Custom costs more than cookie cutter done on a mass scale. Double, a lot of the time. All the way up the scale to 10x. Complex homes with lots of corners, changes in ceiling height, bulbous top heavy roofing, open concept full of engieeriing needs, wigh a lot of expensive squae footage kitchens and baths are not cheap to build. First, look to the plan, and eliminate compexity and square footage from it.

Unless you have the deorative finishes specced out to be bid on, how do you expect him to get a price on those elements? Guess what you want and provide a lowball ''allowance'' so that when you do flesh out the specs's, you're double over your budget? That's the second area that people get into trouble in a build. They spend too much time on Houzz and confuse wants with needs. Most homes shown on here would be in the upper 10% for their costs. You're not gonna get the same thing on a beer budget.

Builders get quotes on bones. They don't fuss over the level of carpet in a home unless they are doing fixed fee. Then they pick the cheapest possible from what they've used before. Cost plus, it's whatever you pick, with his markup on top. What is the contract structure?

Sophie: it it not a difficult or huge plan, a ranch with 1780 sqft finished up and 1620 sqft finished down the garage is 900 sqft. 4 beds, 3 full bath, no weird framing. Open floor plan, we are not building a overly complicated house. The new construction I compared to what we want to build all had very similar layouts, cabinets and such.

I am not sure what you mean by decorative finishes , like scrolling wood carving on cabinet tops? No, we are not having anything super fancy like that, it's just not our style. Appliances: we have money set aside already to purchase those out of pocket. For now all the paint will be one color through out the house. We have already picked out brand of carpet, wood flooring and tiles. There are certain things I will not back down on and some things I am willing to do differently.

Even though I have looked here on Houzz for ideas, none of those are being used in the house. We like our beer budget and want to keep with it. As of right now we have very little debt and do not want to raise our debt level to something we are not comfortable with.

As far as his fee, we are being charged an 8% fee on anything he does, which I do not mind paying on things he actually does, however, we will even be charge the 8% on things we decide to purchase ourselves. For example, we find a lighting fixture we like and purchase it for the electrician to install, we pick it up and deliver it to the job site we will be charged 8% for that purchase, even though he did nothing to purchase of arrange delivery of said item.
I also understand that builders who build spec homes can do it for less because they are generally purchasing things in bulk, where our builder buys as needed.

750K-1.1M would be the average cost for that size custom home, depending on location. Location, complexity, and finish level is what drives home prices. A 1200 square foot box in San Francisco coud cost 500K to build, with the lot 750K. The same home in rural KY could be 150K plus 75K for the property.

Decorative furnishings are hardwoods, tile, cabinetry and built ins, lighting fixtures, door knobs. All of the ''pretty'' stuff that can cost so much and is so very taste specific. You can spend 5K on a single light fixture, or a whole home of Chinese lighting products.

And that's why YOU have to spec the build (completely) on the front end and get accurate apples to apples bids. It does no good to compare that house with 5K each specced fixtures with one that specced the lower priced ones. That's not apples to apples.

8% is extremely low. It is usually 15% or 20%. If you want a designer with that to hold your hand while making all the decisions YOU need to make, it could cost another 12%. This builder is doing you a real favor. Cooperate and do your part before he tells you to get someone else. The last 'friend' that had your attitude with me is now living in a trailer house, and her brother-in-law was also a builder. He wouldn't put up with it either.

Yikes! Glad I live in the mid-west. Our lot will be $57,000.00 for .30 of an acre in town. For $500,000.00 you can get into a very large home here! Sorry but there is no way I could ever justify spending 5k on a single light fixture. Our entire decorative lighting fixture quote came in at just shy of $1200.00 for all the lighting under that category

Our needs are fairly simple and we do not like nor want overly extravagant things, we do like nice things however.

Fred: I have an attitude because I don't want to be taken advantage of? I have an attitude because I want to make sure I am doing things the right way instead of getting half way though the build and then questioning things? If yes, then I guess I have an attitude.

I do not think it's uncommon to ask these questions and I welcome comments that are constructive and helpful. No I do not need my hand held and 8% is actually high for this area. You are making assumptions about me with just one post on this site and you know nothing about who I am.

There is quite a bit of money on the line and I would hope anyone with any kind of common sense would question everything before signing their name on the dotted line for that price tag.

Clearly, you just don't want to hear the truth. The builder's 8% is NOT what is doubling what you want to pay. He is allowing you to see all the costs to him which will be the same for any builder. He is being completely transparent in his pricing. What more do you want?
I live in one of the lowest income per capita areas in the Midwest. Trying to tell me 8% is high is just laughable. You are building a custom home no matter how badly you want to call it something else to get the price down. A minimum wage person couldn't do the paperwork to deduct the 8% for a light fixture off the total bill without the wages costing you more than the deduction. This is how I know you are being unreasonable. It is simply never done that way. "(carpet, lighting fixtures, plumbing fixtures)" are decorative finishes and prices you are getting because they can change greatly, even within a particular brand. If you have not figured that out by now, then you have not spent enough of YOUR time researching these products to get the lowest price. It sounds like you are comparing higher priced and quality items you are picking out to very low price/quality (builder grade) items that other builders are using even though they 'look the same' from a distance. There really is no other logical explanation. For example, If your flooring costs $2 per square foot, then you are doubling the cost of 'builder grade' and therefore doubling the price of the house as you do this with everything else in the house.

We commonly run into the problem of a potential customer's budget being insufficient to accomplish what they want to do - whether it is new construction or remodeling (which is our primary business). Many things can cause it and realistically it is likely a combination of things. Homeowners may set a budget that they are comfortable with, but select plans based on what they want and not based on what the budget will build. Some contractors provide more services and build to a higher level of quality and their pricing will be higher than others. Some contractors have an office, insurance, staffing, etc. that means they have a higher fixed cost to cover than someone working out of the bonus room over their garage. It can be due to various things that might have nothing to do with how much or how little the contractor is making on the project. Before you dismiss your friend, I would sit down and ask what he/she believes is driving up the cost of the project and what it would take to get to $X cost and why.

Unless a contractor is a design/build firm, generally the business model is to develop a cost for the project using allowances for all items that the owners get to select. The owners are then given the names of suppliers to visit to make their selections and these suppliers write up the information and generally send it back to the contractor - they may or may not copy the owners on the correspondence. So this is pretty normal unless you are hiring a design/build firm. If you do go with a design/build firm, then the costs are higher as they are taking their time to go with you to select everything and they are providing guidance and advice. Some design/build firms have interior designers on staff for this. So I would say that the fact you are going out to make your selections is not unusual at all if working with a standard residential contractor.

The other thing you mentioned is that the contractor will be taking a mark up even if you supply something. Having been doing this for a lot of years, we have found that we can spend more time on an item that is supplied by a homeowner than if it were purchased through us and our suppliers. Missing parts, order incomplete, doesn't fit, light is incompatible with dimmers, we're asked to go pick up items for them because they don't have a truck, etc. It can be a long list. What we have also found is that invariably the consumer asks us if they bought the right thing, is this going to work, etc. - and if we glance at it and say yes we think so, all of a sudden we own it if it doesn't work and there is a problem. In their eyes we blessed it and approved it so it is our fault. After years of this, a contractor learns to go ahead and charge because time is going to be spent on it (best case) and you may end up buying it or replacing it (worst case). Maybe that is a jaded view, but so far we have never had one case where things like this didn't happen if we allowed the customer to provide products or do some of the work themselves.

Not knowing the full terms of the contract it is hard to address the specifics, but it would appear that 8% would be very low. One would expect to see about 20% or so on a new build.

Having said all this, I believe that it is informative and helpful for consumers to interview 2-3 contractors to understand the differences in process and pricing. I can tell you without ever seeing them that the quotes/bids will be all over the board and you will most likely see wide ranges. That's when you have to roll up your sleeves, meet with each and really understand what you are getting. You do not get the same thing for less money and there is no way to know what is left out of one bid vs another without a lot of work. There are no customary forms and no standards regarding how quotes are done and it is hard to get down to the differences. It is very confusing and not a slam dunk. In the end, you get as much information as you can and go with someone you trust and that makes you feel good about the process.

Good luck to you. It is always stressful, but should be fun as well.

8% is absurdly low anywhere. Double that, and you'd still be on the low sde for someone truly competent and in demand. Your friend is trying to do you a favor, and like a lot of people that mix business with friendship, it will probaly cost him both relaionships.

A 4000 square foot home isn't going to be 400K anywhere unless it's a used home. New construction costs more than existing for the priviledge of having things the way you want them. You want to be the boss, you pay the costs.

Look into buying existing if you priced yourself out of your market with your plans.

Lag19905, put this under design dilemma. Get 2more quotes on your job.

So what did you decide to do? I hope some of the advice you got was helpful in guiding the building relationship with your Contractor/Friend.
If you need any more guidance, let me know and I'll help if I can.
Best, Jeff