So, you want to hire a general contractor to build you a house or do a renovation for you and you don’t know what the cost would be to hire someone. To some degree, they really need to be dealt with differently because building a new home is a lot easier than doing a renovation and renovations can range from something really small to a complete gut of the house. However, for the sake of this article, I’m going to talk in generalities and try to deal with this in one article.
What does it cost to hire a general contractor? The cost ranges from one general contractor to another. Some will charge you a flat fee; some will charge you a percentage of the job, while some will combine a flat fee and a percentage of the job. There is no right or wrong way to do this. Is should come down to how much is it going to cost you to get the general contractor to do the job. The easiest way to determine how much you are going to pay at the end of the day is a flat fee. The problem with this approach is that the job may sometimes be under the estimate (not vary often) or over the estimate which results in either the home owner or the general contractor feeling like they have been ripped off. No honest ethical individual wants to end a business relationship (when you hire a general contractor it is a business relationship) this way. Consequently, I prefer to charge a percentage of the job which is fare to both the customer and me.
Now that brings you to your next question. What is a fare percentage rate to charge for building a custom home or doing a renovation? Again, that ranges from anywhere from 10% (if they are doing it for lower than this run away) to around 25% (this is a high rate for high end custom jobs). I prefer to charge 15% which is fare for both the customer and me.
You are probably asking 15% of what? The standard is 15% of all material and labour that goes into the house. For example, when a house is framed a general contractor would charge you 15% of all of the lumber and the labour to frame the house.
A couple of things to be careful of: make sure the General Contractor is not marking up all of the material and labour without you knowledge. For example, some General Contractors will tell you their General Contracting fee is 10%. What you don’t know is that they are marking all of their material and labour up another 10%. So what they are really making from you custom home or renovation is 20% of all of the material and labour. When you are talking about a $300,000.00 custom home or a renovation, this unethical tactic can add another $15,000.00 onto your General Contracting fee without you knowing the difference. In order to avoid this ask your general contractor if they are marking up any of the labour or material and ask to see the invoices if you are not sure.
What percentage do I charge and how do I charge it? My business is built around “The pursuit of Complete Customer Satisfaction.” That is my business Mantra. I will live or die by this statement. Now with that said, at some point when a customer is completely out of their mind I have to pull back, but for the most part I will never leave your job until you are completely satisfied.
Being honest and transparent is so important to me that I include every invoice for labour and material that I charge you for with my invoice to you. Now, I guess someone could say that I had the labour or material marked up at the source. My response to that is yes, but it would sure be a tremendous amount of time to do that and would take so much time that it would not be cost effective for me to invoice out that way. So, the moral of the story is, I only charge 15% and nothing more. A fare fee for an honest transparent process and a job that is done right.
Please comment if you have anything to say or any questions. Next time I will write an article on how to properly select a General Contractor. Until then…
LIDA Homes Inc. / Mr. Contractor Referral Services
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