I have no idea, really. We live in the Midwest and got several bids that ranged from 4-15%. I think there are alot of variables.

I guess I should say we are in the south, central Alabama. How should a GC bid on the job? Should they add in a 10-15% over run in their bid? We have such huge number swings that it seems crazy, really, seriously $200k difference in a couple of contractors and we are 3700 sq ft heated and cooled, pretty modest house for our neighborhood! I will concede that we are a total build out of about 4500 including screen porch, storage and covered patio.

The bottom line is......The maximum amount s/he feels can get in their market. What % markup do you pay for a car...furniture....clothes....food....land....etc...etc...etc...??...Everybody in business marks their merchandise up as high as the market prevails.

Well it depends on many things. Does he have an office, staff, trucks, marketing expense etc or is he working out of his house and /or truck. Not that it makes them any better or worse but you have to understand there is a difference. A contractor has a right to make whatever he /she decides is needed or reasonable to manage your project and make a reasonable profit for doing so. There is a difference between contactors as some will manage your project very closely and manage everything closely and other are much looser and are less detail oriented.

You need to be sure you are dealing with someone who is used to dealing with projects equal to yours. Some guys are actually doing much of the work and manage the project for a smaller fee. Others sub everything out and charge a higher percentage. It may also depend on how detailed your drawings are, how many selections you have made yourself ahead of time, how much time you are going to need to get you through the project. Some clients are easy to deal with some are incredibly crazy and should be charged double.

I have seen fees as low as 10-12% and as high as 25% on new homes. Usually it is somewhere in the middle. However just picking a number doesnt tell the whole story and its not fair to compare apples and oranges.

Various regions can be higher depending on the cost of living, amount of red tape you have to deal with, how busy they are, how in demand they are and that usually equates to how good they are.

A contractor's mark up is not just profit; it is company overhead as well. The amount is seriously affected by the location and size of the project, the weather and site conditions, the project management/design services required, the quality/sophistication expected and the size of the contractor's company.

Fair question, but tough to answer. Try to lay out some numbers and fill in what you would want. Start with all of costs (subs, material, etc), call this A. Now what are his out of pocket costs? Is your job the only one? If so what do you think is fair for 1/2 year of his time. Maybe he's running two jobs, that may cut that in half. Is he paying a job superintendant. Running one, two, three jobs? Once you've taken a stab at that, you need to estimate overhead (phone, truck, computers, insurance, etc etc)....If just your job I'd add 10% of A. If two jobs, cut to 5% of A, or 10K Let's review....let's say A is $200,000. Two jobs, no superintenant, he does it. He tries to make $100,000/yr.That's the profit. If he had a super and many jobs, I would use the supers cost plus a profit number. Six months would be 50K, youre one of two jobs = $25K. 5% of A is $10K. Summary: 200+25+10 = 235 sales price. To answer your question, markup would be 35/200 = 17.5%. That's the idea. If they throw in a 10% overage for CYA, thats 27%.

I heard prices in Atlanta on 7 figure builds have dropped signficantly, and my architect told me last week that builders are being very negotiable on rates. I hear 10-12 percent is common, while it used to be 15 percent or more. Depending on the percentage, this may not include optional supervisory folks like a personal project manager (on site every day all day long) which some builders offer.

same here in the midwest. Used to be 15%, now it's 9-12%.

Here in Texas the norm is about 10-15%.

Contractors in our area have lowered the percentages and it is causing them problems that are leaving jobs unfinished.

The banks are watching lines of credit and income statements very closely.

The contractors that are doing jobs that are barely paying the bills and have little built in profit are losing their lines of credit. This results in the contractor not being able to stay ahead of the bills and not be able to finish the job. It is becoming a big problem.

People who think they are getting a good deal because of the contractors willing to lower their prices are ending up with half built homes.

The word "should" is important in your question. A contractor "should" charge enough to make a reasonable living. What he does charge is based on his costs and the market. What you should pay is usually entirely determined by the market which varies wildly across the US.

10% to 25% would be as close as I could get to an answer.

I don't know mbwaldrop, how much should YOU make in "profit" from your job? :)

How much should the doctor peforming heart transplants make? How about one who "just" does family practice? "Should" one make more than the other? One certainly charges more than the other, but in the end, "should" that be?

How about the guy who operates the trencher to put in sewer lines? That's a pretty important job! How much should he make?

A home that you plan to live in for the next 25 years is also a pretty important project. The person constructing that should make enough off of the project where their family eats and there is some left over to reinvest in the buisiness to keep the builder working for the next 25 years also.

Capitalism is alive and well and the bear market will have some builders who lower their margins to the razor's edge not survive. I have to say that below around 8%, I don't know of any builder who would make enough off of that job to fix himself a ham sandwich! Peanut butter, maybe, but no ham. 15% allows him to buy holiday presents for his family and buy a new truck for the job and pay his mortgage. 20% might allow him an actual vacation and to contribute to a college fund for his kids.

People building a home are laying out thousands of dollars and it's natural to want to know you're not "wasting" them by overpaying for items. Profit for a good builder isn't wasted money. Just be sure you have a good builder! Way too many of the oh so likable and cheap 10% guys won't be able to finish your home, or will do so so cheaply that it won't be quality construction, or will get their profit regardless in other ways like kickbacks. A good builder who does quality work, treats his customers and his subs right, and who is above board in all accounting aspects, well, what is someone like that worth to you?

Live Wire Oak

That is an excellent post!

As others have said, differs alot. Our builder is only charging about 6% as a contractor fee, BUT...he owns the framing crew and painting crew...so he makes some money there (he was upfront about this from the beginning). Plus, we're on a fixed contract..so i'm just he's making some other in other places.

Thank you all for the input!!! I know that a lot of different things contribute to how a contractor gets paid, either through kick backs or markups or percentages.

A supplier or subcontractor kickback to a GC may legal in a Fixed Price contract but in a Cost of the Work contract it can be a very serious criminal offense. If a contractor bills inflated reimbursable expenses through the US mail he can be charged with mail fraud by the Feds.

We've just gotten quotes from three builders for the home we are planning. One stated his fee at 30%, one 20% and one 10%. The 10% GC was our favorite even before we knew what his bid would be. He also has the best construction methods of the three using a superior wall basement system, 2x6 exterior framing, blown cell insulation etc.

We are in Central VA

Macv, so only if they mail it, not if they hand it to you correct?

mbwaldrop - still fraud just not federal mail fraud but instead state fraud and as an attorney currently licensed in Alabama who practiced there for 9 years that is much much worse . . . Alabama juries DO NOT like fraud, particularly in your part of the state. North Alabama is much better:)

And you say you are from central Alabama . . . ever heard of Barbour County???? That should answer your question!

The first time around our builder charged 15%. This time, 10%. BUT, his wife is our realtor this time and she has lots of incentive to sell our house. We can't start the new build until this one is sold! So, basically, the builder family as a whole is getting about the same when it all ends. I am still very happy about the pricing. We get a quality custom home for a great price.

homeagain-what part of Central VA? We live outside of Richmond. I am very familiar with the builders, suppliers and subs in this area. Are you comfortable naming names?

Way too many of the oh so likable and cheap 10% guys won't be able to finish your home, or will do so so cheaply that it won't be quality construction, or will get their profit regardless in other ways like kickbacks

That's a pretty harsh statement, and doesn't cover all those who get 10%. I am in central Alabama, south/southeast of Bham. Our GC charged 10%. It was him and his truck. Worked from home. No employees. Very little overhead. We were not charged change orders - but only had a few minor changes during construction anyway. He did not get any kickbacks. There were no mark-ups. Either DH or I were on site daily to answer questions, catch problems - none. He was always looking out for our bottom dollar. We have an extremely well built home, and our GC is now a friend of ours. We recommended for friends, he started theirs as ours wrapped up, and they are even better friends.

All that said, you have to be extremely careful when selecting your GC, because ones like ours is rare. ;) I'd be happy to give you his name if you are in my area.

allison0704, I could have written the same about our builder. He's the type of guy that would build your home on a handshake. It was a pleasure to work with him-that is why we are doing it again. We have recommended him to many many other friends who are building fine custom homes. I have a rare jewel as well.

allison - wonder if it makes a difference what your house costs? I am just saying that 10 percent of your house is a nice salary but 10 percent of a smaller, more mid market house may not be enough.

I don't know the answer but just a thought I had . . .

athensmomof3, yes, Eufaula is a great little town! Thank you for the info! We have had one builder bid a cost plus and tack on 15% to each number for overruns and the bank makes us put up 20% for over runs so we end up with a lot of money laying out on the table!

Allison, we are getting 2 bids back today, if they are still high then I will most definitely get the name and number. I assume we are near you because we are just east of Birmingham.

8%

Our new builder is amazing. I think he is able to get that % because he does some of the work himself, so we pay his labor instead of him obtaining subs. We are so lucky to have found him. We've seen several of his homes, toured inside, and he doesn't just build. he incorporated a lot of his own ideas into his builds with the approval of the owners. He is amazingly creative.

We were almost ripped off by a previous contractor that wanted 12% then sneaked it to 13% without telling us. Thankfully we never signed a contract! What a nightmare that guy was.

We paid 10% in the NE. Bids were in the 10-20% range.

I am a small custom builder and I'm sure glad I'm not in the deep South. Otherwise, from what I read here, my family and I would be living in a trailer tent down by the river!

I build usually on the luxurious side on either a fixed price or construction management basis. I'm on site every day and have never built more than two new houses at a time; or, when I had more energy, up to six renos simultaneously.

If, say, a new home costs me $300-$400K to build, I expect to make a minimum $60-$70K for my time over that 6-8 months.

When risk is involved, the expectation rises expotentially. Spec builders here count on a gross profit of $200K-$400K on new homes selling for $1.6 million and up. Of course, they can and regularly do end up losing that amount. There are more one-time builders than you can shake a two-by -four at!

I am sure Eufaula is charming (never been there thank goodness!) but it also consistently has some of the highest fraud verdicts in the US. They call it the Alabama lottery . . .

Which is why fraud in Alabama is serious serious business. And why you need to steer clear of anyone who you think might be getting a kickback.

Here is a link that might be useful: Barbour County

Well I'm not in the deep south. This is a vacation home in an area that breeds millionaires. In fact, it's voted one of the best beaches in the country year after year.

My 8% builder lives in a beautiful home. No trailer or tent.

I am a small custom builder and I'm sure glad I'm not in the deep South. Otherwise, from what I read here, my family and I would be living in a tent down by the river!

Another slam of the south - and, as usual wrong. My builder lives in nice house on acreage, has several luxury vehicles and travels yearly to ski and tour Europe with his wife and adult daughter. He only builds custom (no spec houses), never has more than 1 or 2 going at a time (now), and the second one is starting as the first gets wrapped up. We were #202.

athensmomof3, that would make sense, but we never discussed what his % was on lower priced homes, so I can't answer.

My 8% builder lives in a beautiful home..

And here's why:

I think he is able to get that % because he does some of the work himself, so we pay his labor instead of him obtaining subs.

1 or 2 going at a time (now), and the second one is starting as the first gets wrapped up. We were #202.

There's your answer! Two at a time, to reach #202, I'd need at least 100 years of building. Minimally insulated homes on slabs covered in barrier EIFS is not the standard acceptable in northern climes. It takes longer to build here.

****
Slamming the South? No. Wonderful place. (Well, aside from that slavery thing and the following hundred years of Jim Crow.)

Carl Heldmann's website offers this NAHB survey on average builder costs and profits. (See link.) This most recent survey shows lower margins than the 2007 survey that had been posted.

Here is a link that might be useful: {{gwi:1427119}}

worthy - I know you don't think custom homes in the South are built on slabs. And just to continue the argument, are you saying that building a 2x6 home and filling with r-19 takes longer than a 2x4 home with r-13. Or are you saying that foam takes longer than fiberglass? Or Cellulose?

There are obstacles in the North that slow down home building. I'm sure that you can't pour a foundation in Jan. And snow probably really slows down framing. But insulting the quality of custom built homes in the South, does not truly explain why it takes you longer to build houses in the North.

Now - we don't need to get into what is possibly a bigger issue - inefficient government leading to excess time for permits. And possible union issues.

My super used to be an electrician on LI - the things he described doing just to justify their inflated wages was laughable....

There are crappy homes in the South. Many put up fast d/t fast population growth. Lots of masonite. Lots of that pre-pex plumbing with all the leaks. But I don't think its fair to compare those with well built custom homes in the South. There are less obstacles here so I'm sure they are built faster than in the North.

There's your answer! Two at a time, to reach #202, I'd need at least 100 years of building. Minimally insulated homes on slabs covered in barrier EIFS is not the standard acceptable in northern climes. It takes longer to build here.

If you had bothered to read my entire post you would see:

never has more than 1 or 2 going at a time (now), and the second one is starting as the first gets wrapped up. We were #202.

Notice the "now" this time? ; ) Our home was estimated to take 11mths to build. We finished in 9mths.. and it's not minimally insulated or poorly built and the builder did not do any of the work himself. We had an excellent builder and excellent subs. They showed up daily and worked. We would happily do it all over again with the same group (minus one of the plumbers). I've been on BAH long enough to know that is not the norm.

The rest of your post only makes you sound idiotic. You act as if those problems were only ever a problem in the South... and really, what do either have to do with building a new home? Why were they brought up? Rhetorical questions, of course, as I'm really not interested in your answers.

Dixiedoodle,

We are just outside Charlottesville, Va. I have to drive to Short Pump to shop for my teenagers as nothing in C'ville measures up! When we moved here 5 years ago we really thought we would be relocating to Richmond and even scoped out a neighborhood in Midlothian but we ended up here instead.

homeagain-so jealous! We love Charlottesville/Albemarle...go Wahoos! We try to get over there as much as we can for games and winery visits. :)

Good luck with your build. You are definitely in a beautiful location! And, you don't have too far of a trip to Nordstroms!

Thanks Dixiedoodle.

There is certainly a small town feel to the area. We are building near one of the wineries. You can actually hear the music and see the fireworks when they have wedding ceremonies on site.

Homeagain - WAHOOWA! Love C'ville (did my undergrad there) and would move back in a minute. Nothing compares. Lucky you!

I thought one of the comments was interesting. Are you converting the Canadian $ to American $ on your comparisons? Our custom cost approx. $76 to build, which does not include our 5 acres. It's approx. 5100 sq. ft.-all but 78 sq. ft. finished. I do not consider I live in a luxurious home, even though it has all the sq. footage and bells and whistles my family could ever want or need. I designed it and picked everything in it. We had a wonderful builder who did not gouge us for anything. He was on site almost everyday and his subs loved working for him. I would see them on the building site even on Sundays. Loved my builder, that is why we are building with him again!

FWIW - nowadays Canadian is about on par with American dollars.

Thanks for the update on Canadian $. I used to live on the border-literally could swim across the river to Canada. I moved away 22 years ago and never looked back! LOL My family used to drive over the bridge to buy stuff as it was cheaper with the conversion.