?" To me that means it's not just a house out of a plan book?? If so your architect or building designer should be guiding you through the contractor selection process...

I could go on and on, but I guess I just did.
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Re: Building house for first time questions
Old 01-05-2006, 09:43 PM   #8
 
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Re: Building house for first time questions

Your cost will be 20% more than the quote and it will take30% longer to build than agreed to.

Factory Built Homes address this problem, delivered when they say they will at the price they quoted.
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Re: Building house for first time questions
Old 01-05-2006, 10:02 PM   #9
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Re: Building house for first time questions

Quote:
Originally Posted by Howard
Your cost will be 20% more than the quote and it will take30% longer to build than agreed to.
My experience

Additional cost: 4%
Additional time: 33%

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Re: Building house for first time questions
Old 01-06-2006, 05:43 AM   #10
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Re: Building house for first time questions

Don't forget to invest in good work boots, hardhat, and clip board.
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Re: Building house for first time questions
Old 01-06-2006, 08:48 AM   #11
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Re: Building house for first time questions

Quote:
Originally Posted by BUM
Don't forget to invest in good work boots, hardhat, and clip board.
True. I visited the work site every day to keep an eye on things. Well, except for the 5 week period after the slab was poured when no work took place because we were waiting for the framing crew to finish up on the 15,000 sq ft house they were working on for a drug czar wealthy Mexican businessman.

Off topic (I know, so what's new?) the framing subcontractor had a degree in math but loved working outdoors. He did all the calculations for the cuts manually using a pencil and pieces of scrap lumber, no calculator involved. He and his crew of 6 did only custom homes, so each job required him to 100's of calculations. He seemed to really love his job, even though the temperatures reached 105F or more. Go figure (he did).

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Re: Building house for first time questions
Old 01-06-2006, 10:09 AM   #12
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Re: Building house for first time questions

Quote:
Originally Posted by Howard
Factory Built Homes address this problem, delivered when they say they will at the price they quoted.
Huh, cause I just read an article that likened manufactured home salespeople to car salespeople, saying that its almost impossible to get a solid quote and delivery time, that everything is an 'estimate' or 'approximate' and that costs always escalate by delivery and that the delivery is never on time.

I was kind of surprised; I figured this would be an area where costs and delivery would be pretty solid.
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Re: Building house for first time questions
Old 01-09-2006, 11:58 AM   #13
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Re: Building house for first time questions

Thanks for all the helpful replies. The it turns out that in addition to the 14% charge there are also itemized charges for this like bookkeeping (1500) and leg work (500). He does have a buyout clause in the contract that I would have 1 year to sign building contract with him or pay him 15000 to use another builder. He is quoting 72k for the 1.7 acres and he paid 64,500 5 months ago for it.
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Re: Building house for first time questions
Old 01-09-2006, 12:29 PM   #14
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Re: Building house for first time questions

See if you can get a commitment that he will work full time on your house until it is done. There seem to be a number of contractors (of various types) that like to put in a half day here, two days over at that job, then take off a week because the weather is so nice.

On a recent electrical upgrade at our house the electrician did five days of work - over three months.

A friend in Berzerkley had his 19teens home significantly remodeled, and since it needed custom milled lumber to match the existing structure it wasn't inexpensive. But the contractor he hired was a bit of a perfectionist and so were his crew, and they showed up and put in 8 hours every day week after week until the project was done to everyone's satisfaction. He thought the higher price he paid for this contractor was worth it.

cheers,
Michael
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