Should we continue with this addition?

nene2013

19 years ago

We are planning a 1088 sq/ft 2-story addition to our Central Florida home. Basically, removing an existing Fl room, rebuild/expand it and bump out the 2nd floor master bedroom/bath on top.

We have talked with three GCs-

The first GC estimate came in at $57K for a very basic job (no plumbing work, very basic finishing, just enough to get the Certificate of Occupancy). He suggested working with a cost-plus contract.

The second GC's estimate came in around $68K for a finished job but he was a little too aggressive for our tastes so we moved on.

The third GC's estimate came in for about $50K. We figured the estimate was a little low but the guy seems geniune and easy to work with. References are good and he otherwise checks out. We have a design service in the process of doing the drawings and engineering the plans. Design fees have been increased due to additional sq/ft and engineering costs (moving exterior wall). The county says we need to increase our septic/drain field according to code...

We don't have all of the details in yet. We don't know whether our HVAC will need to be upgraded, exactly what flooring or windows, plumbing, electrical. The GC did comment that he will get his guys out to do the energy calculations, review the electrical etc but I assume that's after we have the engineered plans and everyone is reasonably sure we will proceed with the project.

We asked the GC for another estimate- its now up at $75 for a finished job but he says a cost-plus-percentage contract may be a better fit for us- his percent is 24%. He says he's willing to work with us to get a good contract.

With what seems to be rapidly rising costs, we are concerned that we cannot afford this addition and currently our plans are on hold- the design service has been paid for work done so far but is waiting on us to finish. We don't want to finish plans that we cannot afford.

Can someone help us get off the fence? I don't exactly understand how a cost plus percentage contract will save us money. How do we protect ourselves in a contract like this? Is 24% reasonable? Is it fair to continue with this GC considering that we may have to pull the plug if the final estimate is too high?

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Comments (5)

Jon1270
19 years ago
I think cost-plus is sort of like time & materials on a grand scale. It guarantees the contractor a profit margin while you accept risk of unforseen problems that would've otherwise fallen on his shoulders, and this saves you whatever margin he would've built into a fixed price as insurance against that risk. The less clear it is what they will run into once they get started, the more risky the project will seem and the more a fixed price will be padded to protect the contractor. Cost-plus makes it more likely you'll get a quality job because the contractor doesn't have to be as worried about unforseen problems that could destroy his profit, and doesn't have to cut corners to maintain that profit. Ultimately it's not the thing to get into unless you have a great deal of faith in the contractor and his subs, that the arrangement won't be abused, and that the project has been thoroughly thought out so that the risk of surprises is minimal.

I'm not sure whether 24% is a decent rate, but it seems reasonable. It begs the question: 24% of what, exactly?

Oh, and cost-plus will burden you with some administrivia, with the need to check his receipts to verify the basis of the 24%.

If things are feeling tight already and you haven't started then I'd back off, maybe consider a more modest project. It won't get cheaper after they start digging and tearing off the roof.
User
19 years ago
You're basically doing a teardown, building a whole new house, and connecting it to the existing structure. Cheap new construction runs about $100 per square foot, and remodeling usually 50-200% more depending on the complexity of tying in the old with the new, the local labor rate, and the requirements of the municipality. You definately will have to have a second HVAC system installed and you already know about your septic upgrade requirements. You may have to reengineer the foundation of the existing structure, redo the roof to be able to tie them together, and add new electrical service to adequate wire it. What type of high wind requirements does your area have? Lots of places have very specific requirements in the wake of all of the hurricanes that have hit recently, and it adds to the bureaucratic gobbeldygood you have to go through as well as increasing the materials costs. I'd expect the bottom end of your addition to be 100K, and that's probably with a lot of DIY on the finish stuff and putting off doing a lot of things. I'd bet that the more accurate real world total would be more like $140 -$190K.
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chisue
19 years ago
How old is your house? Is it unique or historic? Is it built to today's codes with superior construction?

What will be the value of your partly old/partlynew home after you do this work? What if you did a total teardown and built all new?

What would it cost you to sell this house and buy an existing house with these amenities?

Don't forget to figure in the toll of living in a construction zone for up to a year.
kec01
19 years ago
Around us, the rule of thumb is to "plan" to exceed your budget by up to 20% for unforseen items. Particularly with remodeling existing structures, unknowns turn up all the time. This amount may end up being too high, but in my experience, there are ALWAYS unexpected items.
bellamay
19 years ago
the real estate market in Florida is tanked, why would you consider an addition? If you were to get in trouble financially it would be very hard to sell out until the market changes which they estimate to be about 5 years.

I would cut my losses, scale back the project or re-design your current space without the addition.