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Standard Contractor markup = 28%?
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Posted by jjmckillop (My Page) on Fri, Jul 17, 09 at 16:53
Hi,
I've been a grateful reader for months as we begin to plan our home remodel as first-timers. Not sure if we just stepped into a landmine.
After we signed a contract and work began on our home, our contractor told us his standard mark-up is 27.5% (nothing is in writing, earlier he'd told us 25%) - it's beginning to occur to us this is high. Could anyone share their experience with standard contractor's mark-up? We are in Southern California.
Also, he wants to apply his mark-up even to work and purchases we handle on our own (e.g. appliances or semi-custom cabinets from an outside provider who also does all installation.)
Any feedback will be greatly appreciated!
Thanks in advance! |
Follow-Up Postings:
RE: Standard Contractor markup = 28%?
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| My contractor's mark-up is 25%-28% as well, but his price includes installation of everything - appliances, lighting, etc. If he were to ask me for a mark-up on materials I was buying, I would not pay him. However, if he is installing them he should give a separate price instead of a mark-up percent - you never know if the construction cost may go over he will end up earning more than the actual installation price. When you signed the contract, did it include installation of your purchases? Is the additional 2.5% over and above what was signed in the contract? If yes to both, then you should not pay. |
RE: Standard Contractor markup = 28%?
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| There's no such thing as a "standard" markup amongst contractors. Your contractor may have his own standard way of doing business, but I don't think that's what you mean to ask about. Different business models work in different ways. Don't get distracted by any one contractor's rationalizations. Focus on the final product (including quality and timeliness) and the bottom-line cost. Anything else is a diversion. |
RE: Standard Contractor markup = 28%?
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| Thank you both for your replies and insights. These guys seem to do good work, but are finding too many ways to slap on a mark-up. This is a fixed-cost bid with several changes orders that came in due to inspections/engineering, not any changes we've requested. So on those change orders, they charge labor/parts +27.5%, or subcontractor's price + 27.5%. We wanted to order custom cabinets from Plato, who have their own installation team (part of the price we pay to Plato.) Our contractor wants us to pay him 27.5% on top of what we pay Plato. We want to source our own tiles (we need to cut cost wherever we can at this rate!) and they want us to pay them 27.5% on top of that. Since we're first-timers, we have no experience to back up our gut instinct that this is a bit fishy. thanks again! |
RE: Standard Contractor markup = 28%?
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| Setting aside what your contractor "wants," what does your contract say about this stuff? If the documents you signed spell this out then you may be stuck. If it's not spelled out in the contract then everything is negotiable. |
RE: Standard Contractor markup = 28%?
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| Honestly I would be appalled if my contractor asked for a mark-up on products I am buying. Is the mark-up inclusive of installation charges? What helped me was getting several bids and comparing, and going specifically to say Marble places to get quotes including installation to negotiate lower prices. It seems fishy that the contractor is charging so many mark-ups. Your contract should then spell out charges specifically and services included to protect you. I went through a long process because my contractor would not give price breakdowns but I did negotiate a lot. I disagree with jon1270. While I would be wary of going with a cheapest contractor just on price alone and do care about quality, I would be equally wary of mark-ups and additional charges. Again, I would not pay a mark-up on materials that I am buying unless the mark-up covers installation cost. Even then the installation cost should not be a % but a fixed cost, because why should the contractor profit more from the higher cost that you pay? Can your designer or architect talk to the contractor about how such a practice is unheard of? Can you shop around and have proof that what they are asking for is not common? |
RE: Standard Contractor markup = 28%?
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| We have a CM and I pay him a percentage on anything that he provides or that his subs install, as well as the cost of the sub labor. So, for example, I found my own flooring guy and purchased my travertine from Home Depot. My CM got no money from that. However, if I had used his tile guy I would have paid his percentage on top of the cost of the labor and materials. He does not actively manage aspects of the project for which he is not being paid (doesn't provide any conflict resolution or quality control, for example). If his guys don't touch the product in any way, my feeling is that he is not due a percentage. Check your contract to see how it is spelled out for you. Sandy |
RE: Standard Contractor markup = 28%?
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| I'm remodeling two baths for $35 - 40K and my markup is 20%. I live in TX if that makes a difference. I am not procuring anything outside of my contractor. 20% is causing pain for me on change orders, so it was helpful to know that it appears to be a reasonable percentage. Good luck w/ your project. |
RE: Standard Contractor markup = 28%?
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| In my experience a markup over 20% is due to unions or design-build services. It would be hard to justify 28% for home building in most of the country. However, costs vary so much between locations that it is pointless to ask this question without telling us where you live. It can be as much as 70% more expensive to build in California than in Arkansas. |
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