steve's White Mountain Blog

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Hiring a Builder...Watch for these tricks some contractors use to raise profits.

 

  Not all builders are busy at this stage in our economic recovery, in years past you would have a hard time getting multiple quotes for your project. Many customers were relegated too accepting the price they were able to get from the one builder that responded to the request for a custom home quote (and they put a number on it that made sense to drop other jobs).  

  Our in-house design. 

 

 But just because builders have more time on their hands doesn’t mean multiple quotes are going to be honest examples of competitive bids. Here are a few ways I have seen builders make a bigger profit than you are lead to believe.

   General Contracting services available.

 

Apples and Oranges: As many know kitchens and bath rooms are high ticket items…Cabinets, counter tops, specialty flooring, appliances and fixtures can vary in price tremendously. If your quotes vary here make sure the low bidder is using the material you specified for his quote, as an upgrade later will make the low bidder…not so low.

   Vs.  The basic Allowance Vs. what you were expecting.

 

Similar to the above; Change orders at Cost plus: when it turns out the cabinets you were budgeted for are inferior to the ones you really wanted, the builder will return (cost to restock) and re-order the upgrades at cost plus 10% for time and material (and builder profits and overhead charges will be based on the new over all price of the project) this could be a 25% swing.

  .... shop several lumber yards & see if the #'s are right

 

Builder rebates from vendors: Here is another sneaky little deal some unscrupulous builders employ to raise their profits. The materials list from the lumber yard is one of the largest ticket items on your bid. What if I told you some builders are getting 10% or more back (checks cut to the builder) as a rebate, volume discount etc… But the invoice the home owner sees has no such indication of these cash back deals. And many times these builders show a lower profit and over head figure to the buyer, who thinks they are getting a better deal…and paying less general contracting fees.

       upgrades later are costly.

 

Turn key is short of completion: I was asked to compare our companies estimate to a competing estimate recently, we had 63 items required to complete the project and the competitor had less than 40. I understand some items can be shared under one heading so the list in and of itself didn’t scream what the hell. But when I asked the Home buyers to take our list of items with all the prices removed to the other builder, and have him fill in the blanks…his over-all price went up…surprise it was higher than ours.

This copper roof will last 100 years, but we could have saved a lot of money on a cheaper roof and had to replace it 5 times before this one needed any work.

 

Low bid isn’t always the best bid: For example the licensed tradesmen we hire have a reputation for doing the job right, using the systems that are the best available for the style construction and warranty their work. The low bid from a plumber, heating contractor, or electrician, may very well mean they are going to install a furnace, service or mechanical system that is cheap or not sized properly for the application. Sure it can make the bid seem better but you will have to live with a hard to service system or outdated or inefficient HVAC system for the few dollars saved upfront.

I have been a Realtor for 25 years and have been involved in the development and construction of hundreds of homes. The list of ways to raise the profit on a building project are not easy to see on the surface...and getting only one quote is an invitation for padding the profits. Ask for multiple references from past customers, check with the suppliers on builders reputations, and ask to see the samples of the actual products being installed to make sure your quote is for apples not oranges.

 

 Remember Measure twice (or more) and cut once.

 

steve@alpinelakes.com    www.alpinelakes.com

  35 years in the general contracting business, custom homes, and design build services in the lakes and  White Mountain regions of New Hampshire.

  www.cargillconstruction.com

Kitchens, Baths and masonry work can be the big ticket items, make sure you know what you are getting when you order them. Photos of in-house designed and built homes.

 

 

 

 

 

 

 

 

Steve Loynd profile photo           Steve Loynd, Alpine Lakes Real Estate Inc., Loon Mt, NH.: Real Estate Brokerage in Lincoln, NH " target="_blank"> 

                                                                                                                                                                              Your-White Mountain New Hampshire real Estate Expert

                    steve@alpinelakes.com toll free 800-926-5653 /cell 603-381-7898

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    Grafton County NH MLS search

9 commentsSteve Loynd • July 13 2009 03:18PM
Hiring a Builder… Watch for these tricks some contractors use to…
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Not all builders are busy at this stage in our economic recovery, in years past you would have a hard time getting multiple quotes for your project. Many customers were relegated too accepting the price they were able to get from the one builder… more