We are planning to build in southeast michigan. Our builder just told me that their management fee for our job is 17% (a 3% discount) and their margin is 14%. That seems pretty high to me. Am I wrong?
We are in No. Virginia, our builder is getting 10%...and that's pretty standard in our area.
Does that include their fees and margin?
Not if you're the builder.
Seriously though, most around here get between 10-15%. There are a few who have created a solid brand and they are able to charge upper teen to twenty percent.
Our contract is 10% of the sticks and stones only (meaning we don't pay the 10% on the lot, permits, sewer/water taps, final landscaping, architect or other fees) with full bidding and invoicing disclosure. We are given the option to choose the subs based on the bids. We are also allowed to supply our own materials if we find the same products at a lower cost.
Did you interview multiple builders? We interviewed many before selecting the "one". I think your fees sound too high.
I know a builder in SE Michigan that charges exorbitant fees like that. I VERY strongly advise against using this particular builder. If you email me your builder's name, I can let you know if it's the same one.
That is outrageous, especially for Michigan--even when times were good-- since most builders can't even find houses to build now. Look for someone else!
Our bilder is open book and charges between 10 and 14%. I wouldn't pay 31%.
No more than 10% in my area. It can get as low as 6% for +$1M builds.
Does the 31% include all the upcharges he assesses on materials? There's a thread on the bathrooms forum about this right now--builder charged homeowner $2,000 for a vanity and homeowner found out from his supplier that he only paid $1600 for it. That's a 25% markup on materials--he didn't have to pick it out, pick it up, deliver it, nothing. Evidently a pretty common practice.
~20% markup on materials + 11% builder's fee = 31%
Something to think about...
As the preceding post indicates, the OP's builder may have made the mistake of being too honest.
But what's not clear in this thread is how the job is being charged; fixed price, fixed price with allowances; management only. Or some other variation. Let alone, the size and finishes, custom or existing plan etc.
Any builder charging a gross margin of 10%-14% is likely losing money on an after tax basis. If it's a small builder, he's essentially getting a salary.
Rather than concentrate on what someone's making, it might be more productive to focus on what you're getting for your money.
I agree with Worthy. Too many of you are stuck on the number the builder is giving you ad profit and not enough on the actual amount he is paid and how he is paid it and if he gives you value for your dollar.
Who does the framing? How are you charged for it? By the hour or the job?
Is this a bid job or a time and material job?
Who provides equipment? how are you billed for it?
There many ways to get your money. If they want to and they are not honest they will find a way.