Building a Home? Don't Do This!

For those of you thinking of hiring a general contractor to manage the construction of your new home, be sure to avoid the cost-plus contract. In this video a builder discusses why this is a bad contract agreement for 90% of the people out there. The builder also discusses the preferred type of contract that is in the best interest of the customer...not just the builder.
Here's the link to the video, "Is it a Good Time to Build a Home"

[VillainStatus]

Doing a cost + build right now. A little nervous the builder will squeeze the balloon to inflate the price. If I did fixed he would inflate the price of the build, and then work hard to get the lowest cost on materials etc. so I end up paying him even more. It seems like a damned if you do, damned if you don't situation.

[rjthomasindyusa]

I'm a mid-high end remodeler. I live on the front range of Colorado. I can't find subs that take pride in their work.... and I'll pay them whatever they want. I can't imagine trying to negotiate discounts when I can't get the work done at asking price. I am very particular.... a bit OCD. I outline my needs before I hire someone and tell them that I will gladly pay for above average work.... they promise me the world and then they drop off their new hire and tell me how slammed they are.... I'm changing my business model because I can't handle the stress anymore.

[beehappy]

Thanks so much for this information. I’m wanting to build within the next year but it’s very expensive in my area right now. I appreciate you and love watching your videos!!

[mestiza]

Dang. Those interest rates did NOT come down to 4%… :/

[philippedros]

I am a builder and I've been doing a modified version. I charge a flat fee for my service and have the customer pay all the bills. I give them a budget up front and we shop subcontractors if they want for each job. It seems to work well as long as you're dealing with a reputable builder who will give you an honest budget. Customers love it because they know exactly how much I'm making since they all think you're getting rich and by the way I don't charge 20%.

[williamdecamp]

I have to 100% disagree with you on this. Cost plus with each major line item providing cost to build, material and labor and the contractor has limited ability to hide the enormous amount of money he pockets for building you a home. The opposite to that and the builder has a set price and will higher the cheapest and not always the best “quality” subs out there. That brings up the issue of quality. Are you building to control quality or or are you building to the cheapest contractor out there?

[havasuonthelake]

100% agree. I did the cost plus fixed amount, either way a cost + gives you very little if any benefits. The project just dragged on, and on. As you stated, no incentive for the general contractor to save you any money OR time. Never again.

[Its_RichieRich]

I'm skeptical the interest rates on a 30 year fixed will be 4% in 2023. Maybe in 2024 but we're in the for a long hard road out of this.

[kdockrey]

I went with my current builder because it offers a fixed price contract. All appliances, surfaces, and materials were specified in the contract. Thus, they couldn't cut costs by going with cheaper surfaces, appliances, etc. The builder controls its costs since it does not use subcontractors. The builder also only offers limited options. For example, all kitchen appliances are identical and from the same manufacturer. All counters are the same surface and color as are all the interior walls. All windows and doors are the same across any home that it builds. The builder does provide custom floor plans and two exterior finishes. It is not for everybody, but I like builder's design esthetic and it is not my primary home. However, I would consider this approach if I were to build another primary home.

[robthewaywardwoodworker]

I've just been looking to do that, so I'm glad you noted some considerations that I had not thought of. The problem here (in Alberta, Canada) is that you have to secure a new home warranty that ties up a $10, 000 or more bond for 10 years that is onerous to apply for as a self-builder, plus you have to be registered with the province to be a licensed builder. They really have crushed the small contractor and the self-build guys.

[Fedgery]

This sounds like a great deal…for the builder.

[CMbassin]

Absolute BS. A fixed price contractor will cut every corner they can to make sure they come in below the number they gave you in their contract. That’s how they stay in business. I see fixed price builders here side houses with no WRB paper on OSB here 😂 good luck with that in 10 years.

[Avocadosbomb]

Can you create a playlist on your page of your videos for beginners?
Im assuming its a floor plan, all the services needed (bathroom, kitchen, etc) and idk what else lol thats why im here😂
Thanks for your videos they’re all very informative! Im a subscriber to this channel starting today!

[LordVader]

Man, I don't think 2023 has been a good year to build. Prices seem very comfortable up there in space.

[Dlow.K]

Do anyone have a builder that does fixed price contracts in Georgia

[PureSwank]

Well this didn't age too well. Economy is FCKED lol

[myinhairitance]

Can you please make a video on the house plan Quinn 29921 from Advanced Home Plans. It's more of a modern design under their affordable plans. I'm a new subscriber to your channel. I'm located in Illinois contemplating building.

[Anyhowser]

Fixed price contracts are great until a builder hits a snag, blows the budget, and has no motivation to finish. Then come the cut corners, material substitutions, and legal battles. There should always be clauses in a contract for inflation, materials costs and unknowable conditions that may arise

[adamnonnenmacher]

Cost plus doesn’t have to be a percentage of the total price. Just make it is a fixed fee of the total estimate. That way the builder isn’t incentivized to inflate the building cost. You can also add a guaranteed max price which limits how much the builder can spend before it starts hurting their project. You can also add incentives and rewards if the builder comes in under budget or finishes on time.

Cost plus is not one size fits all. It is absolutely the better pricing model for all parties because there’s no confusion and there’s no risk for the builder getting screwed and the builder can also do the job right and also it can save the owner a lot of money. Builders are going to add a ton of markup to give themselves cushion if they are building with a fixed price model.

[jagslion]

Michael going to disagree with you on this one, My GC said I can use any sub I want as long as I put them in the contract so I am in process of bidding everything out on my own and then I will see what bids he comes in with, another reason for cost plus is I want total control over the build cost and more importantly over materials and with a fixed price contract you don`t have that. also remember on a construction loan application you have to list the cost and materials for the bank if you are going to fiance the project.