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What type of contract should I consider?

15 years ago

We're going to be building on a lot we already own (paid $73,000) and need to keep the costs down as much as possible. Originally I thought we would do fixed cost contract because our budget is soooo tight. Well now it's even tighter. Instead of having $500,000 to spend, the figure is going to be closer to $400,000. So with a few exceptions the house will be very basic. There no longer will be frameless shower doors or stone in the baths. We will not pay upcharges for stainless appliances and will instead use black. There will be no custom cabinets. We'll go with a semi-custom line instead. However there are some things we won't compromise on. We will have stained craftsman woodwork throughout the downstairs, soapstone counters and a 48 inch gas range.

My question concerns how a cost plus contract might apply to our situation. I understand that we would pay the builder a percent of all of the costs involved with building the house, but how does that apply to the choices we make in things like lighting and appliances? For example since the range we'll be buying will cost about $7000 more than what a typical appliance package would include, does this mean that we would have to pay the builder 20% extra on the cost of the upgraded range? We also are looking at a light fixture to be purchased through an art gallery. Would we have to pay the builder a percentage of the cost of the chandelier? What about other things that we might purchase ourselves? Although I trust our builder will do a fine job building the house for a fair price, I will be VERY involved. I will make many purchases myself off of the internet, through local artists, and off of craigslist. We've even talked to him about doing some of the painting and cleanup ourselves. How does that fit in with a fixed price or a cost plus contract.

We are thrilled with the builder and his reputation around town. Everyone, including a bed and breakfast host, said that he was one of the finest craftsman around and just simply a good man. We just don't know what type of contract would be the best for all in our situation. We will only be financing around $200,000 of the total project if that matters.

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