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Preferred Type of Custom Home Construction Contract

posted by: virgilcarter on 11.16.2013 at 08:48 am in Building a Home Forum

This forum has good discussions from time to time about the various types of construction contracts for construction of a custom home.

Since there are experienced architects, designers and builders on the forum it seems to me that it would be useful if folks would identify the preferred type of contract they would use for their own custom home, and also describe why plus some of the key characteristics of the chosen contract.

I'm not asking anyone to simply identify all of the types of contracts--every experienced person already knows about them. I'm asking for experienced folks to identify for everyone else the ONE type of contract they would personally use for their personal home and why.

I hope this generates some useful knowledge and reference material.

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clipped on: 01.18.2015 at 07:03 pm    last updated on: 01.18.2015 at 07:03 pm

RE: Allowances (Follow-Up #4)

posted by: Renovator8 on 02.06.2014 at 08:00 am in Building a Home Forum

What must be kept in mind is that a major portion of the cost of a house is from subcontractors and material suppliers and the owner doesn't usually see the markup from the subs or suppliers nor does the GC unless a Cost of the Work contract is used and it stipulates that the same type of contract must be used for the subs. I have heard of this but never seen it used.

In a Lump Sum contract the owner bids the project with GC's who are presumably motivated to get the lowest price from subs and suppliers in order to win the contract and therefore the owner has a good idea of the total cost assuming the drawings are well prepared and complete with no allowances. The GC will not make the same OH&P on each item in the Bid and might even lose money on some items so it is not appropriate to think of what you are paying for each item. Your concern in a Lump Sum contract should be the total project cost; buying the pieces of the job out is the GC's concern. Don't be a shopper.

In a Cost Plus contract a GC is selected by capability and perhaps the best fee proposal and provides a Budget for the estimated cost of the work and later usually shows the owner bids from multiple subs but not their markups.

An allowance is a small Cost Plus contract inside of a Lump Sum contract. If the section that describes this sharp deviation from the base contract only establishes a Fee markup, you are likely to be exposed to potential cost overruns with little recourse. If the Allowance section is carefully written the owner can avoid subcontractor and supplier sweetheart deals, kickbacks, uncredited discounts and excessive hidden markups.

- An Allowance should be for material only; the cost of installation and labor should be bid in the base contract.
- When labor and installation are unavoidable in an Allowance it should be in the form of a Unit Cost (per fixture, per s.f., hourly rate, etc.) (The cost of labor for the GC's own forces should also be listed in the contract)
- The owner should have the right to propose or reject subs and suppliers.
- The owner should have the right to cancel a material Allowance, buy the material and have it delivered to the site.
- The Allowance amount in the contract should be required to be treated like any other "change in the work" requiring a written Change Proposal from the GC for the owner's acceptance and later altering the Contact Amount by a written Change Order.

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clipped on: 01.17.2015 at 07:12 pm    last updated on: 01.17.2015 at 07:12 pm

RE: Cost Plus Fixed Fee contract (Follow-Up #5)

posted by: RQHome on 05.22.2014 at 12:17 pm in Building a Home Forum

We had a Cost Plus contract with no fixed fee. Our contract was very simple, but our attorney modified it to include a few clauses to protect us.

For clause #1, that would make my bank nervous, so if you are going through a bank, you may want to pass that phrase by them. In our case, the GC had no such clause.

For clause #2, I believe that refers to a final affadavit by him, stating all work is complete and he has been paid and no liens have been filed. Again, pass this by your lending institution, but this is a red flag to me. Our GC had to file a final lien waiver.

For clause #3: Basically, you need to work out ahead of time, with the GC, what you will do and what he will do and have it as an attachment to the contract. He gets a commission though, so he may want to hire the subs to get the fee, but with that fee, he becomes responsible for the outcome, the schedule and any warranties. You can ask him to hire your subs, but if he hasn't worked with them before, he may not want to. In my case, we had a few subs we really wanted and our GC agreed to let us hire them, but he would not warranty the work, supervise or have anything to do with them. So you will need to weigh which is most important to you.

As far as material costs, to keep our GC from just buying anything and saying the prices changed, we had the following clause:

Material prices and estimates will be given and discussed with HOMEOWNER to obtain HOMEOWNER approval prior to any phase of construction beginning. HOMEOWNERS will have the right to terminate this contract if costs (including contracting fees) exceed approximations on the attached budget estimate by 10% (for example, due to extreme inflation).

Because we wanted some of our own subs and to provide some of our material, we had the following clause:

Items provided by HOMEOWNER will be excluded from the xx% CONTRACTOR fee (see attached for HOMEOWNER-provided items).

I would HIGHLY recommend having your lending institution or an attorney review the contract before you sign. It cost us one hour ($150) to have ours reviewed and it saved us in the end.

As additional help, here are a few other excerpts from our contract:

CONTRACTOR and sub-contractors shall be licensed and have insurance for their profession.

CONTRACTOR will not use any subcontractor that does not carry Workers Comp insurance without HOMEOWNERS' written permission.

Construction will be completed within 12 months, start to finish, excluding extreme unseasonable weather.

I agree with Live wire oak in that banks will usually only allow licensed Class A contractors. If you are doing a cash build, I would be very careful to thoroughly check out this GC and hire an attorney to review/modify the contract. If you know a lot about building, know people that do a good job and are doing a cash build, you could be your own GC and hire this guy as a sub to take care of foundation, framing, etc. Some lenders (Farm Credit) will allow you to be your own GC, but they have certain rules.

Good luck! Building is like the movie/book Jumanji - once you start, you must finish, so make sure you have all your ducks in a row first. Even with being ready though, you will have surprises and modifications, but they shouldn't be catastrophic.

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clipped on: 01.10.2015 at 11:15 am    last updated on: 01.10.2015 at 11:16 am

RE: I'm Dreaming Of A White....Kitchen (Follow-Up #30)

posted by: amck on 12.28.2014 at 10:43 pm in Kitchens Forum

I was reminded when posting for backsplash suggestions today that I never followed up with details on my remodel. Here is a list of items and sources. I've received so much advice and direction here, I hope it might provide help or inspiration for someone.

CABINETS: Plain & Fancy (Made in USA)
Maple, Door style/Cloister Flush Inset, Finish/ Buttercream Enamel

CABINET HARDWARE: Richelieu, Expression Bar Cabinet Pulls & Square Knobs, Antique English Finish
Special Order through Lowe's

PENDANT LIGHTS: Murray Feiss Urban Renewal Mini Pendants, Rustic Iron Finish w/ Shiny Opal Glass
Ordered from Bellacor.com

ANTIQUE BRASS PICTURE LIGHT: Classic LED Picture Light, Artisan Crafted in Vermont, House Of Troy
Ordered from LampsPlus

COUNTER STOOLS: Canterbury Shaker Counter Height Weaver's Stools,
Custom crafted by Timberlake Shaker Furniture, Bethel, ME
Beige & Natural White Shaker Tape Seats, Custom Walnut Stain

RUG: Dash & Albert, 3x5 Indoor/Outdoor, Samode, Khaki/Ivory

GRANITE: Sourced from Boston Granite Exchange, Installation by StoneOne, Methuen, MA Color/New Golden Beach

RANGE: 30" Electrolux Induction Slide-In w Lower Oven
Model EW 301SJ5JSD

HOOD: Zephyr Gust 30" Euro Pro

REFRIGERATOR: Electrolux Counter Depth, French Door

MICROWAVE: Sharp

DISHWASHER: Bosch (from pre remodel)

SINK: Elkay, Single Bowl Stainless, Undermount
Model ELU2816

FAUCET: Kohler, Bellera K-560-VS, Stainless Finish

WINDOW and SLIDING GLASS DOORS: Andersen

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clipped on: 12.28.2014 at 11:47 pm    last updated on: 12.28.2014 at 11:47 pm

RE: When energy efficient options on a build cost so much more. (Follow-Up #1)

posted by: Brian_Knight on 09.12.2014 at 06:52 pm in Building a Home Forum

If you build to the current International Building Code which currently includes the 2012 IECC (energy conservation code) then you should be achieving a very cost-effective level of energy efficiency. It is currently being "enforced" in some states and even if your state has not enacted it, or local inspectors dont enforce it, you should do your best to meet it's minimum performance requirements.

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clipped on: 09.15.2014 at 10:14 pm    last updated on: 09.15.2014 at 10:14 pm

Has anyone purchased from appliancefactory?

posted by: lzhwong on 02.21.2014 at 02:25 pm in Building a Home Forum

Has anyone purchased from this website? They also have several store front locations in Colorado.

http://www.appliancefactory.com/

They also sell through ebay. Their prices on Electrolux appliances are lower than anywhere else I've shopped. I called them and they said that retailers usually have to adhere to strict prices dictated by Electrolux, however, their Electrolux rep does not care so their prices on ebay are lower than what other stores are able to offer. They are authorized dealers.

I was just curious if anyone has purchased from them and if so, if the transaction went through smoothly.

Thanks!

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clipped on: 08.27.2014 at 10:09 pm    last updated on: 08.27.2014 at 10:10 pm

Mama Crovatt's House

posted by: mrsfireman on 07.07.2013 at 11:02 pm in Building a Home Forum

Has anyone built this plan? I have googled images of it but there doesn't seem to be to much out there.

Thanks!

http://houseplans.southernliving.com/plans/SL1481?search%5Bcustom_search%5D=true&search%5Bvendor%5D=208

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clipped on: 08.16.2014 at 07:56 pm    last updated on: 08.16.2014 at 07:57 pm