Choosing a Home
Builder…
This
is an individual that you are going to work with for many
months; so compatibility is a must, which can easily be
determined during the interviewing process. Get references
and tour some of the previous house plans that the
home building contractor has
completed, and visit with some of these
individuals. If they
are satisfied a couple of years later, then the
home builder has
done a good job.
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HOW IS THE BUILDER'S
FEE CALCULATED?
Some
home builders charge a percentage of
the project cost. This fee typically ranges from 10% to 20%.
Some builders prefer to give you a finished, set price. If a
builder is charging a set price to construct your home, he
doesn't have to show you the various itemized estimates. He
isn't required to show you his margin of profit.
When competition is stiff, some
home home builders will be tempted to under bid to get a project, and
expect you to pay the additional cost over runs. You'll find
a clause in every builder's contract, and the
home builders that
don't have this clause in their contract will often
disappear before your project is complete if the budget runs
over.
Make certain that your
home builder has
your project properly insured.
-
HOW
MUCH PROFIT SHOULD A HOME BUILDER MAKE?
The ultimate goal for the ambitious
home builder is to build spec (building the structure and
speculating its sale after completion) homes. Although it
can be somewhat risky, it is much more lucrative. If he
spends $100,000 to build and manages to get the finished
product appraised at $150,000, then he makes a great deal
beyond the standard percentage or fee. I have had builder
client’s profit 100% from these spec sales. If you think
about it, wholesale price is typically marked up 50% to 100%
for retail. Keep this in mind as your builder is pricing out
your project.
Some
home builders willing to take a
project for a percentage of time and material are young and
don't have the experience or the financing to
home build on their own, but they
make up for these shortcomings with a great deal of energy
and enthusiasm; very affordable.
Have an attorney look over the
contract that the home builder of your choice presents before
signing; Feel free to negotiate terms and conditions, and
most importantly the price. |
