General Contractors refusing to quote without them buying materials
Rental Property Investor · Member since 2023 · 5 posts · 16 votes
General Contractors refusing to quote without them buying materials
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Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votesAs a long-time Contractor I would never bid on a job where the customer wanted to provide materials themselves. Nothing but headaches....and it's just plain rude. You want to buy the products, but I bet you won't be there to meet the trucks, inspect the materials, unload them or see to their security until they are installed. Right?
You expect the GC to do all that for you for free correct? And then when there is a mistake in the order (because the customer never knows what the H they're doing) then it's a big delay which gets blamed on guess who? Yep, the GC....
@Svetlana Kazantseva if you want to save money (or use your CCs), then it's only fair to pay the GC the money it is costing them to do this your way....I would offer them 20% to start and see what they say. But you will lose any good GCs and end up with the new, inexperienced, unlicensed guys...it just ain't worth it....
132 Replies
- 2yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @James Hamling:
Quote from @Eliott Elias:
Quote from @Matthew Paul:
Quote from @Eliott Elias:
Red flag. They are up charging on the material.
Of course contractors mark up materials ... When you rehab a house and sell it dont you mark it up as much as you can ? When you rent a house dont you make a profit ?
No different than being a contractor .
Profit is not a dirty word
There is no issue with up charging if you disclose it.
FYI: There is not 1 jurisdiction in the U.S. where Material up-charge vs cost is required, not 1.
Do you get a "disclosure" of your up-charge on the hamburger?
Contractors are no different than any restaurant; they acquire raw materials utilized in a construct of a finished product sold unto a final consumer of said finished product.
And all-the-more, if a GC has a great manufacturer direct account on materials they have a NDA agreement from the manufacturer that they CAN'T share there cost's or disclose to anyone.
you end up going into the Tulles with this.. if there is no up charge then there would be no profit for anyone starting with the widget maker and through to the investor selling the home as the buyer would want to know what they paid and what they paid to rehab and therefor they should only pay that amount investor is making to much profit !! WE get this in our new construction development all the time.. change a light fixture 500 bucks why so much because it takes time to find it go get it replace the old one pay the electriction to install it etc.. change orders are where the money is made you have to charge huge mark ups other wise they are simply not worth doing.. My last two new builds we had 100k plus in upgrade charges with the appropriate profit margin which was 50% or better to pay for our time doing it. still cheaper than the buyer can do it for after the fact unless they are a do it yourselfer.. and most 1 mil buyers are not in the trades.. One buyer wanted to do his own concrete in the back yard fine .. I get a e mail Monday hey my guy flaked can I use your guy .. :) - 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Dan Krupa:
Sorry Dan, didn't mean it to come across like that. Of course I made more than my share of mistakes.
What ticks me off is all of the people that constantly come to the Forum and bash Contractors when they themselves are a large part of the problem.
- Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes2y
Quote from @James Hamling:
Quote from @Eliott Elias:
Quote from @Matthew Paul:
Quote from @Eliott Elias:
Red flag. They are up charging on the material.
Of course contractors mark up materials ... When you rehab a house and sell it dont you mark it up as much as you can ? When you rent a house dont you make a profit ?
No different than being a contractor .
Profit is not a dirty word
There is no issue with up charging if you disclose it.
FYI: There is not 1 jurisdiction in the U.S. where Material up-charge vs cost is required, not 1.
Do you get a "disclosure" of your up-charge on the hamburger?
Contractors are no different than any restaurant; they acquire raw materials utilized in a construct of a finished product sold unto a final consumer of said finished product.
And all-the-more, if a GC has a great manufacturer direct account on materials they have a NDA agreement from the manufacturer that they CAN'T share there cost's or disclose to anyone.
Restaurants ONLY make their money on the up charge, contractors make their money on the labor. This is just an attempt to squeeze more pennies out of the client. This may work for your clients, not me. I like doing business by being transparent, not deceiving.
- Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes2y
Quote from @Eliott Elias:
Quote from @James Hamling:
Quote from @Eliott Elias:
Quote from @Matthew Paul:
Quote from @Eliott Elias:
Red flag. They are up charging on the material.
Of course contractors mark up materials ... When you rehab a house and sell it dont you mark it up as much as you can ? When you rent a house dont you make a profit ?
No different than being a contractor .
Profit is not a dirty word
There is no issue with up charging if you disclose it.
FYI: There is not 1 jurisdiction in the U.S. where Material up-charge vs cost is required, not 1.
Do you get a "disclosure" of your up-charge on the hamburger?
Contractors are no different than any restaurant; they acquire raw materials utilized in a construct of a finished product sold unto a final consumer of said finished product.
And all-the-more, if a GC has a great manufacturer direct account on materials they have a NDA agreement from the manufacturer that they CAN'T share there cost's or disclose to anyone.
Restaurants ONLY make their money on the up charge, contractors make their money on the labor. This is just an attempt to squeeze more pennies out of the client. This may work for your clients, not me. I like doing business by being transparent, not deceiving.
I dont know where you get your info . But contractors make money on EVERYTHING they do . They mark up the labor , the subcontractors , the materials , the dumpster , they charge for the time to get permits , even charge for the spot a pot on site .
Labors make their money on labor .
Contractors are businesses .
The discounts I receive from my suppliers , the price I negotiate with my subs are to MY benefit . This is how you run a professional and successful contracting business .
There is no deception involved , the customer is paying for a finished project , material costs are only 1 of many parts . What materials cost me is none of the customers business , their only concern is the contract price for the job .
- Investor · Member since 2020 · 337 posts · 213 votes2y
This thread is very interesting. As an investor, I always want to get everything done for the cheapest price......but as the saying goes you get what you paid for. If I am in need of a major rehab, I will hire a GC. I will get markup on the material, on the labor, etc. because it's just part of business. But at the same time if the GC does a solid job, I will be bringing them on for more work. And what happens after is you build a relationship with them. Once you have relationships in place, then there can be some favoritism and you can potentially get some breaks on prices. At the same time I feel people don't understand that the markup of GCs material most of the time comes out to the same cost as you would go buying it yourself. May be at most, you're paying a 10% premium. If you value your time and put a price to it, that 10% you pay for the GC buying, checking and delivering your material is priceless.
Now if you want to nickel and dime, go get a handyman off the street. There are plenty of jack-of-all-trades out there, I use them for minor work here and there. But for a big project I'm going licensed GC who backs their work and backs their repuation.
- Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes2y
Spec the important things to you.
Kohler sink white model XYZ.
Cabinets Kraftmaid model XYZ in color gray particulars specified below by model number.
Install that as per manufacturers instructions.
Expect your working people , craftsman , to know about The things you are not an expert in or do not have much care about such as the brand of silicon caulking, or nails used, or type of screw used to fasten Things etc
Or the gage of wire used inside the wall which you have no idea of how to spec that unless you are a master electrician...
What I'm saying is control the things that are important to you. You will know the cost of these things.
All else the person you hire to do the job should bring to the table enough expertise in choosing things to make reasonable choices- and also make a profit on the deal for himself.
Because no one works for free In the building industry accept habitat for humanity.
Good Luck!
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
Quote from @Eliott Elias:
Quote from @James Hamling:
Quote from @Eliott Elias:
Quote from @Matthew Paul:
Quote from @Eliott Elias:
Red flag. They are up charging on the material.
Of course contractors mark up materials ... When you rehab a house and sell it dont you mark it up as much as you can ? When you rent a house dont you make a profit ?
No different than being a contractor .
Profit is not a dirty word
There is no issue with up charging if you disclose it.
FYI: There is not 1 jurisdiction in the U.S. where Material up-charge vs cost is required, not 1.
Do you get a "disclosure" of your up-charge on the hamburger?
Contractors are no different than any restaurant; they acquire raw materials utilized in a construct of a finished product sold unto a final consumer of said finished product.
And all-the-more, if a GC has a great manufacturer direct account on materials they have a NDA agreement from the manufacturer that they CAN'T share there cost's or disclose to anyone.
Restaurants ONLY make their money on the up charge, contractors make their money on the labor. This is just an attempt to squeeze more pennies out of the client. This may work for your clients, not me. I like doing business by being transparent, not deceiving.
This is a wildly INCORRECT, and ignorant, statement of BOTH industries.
I urge you to re-read my above statement. And consider the fact I am a long-time experienced veteran in both industries, speaking from a place of informed 1st hand knowledge.
A little education to aid in this. UP-CHARGE is a charge added onto an item of conveyance, ie when one party acquires something and passes it along to another.
Does a GC simply "get" materials and pass it along? No, they USE those procured item's as "ingredient's" in the CONSTRUCT of a finished product. The finished product is the item the customer purchased, NOT the "ingredients".
That is NOT an up-charge. There is no up-charge at all in that chain. You are incorrectly using the term "up-charge".
Restaurants make money on MANY items depending on there business strategy. For many it's EXPERIENCE based, for example a Nashville bar with live music. You may be paying $15 for a burger, is it an "up-charge" for the burger? Firstly there is no "up-charge" there as covered above that's a completely incorrect use of the term but point is, the food is only 1 component, it's EXPERIENCE based in value proposition.
AND exactly the same for some GC's where value proposition is experience based, because the GC will do EVERYTHING, bring in design, deliver a super low stress easy "kick back and relax" experience of everything.
OR some GC's are just "get-r-dun" service delivery, kinda like buying a hot-dog at a cart outside one of those Nashville bar's.
Point is BOTH acquire material "ingredient's", that they COMBINE with labor to CONSTRUCT a finished product which customers are purchasing the finished product.
You are arguing Eliott that it's a-ok to go in the kitchen, hover over the cook and say "hey, how much is that bun, ok, hey, how much is that meat, ok and the tomato" and argue on the cost price of each ingredient. Would you do that at a restaurant? No, crazy right? Ok, so why is it ok to do the exact same, to NOT give same respect you give a cook, to the GC's????
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