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Ironwood Builders Bottom line is bottom line. Most estimates for construction are educated guesses, subcontractor bids and material supplier's take offs. Your contract is for a total net sum, unless specified as a cost plus or time and material job. If your contractor guesses low on one line item, he hopes to be equally high on another line item....balancing the equation. I've shared the line by line estimate and costs before, still do...but my price is my price and that's where we start. I had one couple try to tell me if I was over on any line item they should be due a refund..I replied that then I would necessarily need to change the contract to a time and materials contract so that the overages in other areas were paid for. They disagreed, saying I was responsible for the overages....I fell back to saying I was also responsible for the under budget amounts and should therefore be due any difference...but the point was moot as we had a fixed price contract. Historically, the average contract with a 20% profit and overhead margin nets the contractor 7%...or less. Of late that number is more like 3%...it's a heck of a competitive world out there.

The one thing I want you to take away from this is that the price to build your new home is startlingly low. Even the lowest new construction in the US hasn't been under $200 per sq. ft. in forever...and things are more expensive than ever. At the $200 per s.f. level, you are building a 700 s.f. house? I think my one bedroom granny unit is 600 s.f.. If you have a 1000 s.f. house that brings the price per s.f. down to $140. Unbuildable at that rate. Even the lowest grade appliances and plumbing fixtures will push the kitchen and bath to over $300 per s.f. Leaving pretty much nothing to build the rest of the house with. My idea of costs may be skewed because of my geographical location...NorCal is more expensive....but not by 100%. If this guy is the low bid by a whole lot...like half the next bidder...you are going to have some serious issues down the road.

14thstreet Ironwood--you must be looking at construction numbers by average or for a certain geography. $200/sq foot is on the higher end here in Iowa. I built a very nice 1600 sq foot home with finished basement, walnut floors, 9 foot ceilings, attached heated three car garage, decra metal shingle roof, marvin windows, cherry cabinetry, quartz counters, etc etc for under $150/sq foot (not including the lot), only using 1600 sq feet as my divider, so not including finished sq footage in the basement. I think the price totally depends on location. A new $140,000 house (not including the cost of the lot) in my area would be smaller of course and not finished with high end materials.

14thstreet To answer the question - you can definitely ask for a detailed bid if you are concerned about the breakdown. Sometimes, just having things grouped into categories is nice to see - i.e. plumbing, electrical, foundation, etc. The worst your contractor can say is "no", then perhaps you should look at another contractor.

lewis + smith Our bids are very transparent. There are probably sixty line items in the main bid which is then further broken down with lighting fixture, plumbing fixture, and hardware spreadsheets. There is also a pretty extensive written specification attached to an already annotated bid spreadsheet.

I too can't fathom how anyone could build a house for 140k. Most of my guys are highly skilled and make 3x-3.5x minimum wage. Our work is middle high end for the area and starts at a minimum of 250.00/ft, but is typically closer to 300.00.

Ironwood Builders Right! lewis + smith and I are on the same page here. Minimum wage workers are not journeymen carpenters...Read a statistic a few years ago that the average age of journeymen is 42...not a minimum wage guy. He shows up with tools and a truck and years of experience...that's the guy I want building with me.

Twisted Minds Custom Designs If you think that 140 grand is a lot for a new house build, get a competing quote from another contractor or two. Personally I don't believe as contractors we need to break down every item of a quote, as others above previously stated. I will group pricing into sections, i.e. elect. plumb. hvac. flooring, cabinets, etc. etc. Along with this pricing I will include allowances on materials not in the hammer and nails aspect of the build, i.e. material upgrade from laminate to real wood, stock to custom cabinetry, builder grade trim to custom moldings and so on. Any other changes to the contract are itemized as a per change contract order or time and material charge. To put it into perspective, when you buy a new car you know the list price but not how much the oil pan cost the manufacturer or what the cost on the belts and hoses were, or what they are paying the auto workers to assemble, but on any upgrade such as leather seating, power everything, larger engine, these are listed out as a additional cost. Same principal as your homes construction cost.

mjmccarthy1980 Thank you for all the interesting responses, I really needed the help. As far as price is concerned I live in south texas where labor and materials come very inexpensive. The house is 1500 living and 2200 total sqft. I am saving money here and there on things like flooring for example and would like to put those savings into upgrades on the rest of the build plus if I see price breakdown maybe I can save more money. I just don't understand why the contractor is afraid to show me his numbers, I don't mind him making a 20% profit but if its higher than that then I would like to know why. I like the comparison to buying a car, but we all know how bad car salesman can be and considering I'm buying a home and making a large investment I would like to where my money is going?

Mega Builders Engaging a contractor to build a home is A BIG DEAL!
At the outset, there must be rapport and trust. I do not feel that you have developed much of either with 'your' builder.
If you leaning his way because his price is appealing, it might prove to be the perfectly wrong reason.
As for your question, your builder and you should be 'on the same page'. If there is anything you strongly feel you need to see, know or understand before committing, than I would advise to absolutely insist on getting it.
My advice though, would be to limit your candidates to builders than have been around for at least a decade, have a perfect rating with the BBB, belong to a trade organization (like NARI or the NAHB) - as these organizations are selective about their members, can show you current and past projects of similar scope/style as what you are interested in, etc.
We have posted several blog posts about 'how to hire a contractor' and 'how to prepare for a large project'. I would think ANYONE considering a sizable remodeling or construction project would want to have the information presented there. You can find these here: http://www.megabuilders.com/blog/page/2/
Good luck and let us know how things went!

K B As a consumer and not a professional, I'm wondering did you get any bids from other builders? I would not go forward with such a large investment without getting at least 3 bids.

Ironwood Builders He's afraid to show you his numbers because they are not real.

Kathleen Amatangelo You have the power. If he wants your business, you demand the numbers. If not provided, you have MANY more options. All the above that are talking cost per foot are a bit out of line, since "cost" differ depending on where you live. For example, in Texas you can have aTOP of the line new home built for about $150 / foot!

S. Thomas Kutch You've gotten some good advice here already......but I would question any builder who had a problem showing you his number breakout.......especially when it comes to things like allowances. Allowances are money in the pocket. This is exactly why I preach to people about getting a thorough set of construction documents.........and I'm not talking about a builder's permit set. If you want to save money, then get as much information in the documents as you can..... from materials to fixtures to expected finishes (i.e if you want custom cabinets it should be shown and specified on the documents.....not an allowance).

In short if your contractor is not willing to show you the line item figures to substantiate his "contract price", then you need to find a new contractor.........but Ironwood and lewis & smith are correct, $140 / SF is low.... even for Texas standards and you're not getting journey men contractors for that price......you're getting some guy in a beat old pick-up truck with a tool belt, framing hammer and a hang over from a two day drinking binge over the weekend.........who may or may not show up everyday depending on which hunting season is breaking or how the fish are biting...........

Yarbro Home Improvement LLC "I am saving money here and there on things like flooring for example and would like to put those savings into upgrades on the rest of the build plus if I see price breakdown maybe I can save more money" Mjmccarthy, what are you going to do with your contractors numbers? Are you going to call each and every one of his sub-contractors and suppliers and ask them what were the numbers they provided to him, and compare to those that he just provided to you? Are you going to compare his, excavator, foundation guy, plumber, and electricians numbers to those of another of YOUR choice? If the folks that you contact are cheaper, are you then going to take on that portion of the project? I don't understand what you are trying to accomplish. You said, "my builder" & "the contractor is afraid to show me". Sounds like you already hired him, and I'm sure AFTER he provided a estimate. Why the change of heart? Sounds like somebody got in your ear. Anyway, to answer your question, "yes", if you've already started a working relationship, its too much to ask for.

Ironwood Builders ...or whether or not he was able to afford a burrito for his kid last night

Ironwood Builders BTW...the math doesn't parse out. Garage space or other at 700 sf...say on the Texas low side $40 per. $28K Leaves $112K for 1500 sf. Less than $75 per square foot. Texas may want to secede from the Union..but plywood still comes from CANADA! Plywood is a commodity as is drywall..the costs vary only slightly nationally....Texas, Iowa, California...nobody gets off cheap...not that cheap.

A.V. Builders Inc. If he is already your contractor and you are trying to make sure the project turns out properly and want to know what your options are... I'm sure he could give you allowances on important items, like floors, cabinets, windows, doors, countertops finishes, things where you may have options and need to know how much is allowed, or you can make sure what you want is included by letting him know exactly what it is that you want, and if he can tell you that's included, then you don't have to worry, maybe inquire about his methods. You can tell alot from how they respond to that. It would make sense that you haven't hired him yet if you are asking these questions. In that case, you need to get two other bids and figure out if everyone has included the same items (apples to apples, this is a very important step) and who is going to provide you with the quality of work you are looking for. Ask questions if you aren't sure.

mjmccarthy1980 Yarbro, I am not going to call any of his subs, but if I can get one of my friends companies to do the same work for less and still guarantee the work then I'd rather go that route. Not only that but what is wrong with me knowing what the builders cut is?

mjmccarthy1980 Iron, I'm telling you it's really cheap down in south texas. The housing market wasn't affected like the rest of the US and there is a lot of competition here plus many skilled workers willing to go low just to get the job.

Architectrunnerguy @mjmcarthey1980 Building a house is NOT like buying a car. I always tell my clients trying to look $$/sf is like trying to buy a car by the pound. There's a big difference between a Chevy and a Lexus.

Also, regarding cold hard numbers and the builder, see my response here to another thread posted yesterday:
http://www.houzz.com/discussions/398080/Do-you-consult-a-builder-or-architect-first

Yarbro Home Improvement LLC Mjmccarthy, nothing wrong with knowing what the builders cut is. I made a remark in my comment and you didn't deny nor defend. From some of your comments, I'm under the impression that you have already started a working relationship with the contractor, and now you want to strip out some of the sub contractor work. You said, ... "if I can get one of my friends companies to do the same work for less"... well, then you should. You should also take on the responsibility in managing that portion of the project and allow the contractor to wash his hands of that particular line item, or, pay him to manage YOUR choice. Now, you are back to his original #

If the market is as competitive as you say it is down there, and this contractor was fortunate enough to land the project, who is fully aware that you are going to shop his already low #'s, I'd be hesitant also.

"Iron, I'm telling you it's really cheap down in south texas. The housing market wasn't affected like the rest of the US and there is a lot of competition here plus many skilled workers willing to go low just to get the job"

Sounds like you are taking advantage of the situation. I agree that you are getting a steal at the per sq. ft. price. Give the guy a break


If I'm way off base, I apologize

Architectrunnerguy "The housing market wasn't affected like the rest of the US and there is a lot of competition here plus many skilled workers willing to go low just to get the job" Somewhat of a paradoxial statement. No ill effects from the recession but "skilled workers willing to go low just to get the job".

One way to work it is to go cost/plus. That way you see all the raw numbers. We built our first house that way and did some work ourselves but being sure to select tasks that could be done later or didn't get in the way of the job. Worked well. For example, when it came time to clean the windows, the cleaning people wanted $8/window and we had 50 of them. My wife and I cleaned them over a weekend. And we left all the fireplace mantle stuff for after move in.

Ironwood Builders Sounds to me like Texas never experienced the housing price bubble, so they never were in the national trend...but as prices go up...they stay low. Flatlining the biggest investment most people make. No appreciation...just aging and potentially depreciating the investment value of a home. Guys still buying jobs to feed their families, low balling to keep busy, that bubble burst here three years ago. Some of us bucked the trend and are still in business....a lot of those lowball guys moved to Texas. Good riddance.

Curb Appeal Renovations mjmccarthy1980 I'll tell you we give a bottom line item - we don't break it out. We do give allowances on items like sinks, faucets, tile, etc., however, we just had a client we're in design with decide to make changes. They couldn't do the entire project now - needed to phase the project. We said fine, we're cutting some areas as we've discussed, but the pricing will change and go up. They SAID they understood.

We met again this weekend. The new proposal was still higher than they thought...because they didn't realize splitting the project into 2 phases was going to change the price SO MUCH.

Don't think that you're getting a grocery bill and if you pull one item out that it'll bring your price down. It doesn't work that way.

If you want to know the profit your builder is making - ask. But really - what business is it of yours? If you're getting a fair price and a WELL BUILT home and you trust this person, then don't second guess him or yourself.

You say that you want your friends to come in and do work...I'll tell you that on our projects, your friends would have to sign our subcontractor agreements, they would have to have worker's comp and they would have to $1M in insurance...otherwise, they are not working on our jobsite. The liability is too great. Plus, we provide a warranty - by a 3rd party - for any structure we build. There is no way I'm allowing anyone on our jobsites that we haven't worked with...and when you think about it, you WANT THAT WARRANTY and you want your BUILDER to be responsible for that. It's not worth the small amount you'll save.

If you want to save money...don't put in flooring...check with your code officials and see if it is required. Put it in after the build is done. Appliances can be changed out later. Lighting is the same.

However, what you can't change, is the structure and the systems. Don't skimp.

And yes, Ironwood Builders. You can build $140K houses here in Texas...they aren't what any of us would build...and they're typically track homes.

Dytecture If someone is going to be dishonest with you, they could always 'fudge' the numbers so your bill will come up higher than usual.

Architectrunnerguy That's well said Curb Appeal. You mentioned flooring, another item we did after moving in was installing 700SF of Mexican tile in the kitchen, foyer, mudroom and laundry. We had a party a week after moving in and it was all bare plywood!

The appraiser raised his eyebrows but gave me a good number when I showed him all the tile which was stored in the garage.

14thstreet Just FYI, coming from a mortgage lender, waiting to install the flooring would totally blow the loan if it is being sold to the secondary market. I wouldn't be able to sell the loan until the house was complete.

eagledzines If you haven’t hired your contractor yet, get a detailed set of specifications for each aspect of the job that is included in the contract. Get the same from other contractors. Compare apples to apples.

If you want to know where you can save money, communicate that to him. Money can be saved on some things and not others. If you start questioning the cost of every item and try to get him to purchase an item from another supplier or use a different subcontractor to save costs you will handicap his ability to do a good job and undermine the very reason a general contractor is hired in the first place. He should have already taken the time to review the qualifications of subcontractors, make sure they are insured, and develop a working relationship with them so that he knows what kind of warranty they offer, lead times and quality of work. Once you start messing with that you start messing with his profit because his profit depends on others' respect for his schedule and quality. Delays cost him money and those that work with a general contractor on a consistent basis understand that. He should already know the same about his suppliers. How easy they are to work with, whether they put up a fuss or ignore, or delay his requests for warranty on materials and product delivery expectations. If you try to whittle him down on every cost, expect to get sub-grade job. Ask him to include allowances in the contract if this is a fixed price. Then, do your homework on what items are going to cost you in the allowances. That’s where you can decide what to save money on. These are typically choices that are preference driven as was stated by A.V. Builders Inc. The allowances if under budget can be put back into other allowances or upgrade change orders or turned into a credit on the job in general. If you go over, you will be billed, but you have the choice.

Given those two things, specifications and allowances, you will be in charge of how the money is spent.

You asked what was wrong with knowing your builder’s cut. Do you ask ANYONE of the people that you do business with what they make on products or services you buy? Your doctor or druggist (much more important than a house)? Do you know what the teller makes who checks out your groceries? Do you know the wholesale costs of any other products you buy? We’re not talking a public corporation here. We’re talking about a general contractor. What IS your business is what you pay in the end and the products you choose. I've never been able to figure out why people think builders are different somehow.

Make sure that your builder has workman’s compensation and liability insurance. Get a certificate of insurance from his insurance company. If he doesn’t have it of course he will be able to do the job cheaper, but is the savings really worth it to you? Again, when you get a price from a contractor, make sure you are comparing apples to apples.

If you don’t trust a contractor already, for goodness sake don’t hire him. This is a relationship. Without trust, it will quickly deteriorate as the stresses of a (any) new building project weigh on you. If you have already hired him, let him do his job.

sam0705 Hi - Just from a lay person's experience - we just did a major remodel. We had an estimate that broke things down like x for electric, x for tiling master bathroom, x for plumbing, x for labor installing the floors, cabinets, etc., in the kitchen. They told us what materials their numbers included without breaking it down bit by bit (for example, estimate included new doors, windows). It was up to us to choose our hardwood floors, tiles, kitchen cabinets, fixtures, etc so we worked within our budget for that kind of thing (which we could have also gotten through them).
Ultimately, you have to do what you are comfortable with. My friends had a 100k budget for a new kitchen. They had someone come out and do an estimate that was just a bottom line and he refused to break it down. They went elsewhere - they were not comfortable not having an idea of where their money was being spent.

nFORMAL design @Mega Builders...first, if people ONLY took builders that had 10 years experience, how would any builders get started? If that happened when you started your business, you'd be out of business. Although, that's a good method of keeping yourself employed if you are the only one around that has been in business 10 years or longer. I just don't think that is always the best method. One of the most crooked, dirty, and yet most hired builders in Raleigh had been in the business for many years. He got a reputation for doing nice houses, but he screwed his subs and consultants over like mad. Also, if you don't hire new people on occasion, then start ups would never happen and we wouldn't get a fresh/new perspective on things.

Also, after going to school in Austin and working on many builds there, I can guarantee you that in Austin, proper, you aren't getting anything for $140 sq ft except a slab and CMU wall and a roof...all crooked after being built within the two day drinking binge. Haha.

@Ironwood...in Texas, that is breakfast tacos...not burritos.

Also, Ironwood, you made a case for NOT giving out line items totally. You said the overall percentage a contractor makes is 3% now...not 7%. What is your job worth? I don't think the client should be gouged, but we have had furniture clients want a board by board account of how much a piece cost. I WILL NOT do that. It's unproductive. People don't understand overages (like your clients), and then when they break off labor, they think you make a ton, but they don't consider the hours you spend after getting called in the middle of the night to fix something that isn't perfect or how much your training and skill is worth.

Everyone has the right to ask what things cost, and some people will only chose you if you give that to them. Not speaking about the OP, but there are some people who would argue if you made any profit. Like you said, Ironwood, you want journeymen, and they deserve to get paid. If you break it down and people see labor, many will not see that the journeyman does the job in less time, so he/she deserves more money for the skill level. They are more likely to choose unskilled labor because it is "cheaper". Yes, it is 1/3rd the price of skilled but takes 4 times as long.