I am about to start a high end custom home on Hilton Head Island. I am the home owner. For reasons I won’t go into I am committed to one builder and won’t be bidding the job out. The job will be cost plus a fixed fee for the builder. My question, given the position I am in, how can I get a handle on whether the costs for various parts of the job as estimated by the contractor are “reasonable”. Are there websites that can help educate me on how home construction is bid and what would be “reasonable” for various parts of the job: framing, roofing, overhead etc. Any thoughts would be appreciated.
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Well, I guess the depends on how you define "reasonable". Is "reasonable" what you want to pay? What you can afford to pay? What someone else tells you is the "right" amount to pay?
Did anyone prepare an estimate that you're tracking various costs against, so you can monitor variances up-front and adjust on the backend? How was the budget arrived at? Will the builder be required to submit and compare multiple bids for each trade? Will you be approving costs for various trades up-front, or is the work being done time-and-material without a cap?
Since you're asking the question, I'm assuming this situation has left you feeling like you've opened a can of worms you're not going to be able to close later....
Bob
FisherBoy,
I can't imagine why you're committed to one and only one builder. Brother-in-law??
I would go ahead and get bids on some of the separate trades. I.E. Framing, Electrical, Plumbing etc... There's nothing stopping you from getting other bids to use as a comparision. Just make certain the bids you get are for the exact same thing. I mean, construction techniques, materials, etc... Even if you tell the bidding contractor what the bids are for, the worst case is that they will charge a fee to give the bid.
Even if you invest a couple hundred upfront, chances are you could save thousands.
Need me to bid the Trim work?
JimmyO
It sounds as if you enter into this kind of araingement you should be privy to all expenses. You should have a meeting once a week to discuss payouts and subcontract bids. If you are paying a fixed fee for his services then I cant think of any reason he wouldnt be showing to you his expense estimates other than to hide the real numbers
By the way did you know that you owe anyone who answers your post a week of lodging and golf? Say, around early May?
Edited 1/17/2005 1:27 pm ET by maverick
IMHO, the only way you have any assurance of the job coming in at your builder's "estimate of costs," is if you have firmly specified all or most all of the following, and have a good set of drawings that defines pretty much exactly how the house will be built.
Windows, doors, all hardware. All specified by manufacturer, color, options, etc.
Exterior siding, trim, complete with material specs. Including finish scheme and specs.
Roofing materials and accessories. By manufacturer name, series, color, etc.
All cabinetry and built ins. This usually means your plans show all interior room elevations. Cabinetry should be specified as to materials, style and finish choices for doors and drawerfronts, hardware and trim, and accessories such as rollouts, pantry shelving, lazy susans, kniferacks, bread boxes, appliance garages with tambour doors, etc.
Complete lighting and switching schedule, including mfgr, model #s, lamping requirements, lighting controls, etc. Include specs for any special controls such as gang dimmers.
All customized wiring requirements, such as may be required for entertainment centers, home offices, golfcart plug in, etc.
Had enough? I could go on ad nauseum.
You probably haven't dotted the i's and crossed the t's, and that is why your guy is proposing this as cost-plus. Or maybe it's like where I live, with the builders so booked and busy, they just don't have to estimate anymore.
To get the place built, you'll need to make all the choices as defined above, or accept whatever he is telling you is the way he intends to build it for you.
You might want to insist that his "estimate" be based on the style, size, and levels of product cost and finish that he can demonstrate by taking you into at least a couple examples of completed work.
Not far from you, my sister and her husband embarked with a builder on a new home project. The story was maybe like yours. He's a great guy, lives nearby, has built some impressive biggies in the neighborhood, and in working with him they got so close personally, that they felt they couldn't go and talk to anyone else.
It went way way way over budget.
Thanks for all the input. Very much appreciated.
Excuse me for being so blunt but chances are you will get screwed unless the contractor is absolutely 100% honest. I don't know why people get themselves into this type of situation then look for a method of controlling it. I've been in the business for 35 years and I still have trouble with controlling suppliers and subs.
Unless he is 100% and you have construction experience your in for an uncertain time.
If you owe this guy money sounds like you are going to get the shaft. Even if that is the case there is no reason why others cant bid, so you have a jump off. Thats how you learn cost.
I have a rule of thumb. A job is going to take 3 times the amount of time that a client expects, and 2 times the amount that a GC expects. If you plug that into your situation, and they are telling you, expect it will take 2 times as long, and 2 times as much money.
If you owe him money that means you are paying 100% interest.
-zen
Wow! Zendo, you are quite the pessimist!
It isn't necessarily that bad. Let me tell you what the big gun outfits do in my town, building expensive vacation and retirement homes, all on a "cost plus" basis.
Highly detailed plans and specs are done by a local architect, and the design team includes specialists in lighting design, kitchen and bath design, and interiors.
With still a number of product choices left undetermined, like for example the $1500 per set Rocky Mountain Hardware oilrubbed bronze rustic handlesets for the exterior doors, the builder prepares an exquisitely detailed estimate of cost for the project, and leaves nothing out of it.
Since he knows he is building at the high end, he knows to include in the budget the costs for the kind of chandeliers and chef-quality gas ranges the owner will eventually choose.
Oh, I forgot. A construction schedule is laid out, too.
It is all totaled up to a bottom line, a deal is drawn, and work ensues.
Many of these projects go out of the gate, move right along, and finish up on time and very close to, sometimes even under, the original proposal.
Others, because of sometimes ridiculous tomfoolery on the part of the too-rich owners, go haywire.
Thanks, Gene. It really can go both ways.
We had one about 5 years ago go from contract to open ended pdq. Old house with an owner that simply trusted us and our judgement. He was always clear about one thing:
"Whatever you do, make sure I'm not going to see you guys again unless it's to watch a ball game on a Sunday afternoon."
He was thrilled with the end result.
I think you hit the key points that a high level of detail in the paperwork before and during the project will eliminate most of the surprises.
You don't happen to know any of the Frenettes, do you ?
carpenter in transition
I tried to get Jim and Hope Frenette to build my house when I first moved here.
My plan set and specs detailed things down to the cabinet pulls by make, number, and finish. They were unwilling to quote a firm price, and also unwilling to detail out a proposal other than a vague cost-plus.
It made no sense to me. It also made no sense that they were demanding payouts each two weeks.
I walked, and built it myself, for $100K under where their "estimate" was when it still didn't include the interior trim, which was extensive.
Understood......
Hope's brother Paul is an old friend from grade school. He also married into the Frenette family. Wonderful people. I'm sure he is still banging nails with them.
Wish I could remember the name of that old ski lodge in Tupper Lake where they got married. My wife was drinking beer out of some guy's Bally loafer. great day.
carpenter in transition
pick someone you trust ...
then trust them.
one type of contract over another doesn't matter ... in the end ...
stuff costs money and someone's gotta pay for it.
a crook will work his contract to his advantage and steal from ya no matter what contract it is ...
and honest guy will word his contract to his advantage and not steal from ya ...
and .. people over the internet that don't understand a "cost plus a fixed fee" contract will tell you the guy is a crook because he uses a different contract than they signed ....
Jeff
Buck Construction
Artistry in Carpentry
Pgh, PA
i built a house that was featured in House Beautiful..
on a "cost plus fixed fee"... the owner got a good deal.. i got a great experience and some good friends...
but i didn't make a dime..... the fixed fee was based on 8 months work..... and we spent 12 months... and our labor rate didn't cover all of our expenses..
Mike Smith Rhode Island : Design / Build / Repair / Restore
I assume you bought a lot you like from the builder. Ask politely, but in the end demand an itemized if possible, but in any case a firm fixed bid on the construction documents (plans) in question. Have your architect, or if the builder also designed it, your attorney prepare an AIA contract. Expect everything on and spec'd by the plans, (try to specifically spec everything), included for the fixed price. Expect to pay extra for anything that is not.
If you can't get a fixed price, I wouldn't trust the builder or I'd prepare to take my lumps.
Talk to a lawyer. No matter what the reason, brother, best friend, you need to control costs and liability. You should have a contract even if it is a no bid contract to specify all conditions. Especially the ones that allow you to terminate if the builder cannot comply with the stated expectations- finish date, cost overruns, injury, natural disasters.
How much headache do you want for how much return?
Fast and simple to find out if you're being treated right? Find out what previous gustomers think of the guy.. is the money he's asking for seem fair? what quaility of work.?
I can honestly get you ten differant numbers for any job. Nobody is getting rich, nobody is cheating on those numbers yet there they are ten differant numbers. The differance may be in the little things or it may be in the quality of materials used or it could even be in how fast or slow someone is.. fast is fine if quality doesn't suffer, slow is also OK depending on the job schedule.. (when you want to move in)..
I know some legitamate contractors who don't plan on making a cent on their intial bid, they add profit via the change order method.. (darn near impossible to build a house without a few change orders)..
Now you can call every contractor in the area for a bid and you still won't won't know anything more after trying to learn the ins and outs of the contracting business
It's tough but you've got to trust the guy you hired.. if you don't it simply won't work.. get someone you do trust..
good post , frenchy...
fisherboy.... the calls for you to get bids from others are not going to resolve the issue..
one thing i'd like to add about my "cost plus fixed fee" job.... it was a great team
the architect, the builder, and the owner were all on board, all pulling together
check your contractors bona fides, if he's a straight shooter, his previous customers will know...
ask him what the accounting procedure will be.. it should be transparentMike Smith Rhode Island : Design / Build / Repair / Restore