Whether already built or going to build, when you purchase a brand-new, never-been-lived-in home, you will pay a builder’s fee. If the home is already built, the question about how much the builder will be paid is often not a concern. This makes sense because the customer knows the price of the home, which is not going to fluctuate. When building a custom home, however, the builder’s fee becomes more important to clients.
The Builder’s Fee
Before we discuss this fee, it is important to remember that there are two different types of contracts–fixed-price and cost-plus. (You can read more about that here.) Of course, both contracts include a builder’s fee. And how much exactly is that fee? Well, it varies from 12-25%, with the national average approximately 15%. That means, a 15% builder’s fee for a $500,000 home is $75,000.
You might be thinking…
What?! Why would I pay a builder $75,000?! I can save the money and do it myself! I mean, it’s just coordinating a few subs and scheduling some deliveries, right?
Well, before we talk about the role of a builder, let’s think about your current job. Could your boss hire someone today who has no experience to do your job as well as you?
The answer is most likely, “Of course not!” But the question is, “Why?”
Well, probably because you’ve made mistakes along the way, learned a lot, and now have the knowledge needed to do your job not only well, but efficiently.
So, now the question becomes… Do you want to hire an experienced builder and pay a fee for his/her knowledge? Or do you want to hire the person with no experience (yourself) in an effort to save a bit of money?
Also, remember that building homes is a builder’s full-time job. Do you really have the extra time to devote towards building your dream home?
The Responsibilities of a Builder
If you’re still unsure (because that 15% fee is a substantial amount of money), let’s talk about some of the responsibilities of a builder…
- Estimating/Bidding the over-all cost of the job
- Ordering all materials
- Ensuring the correct materials are delivered
- Scheduling and coordinating all subcontractors
- Ensuring the subs do all work up to code
- Making sure subs do not waste materials
- Making sure subs do not overcharge
- Meeting with inspectors
- Completing necessary paperwork to receive bank withdrawals
- Cutting checks for materials and labor
- Keeping a record of expenses from the job
And that is simply a few examples of what the builder does when the house is under construction. That doesn’t even include his/her expertise in the following:
- Land Selection
- Closing on Land
- Land Preparation
- House Plans Design
- Financing (including construction loans)
- Closing on a Home
- Warranty Issues
Now, you might be thinking…
Hmm, maybe it might be worth paying a 15% builder’s fee…
Is the fee worth it?
In our professional opinion, hiring a quality, reputable builder is worth the money. (Big surprise, right?!) Notice, however, that we did say a “quality, reputable builder.” As with any industry, all builders are not created equal. (I mean, does every employee at your company have the same work ethic?)
To help you figure out how to hire the right home builder, check out these two articles by clicking on the appropriate image.
Also, subscribe to our email and receive our FREE eBook, “Building a Custom Home on Your Land: A Step-By-Step Guide.” It contains an entire chapter dedicated to how to find a custom home builder you can trust.
And of course, contact us! We’d be happy to answer any questions and would love the opportunity to put you in your Element!
*Note: Elements uses a cost-plus contract, with a 15% builder’s fee.