What Does a General Contractor Charge?
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What Does a General Contractor Charge?


Cordova Bay Complete Gut and Renovation

Before Complete Gut and Renovation

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.


Cordova Bay Complete Gut and Renovation

After Complete Gut and Renovation

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…


Cheers,


Dave Stephens

LIDA Homes Inc. / Mr. Contractor Referral Services

Phone 250-514-7702

Fax 250-590-0268

Email info@MrContractorReferralServices.com

Web Site www.MrContractorReferralServices.com

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Connecting Quality Contractors with Homeowners in the Pursuit of Complete Customer Satisfaction

Dave Stephens - Is the President of LIDA Homes Inc. / Mr. Contractor Referral Services. He has been building and renovating homes since 1998. He is a licensed residential builder with the B.C. Home Protection Office and provides his clients with a 2-5-10 year home warranty. His business mantra is: "The Pursuit of Complete Customer Satisfaction." He will not leave your home until the job is done right.

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12 Comments


  1. James Costello
    Mar 01, 2011

    Yes payment on the customers part is a must but producing a good quality of construction is a give and take process.General contractor should have a very personal touch with their customers as well. They should be able to envision a person’s building wishes, no matter how big or small, and bring them to reality.


    • Dave Stephens
      Mar 01, 2011

      Hi James,

      Yes, you are right and I completely agree with you.

      Cheers,

      Dave


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  3. Dave Stephens
    Mar 13, 2011

    Hi,

    You can find my facebook page at Mr Contractor Referral Services / LIDA Homes Inc. It should come up. If not let me know.

    Cheers,

    Dave


  4. Luigi Fulk
    Mar 23, 2011

    [...]I am delighted that I found this website , just the right info that I was searching for![...]…


    • Dave Stephens
      Mar 25, 2011

      I’m glad it helped. Don’t hesitate to ask if their is anything else I can do.

      Cheers,

      Dave


  5. Frances Goedicke
    May 06, 2011

    i just saw your comment this is really important to me


    • Dave Stephens
      May 06, 2011

      Hi. Hopefully my comments helped. If not let me know and I will see what I can do to help. Hope whatever type of renovation or new construction goes well for you.

      Dave


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  7. Sharla
    Jun 10, 2011

    I would like your opinion. :o ) We hired a general contractor to finish our basement. We’ve had a couple bad experiences with contractors, so we were being very cautious. (We thought?) We’d done our homework and he was right on with the cost of materials and labor, (21,000) and had mentioned while talking, that he would charge his 10 to 15% on top of that. When he came back with the written proposal he had added over 30% ($6500) We were shocked, and he said that’s what he normally charges for a job like this. But offered to take off $500 (yippee) and said that he would be hands on during the entire project and make sure everything was exactly as we wanted and the best quality. It was very hard to swallow, but, we signed the proposal with very high expectations. Well, it would take a couple pages to mention all that has gone wrong, we are constantly calling him to come out to see what’s wrong, and have him get it fixed. It’s been exausting and stressful! So..are we just SOL with paying him $30% or can we refuse, and just pay 15%.


    • Dave Stephens
      Jun 10, 2011

      Hi,

      I’m sorry to hear about your problems. These types of issues are always extremely stressful on home owners when they get out of control like yours has. The very first thing you should do is go and see a lawyer that deals with construction liens. They will generally not charge you for your first visit but check and see. Then I would read the your areas Lien Act which outlines your rights and the contractors rights. I only know the act which applies to the Province of British Columbia.

      Part of your problem is you agreed to 30%; however, any agreeement is always subject to the work being done on time and to the expceted standards. You have three options: 1. pay the fee, 2. negotiate with the contractor on the basis that the work wasn’t done properly and get your fee reduced, or 3. don’t pay at all and if the contractor puts a lien on your home go to court.

      The problem with number 2 is that it will be expensive to hire a lawyer (approxmately $10,000,00 from start to finish) and the stress will continue. If you have legitimate quality of work issues and have documented those issues my recommendation is to negotiate with your contractor and try to come to some type of settlement that you can live with. Tell him what you are prepared to give him and leave it at that.

      I hope that helps and good luck.

      Dave


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