My contract is a combination of macv's post and is written as a fixed price contract, but within the fixed price there is a set fee for the contractor which includes the workmans comp insurance, a set fee for the construction loan carrying costs (separate from the contractor fee), a set fee for permits, and allowance line items for all of the materials and sub-contractors and who is responsible for that line items allowance. For example the contractor is responsible for the lumber allowance and the framing labor allowance, if he goes over the allowance he put into the contract the overage is his responsibility. On the flip side, kitchen cabinets are my responsibility so if I "blow" through my contract allowance that is my responsibility and I can't go to the contractor and expect to get something for nothing. Additionally we have also have an 80/20 split arrangement for every dollar saved on your allowance you get 80% and the other party gets 20%. So if he manages to save me $1000 on framing - he gets to keep $800 and I get $200 and if I save $1000 on cabinets, I get $800 and he gets $200. Also screw-ups are the responsibility of the party that caused them. So if his hired subs screw up something its the contractors mess to fix, but also to be fair, if I hire a sub (I don't expect to but I did reserve the right to hire out my own painter and finish carpenter) and they screw something up that is my mess to solve. Change orders were handled as cost of materials plus an hourly rate. The hourly rate was set at $80.00 (mostly to encourage me not to make changes!) One stipulation I do have written into my contract is that I won't pay a sole proprietor sub-contractor an hourly rate, plus overhead, plus profit. They can bid as either hourly rate and profit or hourly rate plus overhead.

All construction contracts must have a termination clause otherwise when one party whats to terminate the contract (and it might be you) no one will know how to resolve the outstanding issues without going to court which will benefit no one. Don't let the contractor make up a one sided contract; get a professionally prepared contract and use it or copy the relevant portions of it. Here is the termination section of an AIA 107 Cost of the Work contract: "ARTICLE 19 TERMINATION OF THE CONTRACT 19.1 TERMINATION BY THE CONTRACTOR If the Owner fails to make payment to the Contractor for a period of 30 days, the Contractor may, upon seven additional days' written notice to the Owner, terminate the Contract and recover from the Owner payment for Work executed and for proven loss with respect to materials, equipment, tools, and construction equipment and machinery, including reasonable overhead, profit and damages applicable to the Project. 19.2 TERMINATION BY THE OWNER 19.2.1 The Owner may terminate the Contract if the Contractor: .1 persistently or repeatedly refuses or fails to supply enough properly skilled workers or proper materials; .2 fails to make payment to Subcontractors for materials or labor in accordance with the respective agreements between the Contractor and the Subcontractors; .3 persistently disregards laws, ordinances, or rules, regulations or orders of a public authority having jurisdiction; or .4 otherwise is guilty of substantial breach of a provision of the Contract Documents. 19.2.2 When any of the above reasons exists, the Owner may, without prejudice to any other remedy the Owner may have and after giving the Contractor seven days’ written notice, terminate the Contract and take possession of the site and of all materials, equipment, tools, and construction equipment and machinery thereon owned by the Contractor and may finish the Work by whatever reasonable method the Owner may deem expedient. Upon request of the Contractor, the Owner shall furnish to the Contractor a detailed accounting of the costs incurred by the Owner in finishing the Work. 19.2.3 When the Owner terminates the Contract for one of the reasons stated in Subparagraph 19.2.1, the Contractor shall not be entitled to receive further payment until the Work is finished. 19.2.4 If the unpaid balance of the Contract Sum exceeds costs of finishing the Work, including compensation for the Architect's services and expenses made necessary thereby, and other damages incurred by the Owner and not expressly waived, such excess shall be paid to the Contractor. If such costs and damages exceed the unpaid balance, the Contractor shall pay the difference to the Owner. The amount to be paid to the Contractor or Owner, as the case may be, shall survive termination of the Contract." --------- In a Cost of the Work contract, the contractor's proposed cause about cost increases makes no sense and makes me wonder if the contractor understands how a Cost of the Work contract works. Perhaps the contractor means that when costs are greater than the "Budget Estimate" the owner pays the up charge but that is the definition of a cost of the Work contract. Or there might be a Guaranteed Maximum Price that he hasn't told us about. If both parties do not know how to structure a contract (and this appears to be the case) I suggest hiring a design professional or lawyer to advise you in order to avoid unnecessary costly disputes later. This post was edited by Renovator8 on Wed, May 28, 14 at 9:18

Hi, I didn't read everyone's responses or the additional follow up's and you may not really want my two cents, but I am a realtor, we have a building company and I work very closely with several top-notch builders in our area and I just wanted to quickly share how one of the build's we just completed in our subdivision worked out that may help see why we're not all bad and those who think all builders & realtors are just snakes will just have to agree to disagree with me :: Our family owns a 50 lot subdivision that we are developing in phases. We have a construction company that can build up to $500k per our general contractors license limitation. We also have the lots listed thru our real estate firm and I am an agent at that firm. I had some clients very interested in our community who didn't have any clue of what they were doing in terms of building so obviously they wanted us to help them get a great builder to gc their build ... and since the house they wanted to build was about $650k without the $100k land we were more than happy to do so b/c they needed it and we couldn't do it on our license. I as a realtor helped them acquire their dream lot and they actually bought two and decided to put the house in the middle. We helped them interview a few builders who we felt they could work well together and who we knew were top-notch and could be trusted to work with our very first new owners in the community. When we approached the other builder - we told them we would be collecting a 3% of the total cost to build the house itself as a referral to them and we actually helped keep the majority of the books on this particular build b/c it was the first in our community and we wanted to make extra sure it went smoothly. The builders in our area typically profit anywhere from 12% to 20% depending on the complexity of the build and the amount of detail work they'll have to handle with the design, etc. Before we entered into discussions with the other builders we established with the homeowners that we would help them find a builder worth their weight in gold that would build the house for cost + 15% and they were ecstatic b/c like I mentioned the house was over 6,000 sq.ft and had a guest cottage and 3 levels and had blueprints that looked like you were building a skyscraper, etc. It was a complex build and we helped negotiate a cost + 15% which was a little lower than what a typical house of the nature would be which was more like the cost + 18-20% range. When we talked with the other builders up front we laid out that we were referring this and that we had already worked out a cost + 15% and we'd be collecting a 3% referral/marketing fee for bringing them the fee. I think you can see that these owners got a great deal to have the build at cost + 15% and the builder was happy to have the work which made him 12% of the eventual $700k cost to build. There was no snaking and regardless of whether we had been collecting the referral/marketing fee or not, they would have paid cost + 15% or possibly higher for this house. In the end, they have an absolutely phenomenal home that they love ... the build went super smooth, and we all made a little money for bringing it all together. Again, this was built into the builder's fee from the start, the folks new about it and b/c we were involved, they were able to negotiate better overall terms than on their own and they could have cared less who got the final 3% in the end b/c they agreed it was worth it for the quality they got in their final and their dream home they've wanted to build so far. This is what I think is a typical and probably most acceptable manner in which a real estate agent can get paid even on a custom home build. But, if the builder is agreeing to pay the agent the 3% b/c he didn't and/or couldn't collect from the original seller and the then added it on top of what was already established or what would be the norm in your area for a cost + contract to build then I'd look for another builder or tell the realtor they'll have to talk to the original seller to try to get compensated. Sounds like the seller either wasn't offering a commission to the agent at all and they wanted one b/c they didn't have a buyer agency agreement that spelled out that the buyer would pay them directly b/c the seller wasn't paying or it sounds like the agent needs to take the seller to court if they did in fact offer them a commission and then didn't pay. But, either way I don't believe like some folks that realtors have no business being involved in a custom build cost to build as a marketing fee at all b/c I think I described a situation that I've been a part of on multiple occasions that has always worked out well b/c I bring value to my clients in helping them negotiate with their builder and get the lots at good values. I hope this helps and sorry if this has been said before but there were many posts that were as long or longer than mine and I could see most were just opinions from folks who weren't on my side of the fence. We (realtors) aren't all the same and us good ones that are honest and would never do anything to harm our clients are not like used car dealers like I saw in one comment above. Yes, some are and I'll give that to whomever posted that comment, but blanket stereotypes are part of why people in general have such a phobia about real estate and insurance agents and used car salesman - but I could introduce you to several agents/salesman in my area that I know and love dearly as friend/colleagues that would change your mind forever if you'd be open enough to really listen and work with them and let them work for you. Yes, we work on commission, but I'm the type agent who wants to build a trusting and lasting relationship with my clients so that I get multiple transactions over the years that keeps me in a job that pays my mortgage and other bills, etc... rather than one who does whatever they have to in order for you to buy one time and then you realize you got screwed and don't use them again. If I sell you a house or a tract of land, etc... I want to make sure it's something I'd help a family member of mine purchase or something that I wouldn't have a problem putting my money into if I were in your shoes and that in itself has been why my business has been successful and will continue to be. I want to resale the property I sell you and know it's a great listing to have in my inventory and I want to then sell you your next, bigger home that will yes help me in the long run as well. It's not greed when you're genuinely helping folks accomplish their goals and doing so in a manner in which they see brings value. Real estate isn't hard, but it's time consuming and it takes years of grinding out in a job where you wake up every day not knowing where your next paycheck will come from or if it even will come, but we do it anyways and the good ones do it better and more often than the one-hit wanders who only got into it b/c there was a boom ongoing and they thought it was and I quote "Fun to show people houses". Yes, it's fun, but that's about 10% of our job and it is the "FUN" part. My point for this rant at the end is ... please don't be so quick to judge realtors and builders and anyone who works on a commission or performance based pay system b/c there are sometimes things that may not make sense to you but aren't out of the ordinary and therefor may take a little research on your part to learn why and how the situation works before they make sense, but if you ask others who aren't in the know you can and often will get the "all salesman are evil greedy monsters who are out to get you for all they can" comments (not that the original poster of this comment was, but I did see a few that were and were what sparked my comments tonight so I thought I'd share the other side of the fence for a change) Have a great night and if I've offended anyone please accept my apologies and know that I do see there are many sides to each story and am not saying this builder & realtor are in the right. I am urging you to research it with the right folks in your situation and then make the best and most informed decision you can. Maybe even look at a few other builders in your area and one of the best ways to get builder recommendations is ... dum da da dum ... local realtors ... because they see the homes the local builders build and they shouldn't have any problems telling you the quality of any of the local builders & for free. Just remember to return the favor if they do help you get in touch with a good builder who does a good job for you. Hey, maybe even a marketing fee ... but only after they help you negotiate a lower cost + contract than you had before!!! ;) Goodnight!

More and more I'm not so afraid for my safety. I'm beginning to realize that the guy has cash flow issues so he fabricated these fees to finish the job without going out of pocket. It won't work. I also sense that he's not making a profit on my job since I reduced the scope (which I'm permitted to do under the contract, by change order - we have no change orders signed but he did credit me for work removed from the scope already), and instead of asking for more money and explaining the situation (which I'd totally respect) he's cheaping out on labor or making up fees. I want him to make a reasonable profit on our job, I don't want him to do things poorly or in an underhanded way. I could be really wrong but I sense that if he thinks he won't get money from me, he is likely to disappear and move on to someone more into paying him. Meanwhile the architect hasn't returned my call/emails from Friday - I guess I needn't be surprised. I don't think I'm letting this guy back in my house, ultimately. I've been setting up appointments for a roofer, plumber, electrician and flooring person to pick up where they left off. I've emailed him proof of deficient or incomplete work so it's documented. Whatever I pay to new contractors I'll document, let him know that neither he nor his electrician were responsive on finishing up so I got my guy as permitted under the contract, and spent x amount. Same with flooring person. I have less of a leg to stand on with a plumber or roofer but yes I'm tired and want it done. As for a roofer, our contractor vented bathroom fans through the roof. And a dryer exhaust cable. In theory good but rain is getting in through the flat roof somehow. Today a roofer I brought in to look, said it's because the vents are unsealed tin, so when I hear rain through the roof in the walls and it sounds like it's in the ducts, it's really just the sound of the rain hitting the tin from the top floor. But there's still water getting into the third floor pipes area somehow, and the roofer said the duct work to the roof isn't quality and is pricing out for us on building a little mini-roof to protect them from direct rain; a plumber said he would do caps of some sort but then you would still hear rain loudly on the tin. My focus now is on protecting my home, and getting 2nd opinions. And 2nd, getting the job done and problem work fixed as needed, hopefully without the problem contractor's involvement anymore. And my 3rd priority is making sure the contractor doesn't defraud me and/or put a lien on my house for non-payment (even if he's ahead of the game and I'm getting a bit of a shaft). And 4th priority is possibly going after the contractor for anything he legitimately owes me in the end. And lastly, moving on. That's my current game plan anyway.