Newsletters and Ideas

CONTRACTS

Different kinds of contracts that the homeowner can work out with a builder (As stated in Dream Homes by Mark t. White - Premier Home Builder)

There are basically three types of contracts that are the most common.
First: the Flat-Fee Contract where you specify everything about your house including the details for a prearranged amount of money. The contract is built around allowances for windows, carpet, fixtures, lighting and all the other details to be included in the home. The builder will provide choices for the homeowner for all these options, and then with everything specified, the builder will put together his final quote. When comparing other builder's quotes, make sure they are all quoting on the same products. Again there can be a wide variance in different quotes unless all the builders are specifying the same siding, the same cabinets, the same carpet - everything needs to be the same.

Second: The Cost-Plus Percentage Contract. Most larger homes, those over $200,000 - $300,000, are done this way. The Cost-Plus Percentage contract works by taking the cost of building the house and adding another certain percentage for the builder. This percentage is set by the builder and usually is somewhere between fifteen and twenty percent. For example, if a homeowner wants a $200,000 home built, in a Cost Plus Percentage contract, the homeowner pays the $200,000 that is cost to build the home, plus an additional $30,000 in a plus fifteen-percent contract.

Third: Cost-Plus Flat Fee Contract. This is a contract a lot of homeowners like since it creates a better sense of trust between the homeowner and the builder. With this contract, the cost of the home is figured by the builder, and then the builder adds on a percentage like with the Cost-Plus Percentage contract. The difference here is that once this percentage is agreed upon, it doesn't change. This is a real plus for the homeowner because it eliminates the possibility that the builder is trying to increase spending during construction to increase her/his own profit.

It's hard to find builders who will agree to this arrangement though, because of the possibility that the homeowner will intentionally specify lower cost items initially, then increase the budget during construction. Why I personally prefer it is because I like that it allows more of a feeling of trust for the homeowner."

Also, I like the fact that the homeowner doesn't have to pay "twice" for the sudden increase cost of materials due to….say….hurricanes; once for the materials increase and twice to the contractor who is working strictly on a cost plus.

As an independent home builder, together, with the homeowner, any custom contract can be created to best benefit the job, the client and contractor and current trends.