Blog #05: Finding a Builder/ General Contractor

We made the decision to not go with a single firm that did both architectural design and the build. Not saying that one is better than the other. In fact, some of the best firms in our area offer both “Design & Build” services. One of the biggest advantages of going with a firm that does both is that all the responsibilities are centered in one place and it eliminates the overhead associated with using a separate traditional architect and a general contractor. However, when we started googling the style of houses in our city that we liked and gravitated towards were all previously done by different architect & builder combinations. We also found other reasons that made sense to us:

1. Price : We went in thinking that a design & build firm would be more cost effective and some of them were. But they did not have experience building a modern home. The ones that did, quoted us much more than we expected. A firm told us that the architecture design would cost us 10% of the build budget, project management another 10%, and PO about 25% making our overall cost become 100% (~$1000/sq. ft) more than what we had allocated for our project.

2. Checks & Balance: We wanted two different firms keeping each other honest. And this was the BIGGEST advantage we saw when we were preparing to build. For instance, when the builder came back with a concrete quote for foundation, 25% higher than what we had budgeted, the architect immediately recommended a different foundation finish that would give the same look without breaking the bank. Similarly, when our original design by the architect was adding $100K to our budget because to add a steel beam to support a wall with just windows the builder recommended we replace just one window with a wall to take that cost out. Not saying that this was not possible with a design & build firm but we just found it more comfortable knowing that there were 2 different people on our side.

We ended up going with the builder who had worked with the architect and built a house that we kept gravitating towards in terms of design and style and had won multiple awards. We knew we had one less relationship to manage. He also quoted us a sq. ft. price that was within our budget. All in all, we were very happy with our selection.

Builder Cost & Commission: We had two options with our builder.

1. Fixed cost contract: In this option, the builder tells you exactly the amount we will pay for the house. If for whatever reason, the cost goes higher than the amount mentioned in the contract, the builder's margin suffers and if they build it cheaper than what is in the contract, the builder’s margin increases.

2. A cost plus contract: In this contract we pay whatever the house ends up costing to build plus a fee for the builder calculated as the fixed percentage of the cost of the build.

Although the fixed bid was nice, we did not want him to make compromises on the quality to make the project profitable for him. So we ruled that out and went with the cost plus contract since there was a higher potential to save money if things went well. In our research we later found that there is another contract type - “cost plus with max” which is the same as a cost plus contract except the builder gives you a maximum amount the build will cost us no matter what happens.