Home Building Contract

I have a builder who wants to charge labor for a simple 2,000 square feet house by charging the same fee as the materials cost. Is this reasonable? If the materials costs $75,000, he wants $75,000 for the labor. 

Hi Wondering,

I wonder who is buying the building materials?

I hate to assume, but I guess the builder’s charge for “labor" includes the cost of subcontractors he will have to hire for the jobs he can’t do. No one is a master of all trades. And, some jobs he cannot do legally.

The point I am making is that a contract such as the one "wondering" is looking at, is a license to steal, no matter who buys the materials, but more so if the builder does.

Let me give a couple of examples as to why this contract is bad, bad, bad.

If you choose $700 windows instead of $300 windows (easily done), and although it takes no more labor to install the $700 windows, you’ll pay $800 more per window instead of $400. That will add up to $1,000’s of dollars of bogus charges for the average 2,000sq ft house.

What if you decide on a $1,200 dishwasher instead of a “builder’s model” at $300? Are you willing to pay $900 more to install a dishwasher? They all install pretty much the same.

I’m sure you get the picture?

Here are three sample contracts that I used over the years.
(They are PDF files, so if you need the FREE Adobe PDF reader, click HERE.

They are legal instruments and are to be used only as examples. Because of varying state laws, these contracts should not be used by you unless such use is approved by an attorney.

I recommend the second contract, Cost plus a Fixed Fee.
With this contract, the builder is NOT motivated to increase the total cost of materials.
Have him come up with an initial estimate of labor and materials, add his General Contracting fee, and either accept it, haggle over the numbers, or reject it and find a different builder.

NOTE: Any contract will have “allowances” for items you need to select such as appliances, floor covering, etc. Be sure to read my blog posts on “Building Allowances” and web page on “Building Allowances”.

Best of luck,

Carl Heldmann, byoh.com