What type of contract should I consider?

16 years ago

We're going to be building on a lot we already own (paid $73,000) and need to keep the costs down as much as possible. Originally I thought we would do fixed cost contract because our budget is soooo tight. Well now it's even tighter. Instead of having $500,000 to spend, the figure is going to be closer to $400,000. So with a few exceptions the house will be very basic. There no longer will be frameless shower doors or stone in the baths. We will not pay upcharges for stainless appliances and will instead use black. There will be no custom cabinets. We'll go with a semi-custom line instead. However there are some things we won't compromise on. We will have stained craftsman woodwork throughout the downstairs, soapstone counters and a 48 inch gas range.

My question concerns how a cost plus contract might apply to our situation. I understand that we would pay the builder a percent of all of the costs involved with building the house, but how does that apply to the choices we make in things like lighting and appliances? For example since the range we'll be buying will cost about $7000 more than what a typical appliance package would include, does this mean that we would have to pay the builder 20% extra on the cost of the upgraded range? We also are looking at a light fixture to be purchased through an art gallery. Would we have to pay the builder a percentage of the cost of the chandelier? What about other things that we might purchase ourselves? Although I trust our builder will do a fine job building the house for a fair price, I will be VERY involved. I will make many purchases myself off of the internet, through local artists, and off of craigslist. We've even talked to him about doing some of the painting and cleanup ourselves. How does that fit in with a fixed price or a cost plus contract.

We are thrilled with the builder and his reputation around town. Everyone, including a bed and breakfast host, said that he was one of the finest craftsman around and just simply a good man. We just don't know what type of contract would be the best for all in our situation. We will only be financing around $200,000 of the total project if that matters.

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Comments (7)

gary1227
16 years ago
We're doing cost plus with our builder. I specifically excluded appliances, carpeting and lighting from our agreement as I did not need any assistance from the builder in selecting these items or coordinating installation. You can request any items to be excluded from your build contract thus not being subject to your builders markup as long as there is an agreement up front. Of course you can't hold the builder responible for warranty issues related with those items.

You should be able to write in exclusions in any typical build contract.
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mightyanvil
16 years ago
In a "Cost of the Work Plus a Fixed Fee" contract everything should be open to negotiation. Talk to your contractor and see what he thinks. Insist on a detailed Budget and Schedule and that they be updated on a regular basis so you can stay within your cost constraints.
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sierraeast
16 years ago
"there are some things we won't compromise on."

Also on your list of non compromise should include quality insulation/windows/doors with an energy efficient envelope.
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ncamy
Original Author
16 years ago
Oh the construction will be top notch. It's the finishes and fixtures that are subject to compromise. We're just not going to be able to do a lot of the things which are currently popular in the decorator world.

Thanks for the ideas so far.
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meldy_nva
16 years ago
"We're just not going to be able to do a lot of the things which are currently popular in the decorator world."

Not a loss, since the decorator world is more about fads and trends in fashion than it is about quality. Spending your money on quality construction will be more satisfying for far longer.

Keep in mind that anything which is not structural can be changed down the road, which means that you can get comparatively low-cost fixtures, counters and appliances now and replace them in a few years. Whenever possible, choose what appeals to you without looking at the brand or price tag and then if downcosting is required, you can often find very similar for fewer dollars.

For an example, I have two friends building very similar new-old houses. One has a nearly bottonless purse and the other is OB/DIY because she has almost no purse. The first admits to spending over $50K just on lighting fixtures, the second has spent less than $5K. No doubt a lighting store specialist could tell the difference, but not too many others will notice.
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ay1128
16 years ago
The fixed price contracts I've been offered are priced for every possible contingency arising, and then have 10% tacked on. Cost-plus looks like it's always the better option, but you have to really be on top of it. Also, you'd better trust your contractor. There are scams that I've heard of. But, I guess you always need a guy you really trust.
Just my thoughts. Good Luck.
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booboo60
16 years ago
IMHO 'ay1128' is right on when she says, "you'd better trust your contractor."
We have a cost plus contract and our builder is very flexible. We negotiate back and forth over what we can do ourselves and what we want him to do.
It just all boils down to communication and trust. We have known him and his work for years before we decided to build. You must realize also that your builder is trying to make a living too so it is only fair that he get his money for a job well done! Best of luck to you :)
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