We have a cost plus contract. I understand what you are saying about buying unique things. If the things you are going to buy are of little monetary value compared to the the value of the entire house, then I don't think the builder will mind, as long as they are available when needed. As far as appliances, choose what you like and give the list to your builder and have him buy it.

Another alternative is to set a fixed salary for the GC. He will get paid $XXX for the build. Then you are free to buy whatever you like and he won't care.

"cost plus" is contractor jargon for a "Cost of the Work plus a Fixed Fee" contract. The builder bills you the actual Cost of the Work plus a Fee each month. The Fee can be a fixed percent of the Cost or it can be a fixed Lump Sum billed in predetermined installments.

Ours just put fixed price on most of the work and allowances for the things I had to go shop for. We also included a provision he pays the interest on the construction loan if he runs past 6 months, which he did.

Our contract is fixed price with allowances for items like lighting, appliances, kitchen cabinets, etc. There isn't a separate mark up on the allowances and we're able to buy items against the allowances from any source. For some smaller items like a powder room sink, we found one we wanted at a home show and just paid for it ourselves and the builder will install it. We'll eventually settle on the puts and takes from all the allowances.

As another example, we have an appliance allowance that we knew from the start we would exceed, once we've decided on the appliances we want, the builder will pay the appliance store and collect the overage from us. We are free to use any appliance store we'd like but the builder obviously has one he likes to do business with and so far, their prices seem competitive so we'll probably use them.

We are working with a smaller, custom builder so think that adds to the flexibility and there is a LOT of faith in both directions on how this will work out in the end. We wanted the safety of a fixed cost contract and spent a lot of time working through exactly what was and wasn't included. Our thought was to agree on a contract with the idea that if paid the total price we had agreed on at the start, we'd know what we are getting and we could be happy with it.

Like everyone else, controlling the upgrades and overages will be key to the project. Although I may not have fully understood how the cost plus contract would have worked,, it just seemed to have too many unknowns.

Hope this helps and good luck.

The first things to determine are who you want to design the project, who you want to provide construction phase assistance, the sophistication of the available contractors, and whether you want to bid competitively or select a contractor and then negotiate a contract. Your time frame for completion and the climate are also important factors.

Until you have made these decisions it is premature to consider the form and structure of the contract. The most common mistake of inexperienced owners is to start at the end of a decision process and work backward thereby having to reconsider each issue repeatedly.

We have an architect from Atlanta. He has very highly recommended a builder who happens to be local (just moved back from Sea Island where he was for a couple of years building lovely Mizner inspired Spanish houses) who he has built with several times. They work well together and the recommended builder supposedly has "a good eye". We actually almost bought a house he built (designed by a different Atlanta architect), and the folks who did are very happy with the construction (we live in a small town!)

In fact, I actually grew up with him and he has built for two friends so we have other references. My husband also delivered their child :). This would be the easy choice as our architect and this builder have a past record together which has been successful and no problems. He routinely builds multi-million dollar houses so he is familiar with the process and suppliers for high end homes.

We are also going to bid out the contract to a couple of other builders who build top quality houses, architect designed, non spec houses. One we have identified, also local, who has built for many folks we know. The other we are unsure about - apparently choice number 3 has a dad who has one foot out the door, and the folks we knew who used him to build a beautiful Versaci inspired Maryland Tidewater house said they had some concerns about this.

The main reason I am asking is that I want to start prowling the local and regional antique shows for items and don't want to buy a bunch of stuff that I won't be able to use. I also want to be able to ask the right questions when we get preliminary cost estimates.

Climate is generally not a factor (we live in Georgia), and neither is time frame for us as we are in no particular hurry.

So you would be using a Lump Sum contract in order to bid the project?

Regardless of the nature of the contract, if you tell the bidders up front you want to supply certain materials I can't imagine why they would object. Buy whatever you want; it's your project.

No idea macv. Guess I will need to talk to my architect! I always assumed cost plus but I definitely would like to provide some things, maybe not always known up front? I.e., if I find the perfect powder room light fixture different than specs, etc.?

I think some have said something about having allowances - i.e., 35,000 for appliances and the percentage is paid on the allowance but not if you go over? Philosophy being it is as easy to order/install a 4,000 range as it is to do that for a 10,000 one???

As you can see this is all new to me :) Think I need to read a book, or at least an article, so I have some walking around sense! I am a researcher and former lawyer (now mom) so I like to know what I am getting into, and need to compare things to be sure I am making the right decision (which is why this build may make me nuts :)

You would not bid a Cost of the Work contract unless you were just bidding the fee or if you were asking for a Guaranteed Maximum Price (a not to exceed amount) which is not normally included in home building contracts although there is no reason it can't be (assuming the builder is capable regarding project management and paper work).

There is no reason to have an Allowance for materials you want to supply; just list them as "supplied by owner, installed by contractor". You want to include all costs in the base bid price if possible.

As for not making those decisions now, it is important to make up your mind in order to avoid cost overruns, delays and misunderstandings later. You can put in the time now or pay the contractor later. This is one of the hidden costs of home building that doesn't occur in larger scale projects where virtually everything is included in the original contract.

I am reading this thread with great interest. We hired a builder before we even started planning our house; he helped us evaluate lots, we interviewed him extensively, and felt that he was the right fit for OUR project. He has been to most of our design meetings over the past 5 months, and we only have a handshake agreement right now - but he has already provided tremendous value in helping us make decisions that are more beneficial to the budget.

He did a 'preliminary cost estimate' for us once the plans were more stable. For most items, he talked with the architect and got guidance on what the architect wanted in terms of the finishes and trim and such; he talked with my husband and me about our thoughts on the type of appliances and plumbing fixtures we had in mind (as far as level of quality). He then spent a few weeks getting estimates from his suppliers - keeping in mind that this was really just a ball park so we could have an idea whether we needed to scale back in the design or materials.

Some of the areas had an allowance, as we obviously have not picked flooring or trim at this point. Generally, we assumed that everything 'attached' to the house would be purchased through the builder - including tile and faucets and such (which are sometimes purchased through designers); we also assumed that all lighting would be purchased through our designer (chandeliers and sconces and such - not can lighting). On that line item in the estimate, it says 'supplied by owner'.

So - when going through the bid process, I think you make it clear with the builder what you are planning on buying.

We have not signed a contract yet, and of course will be fair, but I am also confused about the fee component, especially since I have heard that my architect often likes to change a few things while the build is going on - not major structural, more inside tweaking. If you have a fixed fee based on estimate of construction cost, will you be eaten up with change order fees?

PS - my designer had good things to say about the builder you are considering - she worked with Bill on a project with him

thingsthatinspire, you are describing a "negotiated" contract since the GC is not actually bidding against other GC's. You haven't said if the contract will be Lump Sum or Cost of the Work but either way it is negotiated not bid unless you intend to allow other GC's to provide prices when the design is done.

You need to negotiate with your builder what the mark-up will be on change orders independent of the base Fee. Often it is possible to get a lower rate or no mark-up (within limits) since he is not bidding his fee against other GC's. Remember, until you sign a contract he could be left holding the bag and that is always on his mind no matter how well things are going. Frankly, I'm surprised a GC would invest this much time without a retainer, consultancy contract or a letter of intent. I suspect he really wants the job so let hm show you how much.

Thingsthatinspire - yes, they worked on the Golf Digest for Women house together, and he has worked with Land Plus extensively as well and all reviews are good :). He actually recently moved back to Athens and I think there is a great benefit to having a builder that is local - I would have second thoughts if he was coming from out of town.

I suspect our next step will be preliminary pricing as well, at least that is what our architect said.

As far as bidding it out, I guess the main reason for us to do that at this point is to get a feel for the percentage charged by each above the materials? If one is way out of line, perhaps you could negotiate? I guess that is what is meant by bidding out a cost of the work contract?

Interesting about the change orders - there is so much information out there that I don't know! I also read with interest the desirability of adding a provision to protect yourself from subcontractor liens . . .