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mmme_gw

the contractor's cut

18 years ago

I'm very curious about how people are purchasing various materials.

I have tried to be very agreeable all along, purchasing materials wherever my GC directs me to. I never question the materials he or his crew purchase for the project--stuff like pipes for the plumbing, subfloor materials, insulation, framing supplies, lumber, etc etc. For that stuff, I just smile and nod and hand over a check. I trust him and appreciate his expertise in selecting appropriate materials.

But when I am asked to purchase things (bath fixtures, light fixtures, etc), and I am directed to a showroom, I do have an issue. For many things, just like so many of you here, I find that I can purchase exactly the same item online or at Home Depot or a discount store for half the price. If I purchase at the showroom, I pay about 95% of retail; the contractor gets the item at about 75%, passes 5% or 10% of the savings on to me, and pockets the rest.

When I started this process, I was perfectly happy to allow the contractors this cut. But the more it happens, the crazier it seems. The difference between the amount I would pay if I went wherever I wanted and the amount I pay at the showroom is enormous. For my bath fixtures, I realized that I could GIVE my GC five hundred dollars and still save myself an additional $1000 simply by purchasing online.

There must be a plan that allows homeowners to take advantage of readily-available lower prices while still preserving the builder's commission-style compensation for materials that the homeowner is asked to purchase. I'm curious what kind of a deal others have worked out.

Comments (15)

  • 18 years ago

    Except for things like sheetrock, pipes, etc., I bought all my home appliances, fixtures, etc. My GC didn't want to be bothered by any of that stuff. You know, it's one thing if your GC is actually doing the purchasing, but if he's sending you out to buy it, you should be able to get it wherever you want at whatever price - and since you're doing the purchasing, he shouldn't even be getting a cut. What's in your contract about this issue? As long as the items are on hand when he needs them, it should be irrelevant to him where you get it.

  • 18 years ago

    One thing I like about our builder (we are building a whole house) is that he just charges a management fee for the whole project (a percentage). So, we can buy our stuff wherever we want. That being said, we will use most of the subs he prefers, but we can buy tile, appliances, etc. anywhere. He still will pass on the builder's discount to us too.

  • 18 years ago

    I'm with Weissman -- If he is sending you out to do the buying, he shouldn't care where you go and really isn't entitled to a cut unless his connections get you a deep discount. NOW - If HE does the buying, then I'd feel very differently. Why?

    - Selecting and buying stuff takes time, effort and up-front capital.

    - He who buys is responsible for defective products, and often, factory seconds are sold at discount online. (Not all online deals, but certainly some.)

    - Many items have 'companion pieces' that are necessary that might not be obvious to the consumer, and if those parts aren't included, tracking them down is very time consuming.

    - If he's installing a product he bought and it doesn't work for some reason, there's no "faulty product / bad installation" argument. He's responsible for it either way.

    - If he's sececting it, he will be using his expertise to select products he knows will work well.

    Sounds to me like time for a talk with your GC. Because things aren't fair as is...

  • 18 years ago

    I was advised to specify that things I want to purchase myself be outside the contract with the GC rather than using an allowance for cabinets and other large undecided materials because it gives me more control over what is purchased and where. The flip side is just what Sweeby said: a GC purchase is the GC's responsibility from start to installation. So, I guess the deciding factor is where do one wants the responsibility: with homeowner or with the GC?

  • 18 years ago

    oh holy cow...i buy everything! and the gc's aren't telling me where to go to get things....nor are they getting a cut. i can understand that in a design build job, but not when you are doing the shopping...thats rediculous!

    my contract said the homeowner would provide everything outside of the sheetrock and thats what i did :) i wanted a unique and lovely home...not one just like everyone else that the gc had worked for.

  • 18 years ago

    Our contract (which I wrote) specified exactly what we (the homeowners) would buy, using the phrase "to be supplied by Client"; everything not so specified was to be purchased by the builder.

    That said, when we've run into areas where we feel ill-equipped to make decisions, we've gotten his advice and also let him do the purchasing. One example was a very large pair of stationary "storefront"-style windows which would have been impossible for us to measure properly; he did the measuring and purchasing, but we'll pay the bill separately when it comes in.

    We're about to do the same with our track lighting. He'll configure the various track arrangements and buy the feeds, tracks, and connectors; we'll pay that bill separately, and we'll also go out and buy the track heads and the light bulbs we want.

    This shared approach, which requires a bit of give and take on both sides, has served us well through three remodeling projects with the same wonderful builder.

  • 18 years ago

    We're just renovating the kitchen, so it may be a bit different, but our builder supplies the construction materials -sheetrock, lumber, nails, etc. and we supply pretty much everything else. I think he's supplying the cans for our recessed lighting but that's about it.

  • 18 years ago

    Like kelleg, our GC charges a fixed management fee for the job. We agreed a list between us of who obtained what items, because he knew I'd done lots of research. That said, I took his advice to get all the appliances from a reputable local dealer that we both know has excellent after sales service and reputation. We also agreed he would order the sink and tap from his dealer because his discount made it equal.
    I'm also happy that he uses a local lumber company - I'd rather see my money stay in the community and shop local than go to Home Depot.

  • 18 years ago

    Our GC has his own crew and only subbed out a very few things (e.g., installing the new gas line). We purchased the appliances, fixtures, and tiles ourselves. We contracted separately ourselves for the cabinets and countertops. Everything he purchased for the project could be categorized as "building materials," such as drywall, plumbing supplies, wood for the ceiling, trim pieces, etc. He provided a copy of every receipt for these items with his final bill and I paid exactly those amounts. If he got a discount, I got that discount. As my GC put it to me, he's "not in the business of selling building materials," so why should he profit off of those? I appreciated his perspective on this. I paid him for his services and that's all.

  • 18 years ago

    I find that I can purchase exactly the same item online or at Home Depot or a discount store for half the price.

    I agree with most of you in here-- if you're doing the purchasing it shouldn't matter to the GC where you get it. However, this statement caught my eye. Look closely at the fixtures you're buying, either electrical or plumbing. There will usually be a 1 number difference between what you find at the big box stores, and what you get from a reputable showroom, and that's the difference between a decent fixture, and one made either of plastic or a cheaper alloy metal, with cheaper fittings, but made by the SAME COMPANY, to look EXACTLY like the quality fixture. I got bit by this myself years ago, and additionally. I know people who've worked at HD and Lowes, and turned me on to this little scam.

  • 18 years ago

    The contract for our new addition, kitchen and bath reno is very clear. All "building materials" are included in the contract and supplied by the builder (i.e. fixed costs). We have specific variable allowances for cabs, light fixtures, appliances, etc (a very specific list). For the variable items, I specify what I want, we both get estimates, and the best price is where we buy it from and what I pay. The invoices are presented to us, and all his discounts are passed thru.

    Our GC earns a fixed fee on the contract and gets paid at the END of the job, after all inspections are passed and CO is issued.

  • 18 years ago

    I've heard of this more for a design/build type project where they direct you to the showroom and usually pass on some of their contractor savings to you. The argument is that they know the quality of that shop. Also for example, the showroom (this is just a backsplash project) that I am dealing with touts how the warehouse double checks the order when it arrives etc. and has a dedicated customer service person that you would call with any issues. Theoretically if either their ordering or quality control wasn't up to snuff - it would result in delays for the installation and impact your contractor. Also, the benefit of using who your contractor recommends is the person should know if there are any additional add-on items needed. Then with the design/build keeping some of the contractor discount - since they are guaranteeing/taking on the risk of the products that is part of why maybe they are getting say the 20% markup on materials.

    That said - I would expect for paying a little more that you have someone from the firm helping with the design and actually placing the order. I would worry if something wasn't ordered correctly that if I were placing the order - I would have the responsibility unless I could show I had wrong measurements from the contractor etc. and somewhere in the contract that they were responsible for giving me accurate measurements/quantities. If you are taking on that risk and doing the design legwork - I don't see why you shouldn't be able to order from another source - or at least have a discussion with your GC about which items that they would feel comfortable enough with you getting from a less expensive source.

    I didn't go design/build for my kitchen remodel/addition in part because the extra cost for the conviences/services (and part of that being limited in where we pick things out and the markup) - would have put us outside our budget. Our GC contract listed that client would provide. Where it was something he would provide but we picked out (i.e. the french door or initially sliding door), we had an allowance.

  • 18 years ago

    Bill Vincent says: There will usually be a 1 number difference between what you find at the big box stores, and what you get from a reputable showroom, and that's the difference between a decent fixture, and one made either of plastic or a cheaper alloy metal, with cheaper fittings, but made by the SAME COMPANY, to look EXACTLY like the quality fixture.

    I say: OH NO!!!
    That's terrible. Thank you for alerting me to this. I will not, therefore, buy any look-alike fixtures at HD or Lowe's. I did already buy some tile there.... I hope that's reasonable quality.
    I also bought some plumbing fixtures online. I'm sort of assuming that online retailers won't be pushing the same scam, and that their low prices come from having little overhead. Please tell me I'm right.... :-0

  • 18 years ago

    The tile is the same no matter where you buy it. As for the numbers on fixtures, I wasn't really very clear, for those wondering. I was talking about a stock or model number that will be 1 digit off from the premium fixture.

  • 18 years ago

    We GC'd our own home. We made a three bad sub decisions, but we made a zillion great decisions, too. One was shopping for appliances, lighting, sinks, and fixtures. We bought almost all of our appliances from an eBay dealer that has a tremendous business. They brought them to our house, too. When the guy delivered our appliances arrived, he had just delivered almost the exact same appliances to another lady about 15 miles up the road from me. He wondered if we knew each other. She apparently peruses GW, too. :)

    Anyway.... I bought the lighting for our home for 25% of what it would have cost me retail. Let me rephrase that statement. I save 75% OFF RETAIL. About 95% of all lighting was from Seagull Lighting Outlet. Instead of over $16,000 plus tax and shipping, I paid $4,200 plus a flat $165 to ship and no tax. Do the math!

    I also bought plumbing fixtures online from an eBay dealer. I forgot to buy the Jacuzzi tub faucet and impatient DH was demanding I go to HD to buy one. I made him come. He was in serious sticker shock when he saw that I could buy the SAME faucet online for about $60 which including shipping and had I ordered it through HD, it would have been closer to $300 for one tub faucet special order. When he realized what the entire matching set would have cost for our master bath, he waited two days for the items to arrive and never said another word.

    Bath fixtures, door knobs, entry sets, Toto Jasmine toilet seat and toilets, hot tub, ...and more... ALL came from eBay dealers at REMARKABLE prices.

    A friend's husband owns a plumbing company and offered to get plumbing discount for me for fixtures, Toto toilets, etc. I saved more shopping solo that she could provide. I kid you not, her husband now uses the sources's I found for some of the Toto products.

    When you hire a GC you usually do a 'cost plus contract', all in one deal with a flat fee (turn-key), or percentage of the entire cost of the project is paid to a GC. There are other types of contracts, but these are usually your most common for remodel, building, etc. You need to glean your contract to see exactly what you agreed to pay him for. I prefer cost plus because there's no incentive to cut corners. I want quality work. If you want to provide and incentive to move faster, then that's a horse of a different color. Anyway you slice it, it is hard work doing the shopping and leg work and you should be rewarded by saving yourself money. These are hard times and he should be, and probably is, very grateful for employment. Don't be shy about your position. He's not stupid and understands exactly where you're coming from.

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