in answer to your first question the GC should give you "pricing" which is based on the information available at the time. If you haven't made many detailed selections the pricing will not be precisely accurate. After you approve the pricing the contract is signed. Understand that the beauty of a cost plus construction project lies in the fact that you as the owner drive the cost of your home. The downside of a cost plus contract is you can easily lose control of cost by not fully realizing that your choices drive the final project number. Another thing that we run into is the owners becoming close with our staff and feeling like a friendship has developed. There is a friendship but you are still being charged for every hour spent working on your job. There are very few "favors" on a construction site.

Have fun!

we were given am initial estimate right after we met the builder and then final numbers once the plans were finished. This was all done prior to signing the contract.

Our contract was part fixed price part variable. The fixed price part covered the structure - the varibale part were alolowances to cover cabinets, tile, appliances, excavation, etc. The allowances were essentially items that were too hard to nail down prior to doing the work (like excavation - you won't know how much rock you have until you dig the hole) or items were we have to make selections.

Since our builder set the allowances - we picked out most of the variable items (lighting, plumbing fixtures, cabinets, granite, etc) before we signed the contract and made adjustments (mostly up) to these allowances. By doing this up front we had a very good budget number so that later on when we finalized these selections, we were able to get something we were happy with. After the contract was signed we did make tweaks to some of our selections, but we stayed within our established budgets.

With all of that - we still overran the total house budget because some of the variable cost items that we could not get solid costs for ahead of time (well, spetic, excavation, driveway) cost a lot more than the builder estimated. That has been a great source of stress for us because we now feel that he pulled these numbers out of his rear end given the amount level of overrun in some areas (e.g excavation was off by a factor of 2!)

The only advise I can give you is to make sure you have plenty of management reserve before you start (i think a minimum of 10%) to cover cost increases and then work the budget as hard as you can before you sign the contract and then from day 1 of the project. For allowance items - try to pick out (and get bids for) the high cost items up front before you sign the contract. You don't have to be exact - but you need to make sure that the allowance will permit you to purchase things that meet your expactations. Based on my experience, I believe that the builder low balled ever single allowance item to make the house seem more affordable than it wound up costing. Sure - his allowances would have allowed us to buy bamboo cabinets from Ikea - but that is not what we wanted nor what he said the alloowance would buy given his great discounts (which turned out to not be that great).

Do not sign the contract until you have a complete understanding of the true costs - as best you can. And then after that - have contingency plans so that if you run into problems, you know where to make trade off's.

Best of luck.

Use me as your "what not to do." We built our house in a cost-plus arrangement. I asked, and asked, and asked for detailed specifications and a detailed control cost estimate. The builder essentially said, "I don't do those, trust me." He is the most talented builder in town, and we really wanted him to build our house, so we trusted him. It worked out for us, but we did end up spending almost $100,000 more than we intended.

Before signing the contract, the builder gave us a number that he thought we would spend in building the house. Then, we made him put a clause in the contract that effectively says for every item we chose that will affect that # (up or down), we will get a change order. That way, we would be able to track where we were in relation to the initial "estimate." As anticipated, that didn't work. The change orders amounted to about $25,000, yet we ended up almost $100,000 over that initial number.

The builder also gave us a copy of the estimate that he gave to the bank. That estimate was about $35,000 more than he told us he could build the house for and told me, "Don't use these numbers; they are inflated." Inflated? Then, why did we exceed those inflated numbers, by a large margin?

At about the 3/4 point through our build, the builder recognized that our costs were skyrocketing, and changed his "plus" component from a percentage to a fixed amount. That did save us a little ... but we were still almost $100,000 over the original estimate.

Lesson for you to learn: Do not sign your contract or begin your build until you have a real estimate in hand that the builder will stand behind. Also, realize that all of those $1,000 - $5,000 upgrades that don't seem so much individually really add up. Did I really have to have the $6,000 bathtub or add the steam shower to the master bath? In hindsight, nope, but at the time I made those individual decisions, it didn't seem like that much money. Now, changing the hardwoods from oak to walnut ... that's a cost worth it because the hardwoods now make an incredible impact.

I love my new home. It's perfectly built and exceeds my expectation. Fortunately, we saved like crazy during the year that we built and were lucky enough to sell our prior house early and fall into a house-sitting situation where we lived virtually rent-free for a good 7 months. That enabled us to still close on the house, even though we were way over budget. There were a few very stressful weeks when it looked like we were going to have to walk away from it because it ended up so expensive.

Our builder gave us copies of all receipts and invoices every two weeks, so we were able to track the mounting expenses. We just didn't have a real control estimate to use to gauage when and where we had exceeded budget.

Good luck and learn from me!

We did cost plus. He gave us an initial estimate, which helped us make some final design changes to get down to our budget. After a 'final' estimate he set his fee based on his percentage (10%). His fee was then FIXED, spread monthly over the entire 8 month process. We then paid all the bills. He gave us monthly updates on the estimate vs actual in each category so we could see how we were doing. We finished at only about 5% over the estimate. On some items early on where we came in under budget we were able to splurge later because we knew we were OK. Bottom line is you will probably pay a little more with cost+ but get a better quality house. The builder has no incentive to cut corners to ensure he makes his profit, as his profit is already guarenteed.

Cost plus can mean different things. You need to search this forum and read everything about the different types of contracts. For example, is the builder required to get multiple bids? How is equipment that the builder supplies to the job billed? Assuming you are responsible for theft, will your insurance cover? Is a site manager an employee that the build invoices as a cost? What about items you purchase directly? What about the cost of items that must be repurchased due to errors on the part of the builder or subcontractor? Who is responsible for paying the bills and obtaining lien releases?

Have you considered a flat fee?

Thank you all so much for your input. It just reinforces how we are feeling. We have found a builder we really like and we thought we understood the sequence of events based on previous conversations.

Shawneeks, we thought our process would be exactly like yours, did you actually make out the checks to suppliers and subs or see the invoices and then pay 'through' the GC?
Yesterday she brought up signing a contract prior to her bidding the plans-we thought that we would sign after getting the bid. We have talked price per square foot ranges, and possible costs for the various line items based on other homes she has built. Our plans are not finished yet so we don't know how close these estimates will be to the reality of our design on our site. In addition we expect that we will have to make adjustments to our design or selections in case the bids come back higher than were estimated.
Soonermagic, the situation you describe is exactly what we are afraid of, what if her estimates to this point are 'optimistic'?

We also had a few reservations about some of the language in her standard contract. When I brought up these two issues-the contract language and our not willing to enter a contract without a bid she seemed offended.

We had not planned on getting multiple bids from different builders for our plans, we felt we had done enough research on builders and local costs that our plans are within our means and we chose our builder based on many things but her cost estimates did fall in line with all of our other research.

Thanks for sharing your experience we will benefit from it I'm sure!

Thanks for posing those questions, those are exactly the sort of details we want pinned down before we officially agree to a deal by signing a contract. Based on previous conversations and notes we thought we understood how all that would work but since there was a miscommunication about when the contract would be signed we feel like we need to really step back and look hard at all the details again. Regarding the flat fee, the arrangement works out to a flat fee after the bid. The plans are bid and the builder charges a 10% fee on that estimate whether or not the we stick to the budget.