Cost Plus with No Gross Max Price (GMP) is commonly referred to as simply “Cost Plus.” This contact method has no fixed price. Essentially, the Builder is saying: “I’ll build your house, give you every option you want, and you (the Owner) agree to pay for the material and labor cost PLUS a fee. The fee embodies the Contractor’s profit and overhead. The contract should specify what project costs are to be charged, and what is not. For instance, if your house is wood-framed, you would expect to pay for the labor and framing material to build the walls. These are direct costs and easy to understand. But you may not be expecting to see and pay for indirect costs such as the builder’s supervision to manage the framer and coordinate with other trades.
Shared savings is a necessary part of the cost-plus agreement. Most Contractors, will understand their fiduciary responsibility to the Owner and will act responsibly with spending the Owner’s money. But to ensure the process is properly incentivized, the Owner and Contractor typically agree to share the savings on the project. Essentially, they agree on an initial budget, and if the project ends up being less than the budget, then the savings are shared. Typically, the savings split is in the realm of 60%-40% to 75%-25% with the larger portion going to the Owner. For this to work, the initial budget needs to be established based on proposals and substantiated cost estimates. The “savings” then comes from the diligence on the Contractor to keep costs down and to employ cost-effective building strategies. Typically, the savings do not apply to contingency and allowances. If the Owner selects an inexpensive faucet, all of that savings belongs to the Owner. (Although, the Owner may decide to apply those savings from the kitchen faucet to increase the allowance for another item they may wish to upgrade). But, if the contract price is increased for added scope via a change order, then that added amount should be used when calculating the shared savings.
Last time, we reviewed some important elements of any construction contract. Don’t forget that a detailed Scope of Work is essential to setting the proper expectations with your contractor.
Now let’s go through the types of contracts that you may use. Contracts can be lumped into several different types: 1- Lump Sum, (or Fixed Price), 2- Cost Plus (with or without a Gross Max Price, or GMP), and then there are hybrids such as a design-build or design-assist that starts as a Cost Plus and then converts to a Fixed Price. So let’s start with the one most used and easiest to understand:
As a customer, you may want to know how much something costs the builder. With a Fixed Price contract, generally, the Owner doesn’t have the contractual right to this information, and thus, the contractor will generally not share that info. Sometimes, owners want to know the cost of items, so after a quick “Google search”, they think they have the answer. This is not necessarily the case.
You should feel confident and excited during your home building process. After all, the builder you choose could mean the difference between a project that’s done right, on time and on budget, and one that costs too much takes too long and is fraught with quality problems.
But with every builder claiming to be qualified, how can you be sure you’re picking the right one?
Cost per square foot pricing is a terrible way to compare houses since it doesn’t consider any of the unique features and finishes of your home. As a simplified example, let’s say that a 1,000 square foot (SF) home costs $150,000. That makes it $150/SF. But what’s included in that? We don’t have enough information to know. There are so many variables that affect the cost of a home. For instance, does the home have any carpet, or is it tile? There is a large price difference between these two.
In February 2020, Roger Thomas was a featured guest speaker on the Live Your Light podcast. The podcast focuses on spiritual and practical tools to help people design the life of their dreams. The show is hosted by Emily K. Thomas, a transformational coach, speaker and entrepreneur, who is on a global mission to help people align their vibration, consciously create new thoughts, forge new beliefs and create new outcomes in life.
When you are sitting down with your contractor to finalize the home you are building, they will most likely bring a contract for you to sign. Many folks will sign the contract without really understanding it. This is a BIG deal as you need to know what you are legally obligating yourself to. What some people don’t understand is that if a lawful contract is signed in good faith, they are bound to it and the contractor has the right to sue you if you break, or breach, the agreement. (Likewise, you can sue the contractor if he breaches).
This question gets asked a great deal and the answer is driven by the market and current material prices. Generally speaking, building up tends to be less expensive than a basement. That said, not too long ago, lumber was at an all-time high and basements were the better option. Check with your builder and they can advise you on the pros, cons, and cost of each.
There is a long-standing expectation in this industry that all contractors should give free estimates. As a result, little work actually goes into the initial estimate. Herein lies the problem. Some contractors guess an estimate or make a low bid to get their foot in the door. As a result, the consumer chooses the low estimate because he or she trusts that the contractor actually put a lot of time and energy into quoting their project. But is the estimate really free? Seriously, who works for free? I don’t know too many people who are willing to produce quality products for no cost. The fact is that people don’t work for free, especially business owners. If they do, they typically aren’t in business for long. Someone will eventually pay for that free estimate in one way or another. Whether it is the one out of ten homeowners that accept an estimate and start a project or the contractor who goes out of business because he didn’t charge for his time. Someone ends up paying for the free cost.
When looking for the right contractor for your unique project, there are many things to think about. Although price is important, it shouldn’t be the primary reason to choose a contractor. So, what should you ask your prospective contractor? Here is a list of questions for you to think about, make your own, and then ask your contractor candidates. The most important thing is to trust your instincts and choose the contractor that you feel comfortable communicating with and spending the next 4-6 months working with.
At Choice Builders, we have over 30 years of experience in the construction industry. We can take your visions and turn them into reality. From small homes to larger design build projects, we’ll always get your project completed right and in a timely manner. When you hire our professional team to complete a project for you, we’ll guide you through our 5-step process that’s easy, clear, and highly effective.
If you ask someone who has recently built a custom home, you may hear a horror story about their experience. Perhaps four out of ten people will say their experience was “fair,” and only one in ten will say their experience was “great.” My aim is for you to be in the group that has a great experience building your new luxury custom home. I want you to imagine your dream home, to see it in your mind, and perhaps even sketch it out on a napkin over lunch with a friend because you’re so excited about your unique vision. Then I want you to see it on paper, and some day see your dream to live in the incredible home that you’ve created come true.
Cedar City has relatively minor winters and we can usually build all year long. Building in the winter can be slightly more expensive since the home needs to be heated during construction to ensure the drywall texture and paint cures without freezing. And when pouring concrete, we must use special thermal blankets to cover the concrete until it cures.
HERS is short of Home Energy Rating System and is a process of evaluating the energy efficiency of a home. Without it, it’s just a guess on whether of not a home will perform well or cost you money. To earn a HERS Index score, there are many mandatory standards the home needs to comply with, such as window sealing, insulation, and wall sealants.
Building homes isn’t just about creating something new and innovative; it’s about helping our customers realize their dreams while protecting the environment and enhancing the community in which they live and work. That’s why energy efficiency remains a cornerstone of Choice Builder’s business philosophy. Our houses are healthier, more comfortable, and energy efficient. At Choice Builders, we practice sustainable principles to create healthy, energy efficient homes and buildings that provide a life and livelihood for our customers while saving money each month on utility costs.
Choice Builders is proud to offer new homes that have earned the ENERGY STAR® label. The ENERGY STAR label means that your new home has been designed and built to standards well above other homes in the market today. It means better quality, better comfort, and better durability. It also means that your new home is a better value for today, and a better investment for tomorrow. The ENERGY STAR label gives you the peace of mind that your home has undergone a better process for inspections, testing, and verification to ensure that it meets strict requirements set by the U.S. Environmental Protection Agency (EPA). ENERGY STAR certified homes are better because they are designed and built to provide homeowners:
As soon as Kermit the Frog sang “It’s Not Easy Being Green” on national T.V., this phrase entered our pop culture and has been used and overused ever since. But, it does fit with the topic of Green Building and Greenwashing. Green Building is synonymous with sustainable or environmental building. Whereas greenwashing is merely jumping on the bandwagon and using keywords & tricky phrases so marketers can make something appear to be environmentally friendly when it’s actually not.
Most people think of sustainable homes in one of two ways: The first, it’s an elaborate process of using unusual alternative building principles to make your home “off the grid”. And that sustainability is only for hard core environmentalists do who suffer inconveniences for the sake of the environment. That you use things like dirt and straw bales and other unconventional building methods.
The second way that many people think of sustainable building is that it’s for the wealthy. That it takes lots of money to buy the latest and greatest in energy efficiency and complicated technology to make a home “High Performance.”
Choice Builders sees a sustainable home differently: one built with common sense.
As I sat down to write a few words, I read through a few of my saved articles for inspiration, and this article from Oprah’s website written by Winfred Gallagher really struck me. One quote in particular:
“We worry a lot about how our homes look, but how they make us feel, emotionally and physically, is far more important. That costly renovation or those silky sheets matter less than whether our living spaces nourish who we are, buffer us from stress, and provide opportunities both for privacy and for socializing with family and friends.”
One of the great things about Southern Utah is the wonderful outdoors. There are so many things to do and see…they literally beckon to you to head out. Those first few steps in that clean, crisp air feel so remarkably good. And then we return to our home and the difference in the air is notable….but should it be? Wouldn’t it be great if our houses had that same high-quality fresh air we were just walking in? Well, it can. Indoor air can even be of higher quality than outdoors by having fewer particulates and less pollen. This first step can be accomplished by using high-quality pleated air filters and changing them often. But that is only part of the battle to have high-quality air inside your home. A major contributor to poor air quality is the off-gassing of Volatile Organic Compounds (VOCs) from materials used to build your new home. Have you ever walked into a home a smelled that fresh, “new carpet” scent? Well, that is the chemical adhesives in the carpet coming out of the carpet as a vapor and into the air you’re breathing.
Our houses are very comfortable houses to live in. When we're designing the our house, we pay attention to the heating and the cooling system. We don't use general rules of thumb to decide how big or how small heating and cooling should be. We design the system specifically to the house. We take into account the insulation, the windows, the solar exposure, all of these things to make sure that we're delivering the right amount of heat or cooling to each and every room. So, you can be in your bedroom and walk into the kitchen. You can be on the sunny side of the house or the shady side of your house, and it's going to be comfortable. It's going to be the right temperature that you set it on your thermostat because it's important to us. We want you to enjoy your home.
Your home is a safe haven. A place to be with friends and family, to feel snug and secure, protected from weather and sometimes the world. But what truly makes your home safe? If you’re alone at home with an injury or if you fall, how safe do you feel? There are specific design elements that can be used in your home to make it safer, easier to live in, and more convenient. It’s called Universal Design, also known as Aging-in-Place.
Using the Aging-in-Place design approach allows you to live gracefully in your home by having all the details of safety and comfort simultaneously considered. As a Certified as Aging-in-Place specialist, Choice Builders incorporates Universal Design features into every one of our custom homes.
One of the ways to go about designing and building a custom home is the design-bid method. The design-bid approach is when homeowners first find an architect/designer and then find their builder after the plans are done. Or, a homeowner could purchase an online pre-made plan, then search for a builder. Usually, the homeowner sends the plans out for competitive bid by two, or three, or even more builders.
On the surface, design-bid, or competitive bid, may seem like the logical way to get the best price for your new custom home. But the competitive bid is not the best way to get the best value or even the true cost for your custom home. And, it can lead to many other unintended problems.