We purchase a lot, primarily for the view from the back of the home. In looking at hundreds of plans & visiting many open houses, we found a builder who has the perfect downstairs plan for this lot; i.e. all the daytime rooms face this view. His handout plan of rooms & sizes (i.e. not a “buildable†plan) says that it is copyrighted, and the fact that we did not come up with the design, tells me that to plagiarize most of it would be unethical if not illegal. To complicate the matter, we’ve met with him to discuss slight changes to accommodate our needs & wallet. “Me thinks†that he wants us to take out a building loan & finance it. I have no problem with this, but I would like control of mark-ups stemming from average building sq. ft. expenses, allowances, upgrades, etc., Some of the readings say that gross profits for home builders range from 20%-30% (please let’s not debate this). Since I lack the experience & the contacts for subs, I don’t want to be the general contractor. In researching, I feel that perhaps a Mangers’ Contract would be best for me. We haven’t said anything to him about this arrangement, but was wondering how to approach this without pis*ing him off. As contractors, please share your comments, thoughts, alternatives?, etc. about approaching him on building.
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My gut feeling is, if you want to be the General, and have a manager working under you, go for the manager's contract. If you want the builder to be the General Contractor, use his contract.
If you take the time to make your choices and decisions in the planning stage, there should be little "upgrades" to be concerned about. Changes in the field, and unanticipated "upgrades" are a PITA - there's a reason they cost a bundle!
And I promise I won't debate your fictitious but humorous "profits" fantasy!
"he...never charged nothing for his preaching, and it was worth it, too" - Mark Twain
Jimz,
"gross profits for home builders range from 20%-30%"
Actually, that sounds like it's in the low to middle range. But what does it mean? Well after deducting Overhead and other liabilities, it means the bulider is taking home from -2%, Yeah, he's losing his azz) to 10% Net Profit before income taxes.
So on a $300K home, which will take from 6-months to a year, the builder makes around $30K. He works 60hr weeks for that. Say it took him 9 months to earn that $30K, thats about $13 an hour. Before taxes.
Now you see why builders have to keep more than one job running at a time.
Why is it that you think builders are making as much as Bill Gates? Is it the shiney truck with his name all over it? The one he has to carry $1M worth of liability on?
Would you hire some sleazeball contractor who showed up in a ratty, smokin' 72 P/U with NO insurance on it. And he's got to stop work every 10 minutes to fix his tools for another day. And misses work at least once a week 'cuz his rat-mobile broke down?
The best value you can get for your building dollars is to find a builder who charges a high enough Gross Profit to:
SamT
I would like control of mark-ups stemming from average building sq. ft. expenses, allowances, upgrades, etc.,
What gives you the right ?!?!
Can you name any business where they wouldn't laugh you out the door for even thinking that?
Phaagh!
If your builder is a "Manager" then you are acting as the GC.
Try again.
I think you are a prime candidate to be posting here in a year a thread about having a half finished house and all the money is gone.
Whatever you area of expertise I hope you earn a living wage and are a dependable employee. In looking for a contractor to build a new home for you, hopefully you would like someone dependable and knowledgeable.
I think you should be looking for a house plan that suits your desires and then look for a contractor with a god reputation and find out what he will charge to build the house you desire.
Worrying about markups is not something to get too hung up on. I could offer to do work for you and promise to limit markups to 30% and use suppliers that have prices way above my normal ones and instead of the framing materials costing 30k they cost 45k and I get a fatter 30%. Had you left me to my own desires I'd have made 40% but your cost would have only been 35k.
I provide a service for which I expect a return on my investment (probably near 200k tools and equipment) and also a living wage. In return I provide the services expected in the time frame stated. I have no shortage of work and no nonpaying clients.
I understand the need to work within a budget but don't be stomping ants while the elephants are charging! On time and on budget should be your goal. Some folks saw value in Yugos.
Jim,
Other than agreeing completely with Sam, I think you have found a good builder based on what information he has delivered to you and his willingness to work along with you.
Why don't you just come up with a budget for the home you wish to build and see how much of that home he is willing to build for that amount of money?
This is probably one of, if not the biggest investment in your life, and it looks like you are starting to nikel and dime before you even get a shovel in the ground.
We DON"T want to see you come back in 10 months with some sob story about the dirt bag contractor you hired.
Be forward, lay it on the line and COMMUNICATE!! You should be talking to the contractor about this, not us. If you can't have this conversation with the contractor, then perhaps the two of you are not a good fit.
And there really isn't much of a thing as "average" building cost per square foot.
That's like saying there is an average car cost per horsepower or number of tires.
We're not here to pound you, don't take things the wrong way.
Good luck.
Eric
[email protected]
It's Never Too Late To Become What You Might Have Been
jimz.... hah... opened a few wounds , huh ?
CM ( Construction Management ) is probably NOT a good idea for you..
it sounds like you like the design but are not sure about the builder..
ask for references.. check them out .. if you hear good things.. hire him as the GC for a fixed price contract..
if you hear bad things, find a new designer and tell her/him what you liked about the first design.. it sounds like you fell in love with a first floor plan... those are easy enough to duplicate.. it's the rest of the design that makes or breaks the finished product
Where I live, the statutory law defines the contractor to be the supervisor (manager) of the project. It is illegal for any person to supervise construction without first having qualified for a contractor's license. The only way you can control markup is to determine by contract what the markup will be. If the contractor wants 20% for his markup (fee) then this is the negotiated fee. In the state where I live, the statutory law requires all mechanics who perform labor and materialmen who furnish materials to submit invoices for the labor or material furnished. Subcontractors and suppliers of rental equipment must also supply invoices. When all the invoices are turned in, the property owner then knows that 20% of the total invoice amount is a specific dollar amount. Progress payments are allowed. A carpenter may have more than one invoice. He may have an invoice each month. Lumber dealers may have monthly invoices. That, however, does not change anything. The contractor gets 20% if that is his contractual markup (fee).
5150 - You have no profile info, but I'm curious - Where do you live? State? County? Country? I've never seen those kinds of detailed regulations on contractor pricing.
Don K.
EJG Homes Renovations - New Construction - Rentals
You know, you've said something like this before. 66141.87.
It's obvious that you've read Arizona Revised Statutes Title 32 Professions and Occupations, 32-1129.02 and Title 33 Article 6 - Mechanics' and Materialmen's Liens. None of which apply to employees.
You should have also read all of Title 33 - Property and Title 23 - Labor. Then you would have known that the contractor is acting as the owners agent for the sole purpose of providing a contractual chain so the mechanics and materialmen can lien a homeowner with whom the contractor is doing business when the HO has taken ocupancy of the jobsite before the contractor was hired. Normally, when an HO takes occupancy before construction, the real estate is exempt from liens unless there is a contractual chain from the owner to the employee. The Contractor is also considered to be an HOs agent when he must defend the HO from mechanics liens.
The only other time a contractors employee is considered an employee of the client is when the contractor is not an Independent Contractor to the client and the client is a business.
You would also know that an unlicensed Contractor, i.e. Mechanic, can only contract to perform work of less than $750 for a HO.
SamT
sm... i think 5150 is the same guy who used to come around and spout this same line about how no one AZ could be an employer...
carpenters could only work directly for the homeowner
he has some weird idea of the application of labor law
or.. he could be someone else who thinks that wayMike Smith Rhode Island : Design / Build / Repair / Restore
Mike,
I was taking a break, so I read/skimmed the AZ codes to research my post to him.
There is a Gotcha in the lien laws about liening an occupied residence. As a workaround the AZ legislature made de facto contractor employees de jure homeowner employees. BUT, only when the contractor has a signed, and, I think, waivered, contract with the HO.
So.
Maybe he got burned by an ignorant boss, and was informed that he couldn't perfect a mechanics lien because he wasn't the HO's de jure employee.
Legal disclaimer: I am not a lawyer. This commentary is not to be taken as legal advice. Consult with an Attorney licensed in your juridiction.
(But I am smarter than 99.9% of all lawyers(|:>)
SamT
(|:>)
Nice hat![email protected]
It's Never Too Late To Become What You Might Have Been
Arizona's mechanics' lien laws state that labor and materials shall be furnished at the instance of the property owner or at the instance of the property owner's agent. It then states that all contractors and subcontractors are agents of the property owner. You can confirm this to be true. So what happens if the property owner employs no agents. That means that labor and materials are furnished at the instance of the property owner and no contractors or subcontractors are employed. In other words, the property owner contracts directly with the mechanics and materialmen employed. Please read section 33-1005. It states that on owner - occupied property no mechanic can have a lien unless he has a direct written contract with the property owner. You can confirm this to be true. Read section 32-1102 of the contractor licensing laws. It states that contractors are superintendents. Read section 32-1127 of the contractor licensing laws. Does it not say that the person who qualifies for the license may be a "responsible managing employee" who shall be the supervisor of the work? Tell the people this is true. Obviously, only a contractor can qualify for a contractor's license. So a "responsible managing employee" who qualifies for a license is the actual contractor. Now read section 32-1122, subsection F. Does it not say that to be a "qualifying party" for a license a person shall have 4 years' "practical or management trade experience"? Confirm this for the readers. The law thus creates 2 classes - contractors who are supervisors (management trade experience) and mechanics who engage in practical trade work. The entirety of the contractor licensing laws relates only to those who supervise construction. Nowhere in the statutory law of Arizona is there a provision for those who engage in practical trade work to obtain a license.
Edited 2/12/2006 8:41 pm ET by 5150
51 varieties.. you're back and you're still full of shid
and if you insist on run-on paragraphs full of legalese..
well... mego..
you're still a one-trick pony....Mike Smith Rhode Island : Design / Build / Repair / Restore
Okay, Okay, Okay 5150....you smoked yourself out....again!
You have your opinion of the law and the judges have their opion. Agree?
What opinion are the judges abiding by...theirs, or yours?
Please....no more quoting that law..just tell me what the judges are doing....because Arizona was on my short list of states to move to and I don't want to be surprised.
blue
Whatever
A little more research leads me to believe that Arizona employees have no right to lien a construction client in any case.
Alll they can do is take their boss to the labor board.
I'm in MO, so I don't care enough to put forth the effort prove you wrong about your belief that your not an employee of your boss. AZ says that if the IRS calls you an employee, so does AZ.
SamT
Passed the View Imagebar yet?
"Citius, Altius, Fortius"
"Me thinks" you want to have your cake and eat it too.
If you want protection, make your changes to his plans up front, work up the detailed specifications, and have him bid the job on a fixed price.
In those specifications (they must be detailed enough to cover ALL materials included in the price, and the plans must include all changes you want from his original) there should be a clause to cover changes and add ons. I typically figure hard cost of labor and material plus 15%. Labor cost includes my time involved in the change/add on at $50.00/hr.
As far as him asking you to take out the building loan and finance the project, well duh.........what's the alternative? You would expect him to finance your home?????????????????
John Svenson, builder, remodeler, NE Ohio