Fixed vs. Cost-Plus Contracts
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8 years ago
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Joseph Corlett, LLC
8 years agorenovator8
8 years agolast modified: 8 years agoRelated Discussions
Advice on a Cost Plus Contract
Comments (7)I don't see why a contract (cost plus or fixed fee) has to include the cost of appliances. IMHO appliances are NOT part of the house anymore than draperies or the television set are. In fact, we chose to buy our appliances separately rather than add them to our mortgage because appliances typically wear out and need to be replaced long before the mortgage is fully paid off. It is not sensible to still be paying on these things long after they're worn out! In your case, just tell your builder that you will be purchasing the following list of appiances and installing them your self and that they are not to be included in the contract. You will provide him with necessary information regarding water/electric/gas lines and the sizes of cabinetry opening necessary. If you're doing all the work of finding and purchasing the appliances and waiting for their delivery, and the appliance provider is doing the installation, why should builder get a percentage? He gets paid for running gas/electric/water lines to the appropriate locations so the appliances can be installed. Doesn't make any more sense that he should get a percentage of the price of the appliance than that he should get a percentage of the price of your TV, stereo system, electric toothbrush, just because you're going to be plugging them into the wall! IF he is going to be advising you on your selections, doing the ordering, waiting for installers to arrive, supervising installation, AND dealing with any issues that should arise if one of the appliances goes on the fritz 6 months after you move in, then it would make sense that he should get a percentage. Otherwise not....See MoreWhat kind of contract is this--fixed or cost plus?
Comments (4)It appears to be a turn-key (not owned by you until finished) Fixed Price contract with Allowances for some items. Allowances are like small Cost of the Work contracts within a Fixed Price contract. These Allowances should be well defined in the contract. I've never known anyone to be responsible for permit fees other than the owner of the project but if the builder owns the project until the end I guess the permit fees would be part of the Fixed Price unless specifically excluded or listed as an Allowance....See Moreneed some help!! cost plus contract?
Comments (8)Thanks luckymom23 & juniork! We are building in VA. We are talking to the builder today and have a list of questions to ask. The main one (after we hammer out a fixed price contract for the bank) will be adding and addendum that spells out the terms of the cost plus idea. The bank is fine with an Addendum, or at least the VP said as much by e-mail last night, so long as it's clear that the bank funds are separate. We can deposit our own money with the bank and they will release it along with the bank draws. It's not really cost plus 10%. It's cost plus 10% plus the fixed fee which is allegedly an incentive for the GC to not shop for high bids to charge the 10% on those high bids. But if the GC normally uses the same subs all the time then they know how much all of this stuff will cost....or at least they can project pretty close except if materials sky rocket again. The cost plus builder wants to make sure they are covered, which we understand. They don't want to do a true fixed price in case costs change dramatically like they did with hurricane Katrina. Looks like we will do a hybrid contract if they go for it, fixed price but with us getting receipts and requesting draws based on those receipts + 10%. The budget will already include the 10% so i.e., it's $16K for sheetrock, insulation and labor and the budget says $20K then the draw will only be for $17,600 (cost +10%). The budgets are all being projected based on bids from the usual subs. I know that the painter for the GC we prefer charges $3.25 psf and he does not spray but uses rollers. That is because if the GC has to touch up then it won't look horrible with their brush marks over a sprayed wall. The $3.25 psf includes labor so we don't need to worry if it takes him and his crew 2 weeks to paint our house. We will not need to be involved in selecting the subs. The GC's all use the same subs for every job. The GC we like best has used the same subs for about 7 years and the finished (and under construction) houses we saw all used basically the same subs. The trim work was AMAZING!! I wish I had taken photos. Our builder friend was very impressed - especially with the california closets (varnished bars) and the trim work behind the toilets (molding around the toilet valve instead of just sheetrock and paint). They just seem to do the little extras and that is why we like them best. We do count the garage when calculating the price per square foot, right? If we count the garage then we are paying (depending on which builder) $123 - $130 psf for 3705 sq ft assuming the cost plus contract comes in at budget and not one penny over. This does not include the payment for the lot though. Builder # 2 gave us a fixed price contract estimate that includes a $40,000 GC fee. And the 3rd builder wants a $24,000 GC fee with a fixed price contract. So yes, the builder we like is in line with all the others - right in the middle in fact as far as final price (assuming the estimates are dead on). Another thing we are requesting is that certain items NOT be on the budget. We see no reason to pay 10% extra for an appliance since the whole point in buying it on our own is to save money. I found a great deal on a 36" gas cooktop and it would defeat the purpose of me getting the deal on it if I pay the GC 10% of my cost in addition to the labor I know we need to pay for the install. I also plan to get my own kitchen cabinet hardware so we plan to ask that those items not be on the budget. I'm not sure if that will fly but we are asking. Thanks so much for the advice!!...See Morecost-plus contracts - good idea?
Comments (2)In this environment I would not do any kind of conventional deal with a contractor. I have a unique deal with my contractor. He has a crew of 16 that he wants to keep busy and a family to feed. So we worked out a detailed budget that we both agreed on. He will do everything up to puting on the roof with his crew for what's in the budget (except for the excavation, which it looks like we will save $5K from our budget). Then he gets a percentage of what he saves me from the budget for the excavation and tthe rest of the work to completion. He guarantees the work for 2 years after the final punch list is completed. I had gone out for bid on most of the items as an OB before I cut a contract with him so I knew what the various subs and material might cost me, worst case. The bank accepted the budget and the contract for financing (we have FICO scores around 800 so that probably helped a lot, and the banker told us that if she was going to build a house she would use our builder). We are 1 month into the build and things are going well (the CMU has been layed and grouted). It looks like we will build a real super house (3,000 ft^2 livable, all knotty alder doors and trim, 10 ft ceilings, Certainteed siding, steel roof, 1000 ft^2 AmeraDeck, 2 tray ceilings [great room and master BR], 750 ft^2 garage and about 800 ft^2 boat and storage area in the crawl space for about $140/ft^2 livable)....See MoreGreenDesigns
8 years agojellytoast
8 years agolast modified: 8 years agoweedyacres
8 years agojellytoast
8 years agolast modified: 8 years agojrb451
8 years agolast modified: 8 years agocookncarpenter
8 years agolast modified: 8 years agoJoseph Corlett, LLC
8 years agorenovator8
8 years agolast modified: 8 years agojellytoast
8 years agocookncarpenter
8 years agolive_wire_oak
8 years agolast modified: 8 years agoweedyacres
8 years agoJoseph Corlett, LLC
8 years agocookncarpenter
8 years agojellytoast
8 years agorenovator8
8 years agoJoseph Corlett, LLC
8 years agobry911
8 years agolast modified: 8 years agorenovator8
8 years agolast modified: 8 years agoJoseph Corlett, LLC
8 years agoJoseph Corlett, LLC
8 years agorenovator8
8 years agolast modified: 8 years agoJoseph Corlett, LLC
8 years agocatbuilder
8 years agorenovator8
8 years agolast modified: 8 years ago
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