Thanks Jake, two ways this video lifted a huge weight off my shoulders… 1st, hearing someone with a lot of experience admit they can’t catch or plan 100% of possible mistakes helps me have confidence while talking to homeowners that being a builder doesn’t mean you have to be Jesus! And 2nd, this is the exact way I’ve been building and pricing builds. I’m under contract as cost plus but I don’t calculate GC fees on my own crew other than what I would mark up as if I was subcontracted for another builder. My crew is essentially another subcontractor for fill in jobs. This way I can choose to have my guys do things that I know can do better than me working with new subs or new concepts. And the client sees some price benefit maybe allowing more time to have me do something right. I still make the same in the end but can save the client. Tell me if I’m wrong but in an ideal world, If I had employees that could effectively accomplish every job on a build from start to finish And keep them all busy with efficient work flow throughout the year, I would make mark up in every scope of work. Jake, I am actually quoting a new build for a high efficiency home in northern Wisconsin with a slab less slab like you had in a previous video and talking with warmboard about using their system as the top layer of subfloor. Perry at Extreme Panel is also quoting a design to help me compare costs with ZipR.

@jake.bruton.aarow.building

Ай бұрын

Keep up the good work. Thanks for the kind words!

Great series of videos. I like this better than fixed fee. In shopping for a builder for a custom home we were told that because of the uncertainty of the cost and unavailability of materials and labor a year or so out - that some builders will add as much as 50% to their estimated costs. We know in some cases that this has got to be true. So I can see how cost plus this would be an advantage to a builder in a competitive environment and also to the homeowner. The homeowner does share some of the risks - but should get a better idea of what the house is going to cost up front and would almost certainly end up paying less in most circumstances. It does not do the builder any good if the client runs out of money and the house is left unfinished and am sure the bank would not see the humor in it. I also wanted to comment on your video concerning having to pay fees up front. I had to smile at your statement "I don't spend money on your job without knowing that the money's going to be there." When we went to build our first home the builder (recommended by the realtor who sold us the lot) skipped with our 10%. I called the bank and they said that we were now "owner/builders". It ended up fine for us as I am sure we got a much better built home than he was going to do. But our lesson was "I don't give you any money without knowing the builders going to be there".

Cost Plus is the best way to go as long as there is complete transparency. This is where BIM (Building information modeling ) becomes invaluable in heading off surprises such as framing errors and under estimating.

@jake.bruton.aarow.building

4 ай бұрын

Absolutely. The more informed you can be with pricing the better.

How do we know that the subs numbers a builder shows us is not marked up? We are talking to a builder that does cost plus so I’m curious.

@jake.bruton.aarow.building

5 ай бұрын

I feel it should be the responsiblity of the builder to provide all receipts to the clients in a cost plus contract. Open book, is how our firm refers to it. We provide the clients with a copy of every receipt and invoice as well as digital time clock logs. You get to see everything since we operate on a reactive billing system. Here is what we spent, that means you owe us this much.

@heminole4life849

5 ай бұрын

@@jake.bruton.aarow.building Thank you for the reply. I guess what I'm asking and I would hope someone would never do this but the builder could have the sub send over a quote/receipt for material or labor and the sub mark that up say 10% but then give a pay in full reduction to the contractor when actually paid.

How do you talk your subs into giving you a fixed fee bid on a project when you are prividing a cost plus estimate? Sounds like your subs are assuming the risk on the job. If your subs run over budget do you compensate them and pass it on to the customer in the "plus" portion of the estimate?

@jake.bruton.aarow.building

4 ай бұрын

We ask for a fixed fee price and then have an understanding that we need to discuss beforehand if they have an issue. That way they feel supported and can do their best.

How is the cost plus percentage calculated? The way I would calculate it is not how our builder is calculating it 😬 Thanks!

@jake.bruton.aarow.building

Ай бұрын

It is a different calculation for each builder. The overhead costs for each office, builder, staff, and insurance is different. Then each builder will have a different margin that they will be trying to profit as well. I have heard everything from 20% - 100%. And I have heard everything from happy to pay that to highway robbery. It comes down to supply and demand along with services offered. I know a builder that is booked out for years and they mark up 100%, folks are excited to pay it because of the product they offer. By the way its not my firm.

@jenbg6958

Ай бұрын

@@jake.bruton.aarow.building Thanks. I wish I would have known the variances and pinned down our builder on their exact calculation. I was told by builders I was “interviewing” and the lenders that it was cost + 15%= total- okay, cool. I thought that was how cost plus worked. But now that the home is largely done, I see that the builder is charging cost / .85 which is significantly more. The contract says “15% margin,” which I’m paying dearly to learn isn’t 15% of the cost. Takeaway: Builders- be transparent… Customers- ask for formulas upfront.

Cost Plus puts the burden of the project cost on me, and I have no control over how you are spending my money. Fixed fee puts the burden on you the contractor to build the project per the specs and plans. You are the professional and you should be able to quote a fixed fee on projects you have been doing for 25 years.

@jake.bruton.aarow.building

5 ай бұрын

I understand why some folks feel that way. However in cost plus you get to retain the contengency budget. In fixed fee the builder gets it if he spends it or doesnt. Your Dr. and Mechanic operate on cost plus as well. Most folks don’t see that as an issue.

Cost plus works for the seller as it covers the sellers butt. But as a buyer we want a price. As do you when you buy something lol…

@jake.bruton.aarow.building

4 күн бұрын

The issues with the way you view things is that you are likely to pay more because you want that up front number. If I have to guarantee that number there will be a big cushion, and so will every other builder. This method made us more cost effective for our clients and I find that hard to argue with, and I would bet so do our clients. If you are working with honest people this is the method I suggest.