I may not be able to give you much help here, but I will try...I will also suggest that some of these questions (like whether or not you get competetive bids etc.) would be best answered by the GC. The builder we are considering works on cost plus using her own subs on most items, only getting bids if she feels it is necessary to the particular project. In addition she projects a budget based on bids from her subs at the outset and bases her percentage on that. So we will have a pretty close idea of the final cost to build excepting increases in materials or the unknown. If we had to get 3 bids on everything, interview, check references, choose the subs, manage them and inspect their work...I would just GC myself. That is the job of your builder. If you like the quality of work done by the builder it is likely that it is those 'go to guys' you mention that are responsible. The GC you are considering should be able to give you a fairly close estimate of your final cost to build based on your plans and specifications. A good lender who does alot of new construction loans can also help 'audit' costs for you.
I am not a lawyer, but wouldn't having 2 contracts - a 'real' one and one for the bank- be fraud? If that is the case then you would certainly have trouble if the bank found out. That sounds like a big risk for you to take and do you need that added stress during your build? I would not feel great about a builder who asked that of me. It seems that if the builder wants the job and knows of your bank requirements there could be some way to work his contract to satisfy the bank and protect his interests as well. Or as an alternative perhaps this builder can refer you to a lender that one of his satisfied clients has used in the past.
I don't know what part of the country you are in, how much your budget is, or what is typical for your area but assuming *at least* $100psf for your home you will be looking at about $50k (20k fee plus about 30k @ 10%) to your GC which could also be thought of as cost plus about 16%. Does this seem reasonable to you? Is that comparable to what other cost plus builders are charging in your area? If 'yes' then you should ask exactly what that $20k fee covers and exactly how the '10%' is figured. We can't answer that for you here - the builder is the one who can.
I hope something in all this helps, good luck to you-let us know how things are going!

agree w/ luckymom! Also, cost + builders around here WILL charge their 10% (it's 15-18% here!) on your own appliances and fixures, but it's up to them if they want to charge that on upgraded stuff as well (if they're nice, they'll charge the 10% on the budgeted appliance, and maybe won't charge on the difference if you upgrade, but they are definitely allowed to, since it's a cost + contract).

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!!

If you have looked at the bottom line between all three builders, (regardless of how the contracts and pricing are structured) and the builder you like best is right in the middle that is great. If the builder you are considering has used the same subs for 7 years and builds homes similar in style and finish to what you want then he should be able to very closely project your budget-barring the unforseen or a natural disaster like Katrina.

Sounds like you are pretty set on the builder and confident in his work and honesty so that's great, I hope that you can iron out a favorable agreement that works for you and the bank as well.

In my experience when calculating cost per square foot garages are not usually included, that cost is normally just 'wrapped in' to the per square foot cost of living space. If there is a dollar amount assigned to it-it should be lower than the cost per square foot of the rest of the house-unheated, concrete floor, no kitchen & bath, etc.

Good Luck, I will be curious to see what you work out.

Well, we almost have a deal :-)

And we were totally confused by the mention of the $20,000 fee. It's not cost plus 10% + a $20,000 fee. The builder has a $20,000 minimum for the cost plus 10% contract. So if we were building for $175,000 the 10% would be $20,000 (10% = $17,500 + $2,500) and if building for $550,000 the 10% is $55K.

And we did clarify the 2 contracts. There will be an addendum for overages and a fixed contract for the bank. The builder apologized for the confusion and never meant to suggest 2 contracts with different price structures. :-) We are so pleased with that since it was nagging at us that the builder we like most may have been suspect.

Since we do not count the garage when calculating the price per square foot we are at $146 psf for 3186 sq ft assuming the cost plus contract comes in at budget and not one penny over. The $146 psf does not include the payment for the lot though.

We got firmer numbers since we picked our lighting, fixtures, and flooring. The builder we like (cost plus 10%) is still dead in the middle of the other 2 options (fixed price). And we were told that if we want to buy materials that we will not be charged 10% on those items. However, if we buy say a faucet and it's defective and needs replacing the plumber will charge extra to take it out and reinstall the new one. It seems worth the 10% just in case some fixtures are defective or broken during installation. We have already picked all of our Danze fixtures and found the best pricing at www.danzefaucetwarehouse.com (with like 4 items to price match from costco and buyplumbing.net)

After it's all said and done, assuming we come in on track with the budget, we will have over 20% equity in our house based on the same floor plan in the subdivision (spec listed for sale by the 3rd choice builder).

This is gonna be stressful but hopefully fun too.

Thanks for all the advice!!!

valover,

PLEASE spend a few hundred and have an attorney review the contract. It seems all wonderful now, but many, many people on here have found their contract did not protect them and/or that it did not actually say what they intended for it to say.

What sue36 said. And have the atty. explain to you what it all means as well BEFORE you sign it. Contracting with your builder is a process. You get to suggest changes and do a bit of going back and forth (with a lawyer interpreting for you and supplying the contract language) before anybody signs anything.

For anything the builder says like: "And we were told that if we want to buy materials that we will not be charged 10% on those items" you ask your atty. where in the contract it provides for that. Make sure the CONTRACT says it, as well as the builder.

Slow down and take care with this part; it's a critical structure that your build hangs on. (Or, it can hang you!)

Good luck!

Thanks for the advice!

Thankfully my wife is a lawyer (her department handles contracts with general contractors for commercial real estate builds). She said that it won't matter what's in the e-mails and saved voice mails since a court will only look to the signed contract if we do end up in court over this build.