Looking for advice for Home Building Contracts with GC's?

Question

I have done some flips, but never a new home build. I'm doing my first one with an "owner-builder" so pulling the permit is not an issue (I know how to do all the paperwork stuff).

In the future, if I need a GC to pull the permit, I would like to still have the option of firing him from the job if things don't go well. I would want full control over what subs are used. And if he's not willing to do that, I want to make sure that he's going to stay on schedule with a heavy penalty for getting behind schedule. Also, I would want a lot of retainage left that he will get only on 100% completion.

Am I being realistic here?

I wouldn't mind just paying someone to sign the permit, and then handling everything myself to be honest.

Jay M. · Answer

You don't have to itemize right down to 27 cabinet knobs if the "scope" of the kitchen with "all necessary knobs / pulls" is included.  You may also be conflating "quote" vs. "contract".  Are you disappointed you're not getting the details in the quote?  That is common.  They're not going to go to extreme lengths in the quote.  When comparing quotes look at scope and inclusions.  A really good quote will not only have everything they've included but also exclusions.

Here's another tip about outrageous quotes.  If you've got recommendations for a good contractor and and the quote they give you is out of line with what you've heard from other people that know them don't take it personally.  They probably are too busy and threw out a high number to discourage you not necessarily to "rip you off".....  When I want to bid something I ask them if they're too busy to bid it.  If they say no they are not then I ask them if they would be interested in the job.  You would be surprised how many you can weed out because they are too busy but no one asks then if they're too busy.

How do you know if they are good?  Google first, BBB 2nd, contractor desk at the "local lumberyard" (not the box stores), sub-contractors.  Go to the tile store and ask a few tile setters if they've done work for "X" builder.  Go to the electric supply house, plumbing supply etc.  If the builder is established in the area for a few years if they're a rat you'll know.

If all seems good there then you start with past customers.  If he has a limited amount of recent customers that's a flag.......If you're really serious about flushing out recent events go to the building department and look up recent permit applications (public record).

I should have mentioned this first but the first two questions are 1) are you licensed / whose license # is going to be on the permit. 2) are you insured.  These two weed out most of the fly by nighters.  In a state like my the fly by nighters have either never had a license or it has been pulled.

Signing off with don't hire anyone with bravado....false or otherwise......

Danny Kay · Answer

Patrick,

What are you trying to accomplish? I guess I am missing your end goal here.

You could provide take offs if you wanted. I am not sure what it would gain you. But I personally avoid doing this both from the owner perspective and architect. If you are off by one unit of whatever it is, you are going to get killed in fees from when the GC has to order the missing unit, or from delays you cause, from having to re-roll crews, etc. The line may become blurry as to actual costs and delays caused by your oversight, and things that you may not be at fault for. Point is you waste time and money. Let the contractor do take offs IMO.

The penality you are looking for to avoid delays is called liquidated damages. I only see this in commerical, and in hundreds of projects the only time I saw a client ALMOST use it was on a $20mm project where the GC was 1.5years late, even then the client didn't do it because of the difficulty.

Your arrangement with a contractor is a realtionship that builds trust over time. Have a contract written to let you out Incase of non-performance, but to expect reperations isn't realistic, especially on small residential projects.

And yes you should care if you annoy the contractor. It goes against the realtionship building aspect.

Greg Dickerson · Answer

@Patrick Philip  you can alleviate all of your concerns by hiring a professional general contractor. It’s in their best interest to get the job done quickly and efficiently that’s how they make money. A real pro will not drag it out.

If you want to control the subs and supply materials you’re going to have a hard time finding a GC to help you. Also you will not have any warranties from a general contractor if you’re making all the decisions and supplying materials.

Yes some GCs will open the books and line item everything when doing cost plus.

Greg Dickerson · Answer

@Patrick Philip I don't think you will find a GC to agree to all of your terms. Especially the penalty clause. Thats very unusual for residential construction. Also it is a violation of contractor law in most if not all state for a GC to pull a permit for you without otherwise being involved in the project. A GC can act as a CM and pull permits and oversee the project with you in control and you paying all bills directly but you will need a CM contract with them.

Best thing to do if you want to use a GC turn key is to find one that does the type of homes you are looking to build. Make sure they have been in business for 5 years or more, check with current and past customers and make sure to check some of their current job sites. You can tell a lot about a GC by the way his sites look and how many subs are on the job.

For contracts you can check out NAHB, AIA and DBIA for example contracts as well as local attorneys who specializes in real estate and construction law.

Danny Kay · Answer

Sounds like you may want to consider a cost plus arrangement. When you first bid to a contractor let them do the take offs. Use your knowledge to check and screen the contractors, not show how smart you are up front (they wont care). In a cost-plus contract you will be provided a list every single item they pay for. Providing the number of door knobs you need wont necessarily annoy them, but if you don't have clear terms up front as to what you are and are NOT doing, that may cause confusion / annoyances. Hell, I am a little confused just typing this response :)

Believe it or not people are not out to get you. Plenty of reputable people out there right now, you do need to be willing to pay for it. Good people are not cheap.

Patrick Philip · Answer

How do I know somebody is "good" before I hire them? And these are very large contracts we're talking about here.

At this point, I'm having some people tell me one day they could easily build 10 houses at once, then 4 days later it's like they lost interest in the whole thing.

How itemized are these contracts usually? I guess itemizing everything down to the doorknob is overkill, but they are usually at least separated into electrical, plumbing, HVAC, roof, foundation, etc. Correct?

Jay M. · Answer

@Patrick Philip   The whole tone of this thread is that you don't trust contractors, you're smarter than they think, you know how much everything costs and you want to shave every nickel .  In every response you circle back to one of these.  You're setting yourself up for major disappointment.

To address your last comment how do you know the "good" contractors haven't already weeded out the $14k guy because he never shows up and does shoddy work?  If someone isn't "the phone is off the hook" busy in this economy then they suck!!   I'll go out on that limb.....  If you think it's difficult finding quality help now wait until you have a sub that you either fired or walked off the job and you have to get someone to replace them.   No one wants to do that especially when they hear the tone you've been setting in this whole thread.....

In another of your responses you said that GC's get "mad" when they find out you're not a "sucker"???  Dude you are so - fishing in the wrong pond....with the wrong bait I might add.  You've got a long, rough, bumpy road ahead of you.  You need a legitimate mentor not a contractor(s). When you find that mentor make sure you're not attracted to them because they think like you.  That's not a mentor.......  I do applaud your interest in learning but you are off to a very, very bad start.  Take a breath, reread this thread and treat people like you want to be treated not like they're there solely to rip you off.

Patrick Philip · Answer

I never said that's all they do. But for example, if they have an HVAC guy who will do it for $16k and I know one that would do the same job for $14k, I would want to use my guy.

Jay M. · Answer

"And this is not even to mention the fact that if I hire a GC, a lot of  what he will do is just sub out much of the work, in which case I'm  basically paying him a "finders fee" for a sub that for all I know I  could have found a better/cheaper one myself"......

If you think that GC's make all of their profit by "accumulating" a list of sub-contractors and sitting at the coffee shop doing nothing you're so far over your head you're looking up at the Marianis Trench......

Patrick Philip · Answer

How itemized are your contracts or quotes? You said counting every single doorknob would annoy them, but do you at least get it itemized into how much for electrical, plumbing, framing, drywall, floors, foundation, etc.

I still think I'm going to get a quantity takeoff at least when I'm just starting out with a new GC even just for the sake of letting them know that I'm not completely ignorant on the topic (and thus easy for them to lie to).

I can tell them exactly how many CY of concrete will be needed for the foundation and footings and I know that it costs about $130/CY. Just to keep them honest, anyway.

Looking for advice for Home Building Contracts with GC's?

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