Cost Plus Home Builders

[tpack]

With the "Huge" increase in lumber and steel materials used to build a new home or Barndominium and remodels the past year due to Covid 19...... Do cost plus builders lower their % they charge or are they benefitting from the material shortage and making bank?

Since some lumber has gone up 100+% that would be a huge amount for the construction price of a new home.

[meangreen]

Benefiting

[BlackoutRam2500]

With the "Huge" increase in lumber and steel materials used to build a new home or Barndominium and remodels the past year due to Covid 19...... Do cost plus builders lower their % they charge or are they benefitting from the material shortage and making bank?

Since some lumber has gone up 100+% that would be a huge amount for the construction price of a new home.

Your best bet at this moment is to go with a be your own builder type outfit that will charge you a flat rate by the square foot and provide you a list of subcontractors and guidance during the build. Cost plus isn't a good idea IMO if your building budget is more than $250,000.

[tigerscowboy]

Your best bet at this moment is to go with a be your own builder type outfit that will charge you a flat rate by the square foot and provide you a list of subcontractors and guidance during the build. Cost plus isn't a good idea IMO if your building budget is more than $250,000.

I'm on the other side of this opinion.

If it is a "flat rate" build, the contractor has to(and will) add a cushion to cover unforeseen price increases.

If it is a TRUE cost plus build, where every invoice is shared with the customer prior to a draw, there is a relationship of transparency. Makes life simple and we all sleep better knowing nobody was cheated.

Fair work deserves fair pay.

[boy wonder]

I'm on the other side of this opinion.

If it is a "flat rate" build, the contractor has to(and will) add a cushion to cover unforeseen price increases.

If it is a TRUE cost plus build, where every invoice is shared with the customer prior to a draw, there is a relationship of transparency. Makes life simple and we all sleep better knowing nobody was cheated.

Fair work deserves fair pay.

This is how we built our home, builder sent a spreadsheet tracking expenses as draws were taken. His fee was paid upon completion.

[Take Dead Aim]

Your best bet at this moment is to go with a be your own builder type outfit that will charge you a flat rate by the square foot and provide you a list of subcontractors and guidance during the build. Cost plus isn't a good idea IMO if your building budget is more than $250,000.

Nightmare waiting to happen. Know three people that went that route. One worked out great but he is an electrical contractor so obviously had construction experience. Other two were very disappointed and over the experience by the end. Both hired someone to finish the project. Know what needs to be done when and when to tell someone to be on site is huge. Learning as you go building your house is not what I would ever want to do. I'm not a home builder by any means but did stay at a Holiday Inn Express once.

[Take Dead Aim]

I'm on the other side of this opinion.

If it is a "flat rate" build, the contractor has to(and will) add a cushion to cover unforeseen price increases.

If it is a TRUE cost plus build, where every invoice is shared with the customer prior to a draw, there is a relationship of transparency. Makes life simple and we all sleep better knowing nobody was cheated.

Fair work deserves fair pay.

Agree. The builder is going to hopefully make money one way or the other. Cost plus they know a percentage up front. Flat rate they will build in some fluff rover unknowns. Would guess on average they end in the same ballpark.

[tpack]

I'm on the other side of this opinion.

If it is a "flat rate" build, the contractor has to(and will) add a cushion to cover unforeseen price increases.

If it is a TRUE cost plus build, where every invoice is shared with the customer prior to a draw, there is a relationship of transparency. Makes life simple and we all sleep better knowing nobody was cheated.

Fair work deserves fair pay.

I agree with "Fair work deserves fair pay", but the question was, do cost plus builders lower their % they charge or are they benefitting from the material shortage and making bank? A 25,000 framing package @15%=3750.00 to the builder in 2019. If that same framing package goes up 100% or more he stands to make 3750.00 more on the framing alone than the previous year(with no more effort) due to the pandemic. I don`t know if that really qualifies as fair.

I contacted 2 different local cost plus builders in 2017 when we built our house that said the same thing(every invoice is shared with the customer prior to a draw, there is a relationship of transparency). To me, it was like I was giving them a blank check to build my home.

[Take Dead Aim]

I agree with "Fair work deserves fair pay", but the question was, do cost plus builders lower their % they charge or are they benefitting from the material shortage and making bank? A 25,000 framing package @15%=3750.00 to the builder in 2019. If that same framing package goes up 100% or more he stands to make 3750.00 more on the framing alone than the previous year(with no more effort) due to the pandemic. I don`t know if that really qualifies as fair.

I contacted 2 different local cost plus builders in 2017 when we built our house that said the same thing(every invoice is shared with the customer prior to a draw, there is a relationship of transparency). To me, it was like I was giving them a blank check to build my home.

And if the prices goes down he or she gives money back. You can also go cost plus flat fee.

[Dale Moser]

Your best bet at this moment is to go with a be your own builder type outfit that will charge you a flat rate by the square foot and provide you a list of subcontractors and guidance during the build. Cost plus isn't a good idea IMO if your building budget is more than $250,000.

99.8% of people have no business doing this. Those outfits aren’t getting the same price that real builders are, because they are a monumental pain in the ***.


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[jmoore]

Can't answer your question but I am glad we built last year. It seems like they would be benefiting out of these prices.
The contractor at a set rate of 11% of total cost is what we paid him after completion, and it was included in the bid sheet.
Not sure how many contractors do this, but some items on the sheet, we bought out of pocket. It decreased the total and of course decreased his 11%.
For example. Appliances were in the bid for like $7K but we bought them out right had them delivered when the contractors were ready for them.
And yes every invoice had to be approved by us before the bank would allow a draw to the contractor.

[JHT]

I agree with "Fair work deserves fair pay", but the question was, do cost plus builders lower their % they charge or are they benefitting from the material shortage and making bank? A 25,000 framing package @15%=3750.00 to the builder in 2019. If that same framing package goes up 100% or more he stands to make 3750.00 more on the framing alone than the previous year(with no more effort) due to the pandemic. I don`t know if that really qualifies as fair.

I contacted 2 different local cost plus builders in 2017 when we built our house that said the same thing(every invoice is shared with the customer prior to a draw, there is a relationship of transparency). To me, it was like I was giving them a blank check to build my home.

There will already be costs estimated in the plans for each stage.
There is a general idea of what the house will cost per the plans.

People with alot of money that aren't any real big hurry to move will change plans/selections after they have been completed. These changes get an immediate cost associated with the changes. If the buyer knows what the cost is before OKing the changes there is no issue down the road.

The cost of the changes directly benefits the builder because he will get paid for all the work (cost plus) that entails ripping down walls/tile/cabinets and anything else they change.

[W E H]

99.8% of people have no business doing this. Those outfits aren’t getting the same price that real builders are, because they are a monumental pain in the ***.


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What he said^

I deal with subs all the time and they’re a pain. I can’t imagine how they’d treat a one off inexperienced personal home build. Maybe those companies that you pay to help you do this keep them in line.

If I didn’t have custom builders down here I use, I’d just go with Tilson and try and get them to customize it the way I wanted before I started construction. (No change orders) I watched them build a few in the neighborhoods I work and they did good work. Granted these weren’t cookie cutter tract home versions.

[tpack]

With the "Huge" increase in lumber and steel materials used to build a new home or Barndominium and remodels the past year due to Covid 19...... Do cost plus builders lower their % they charge or are they benefitting from the material shortage and making bank?

Since some lumber has gone up 100+% that would be a huge amount for the construction price of a new home.

Benefiting

I bet Meangreen is correct. Nothing wrong with making a fair profit for you hard work. But with the huge price increases of materials lately it`s just another form of price gouging.