I would have a problem with a builder charging 12.5% on the purchase price of the lot/land. What value does the builder add to previously purchased land to justify a fee? None.

$5k lot would be $625.

$500k lot would be $62,500.

This fee on previously purchased land would be a deal-breaker for me.

Your contract should be explicit on this point. It's a point you can certainly negotiate if you haven't already signed.

However, what counts is the bottom line, not necessarily the formula that gets you there. The builder needs to make a certain amount of money and whether he gets to that number by charging you 12.5% on the sum or 20% on only the structure probably makes little difference to either of you at the end of the process.

rwiegand has a point. Our builder sold us our land but is charging us the percentage on only the cost to build. Of course he made profit both on land and he'll make it on the build too.

He has probably not revised an old contract where the lot belonged to him. In any case its inappropriate.

Find a new builder this is just the beginning of your headaches.