Builder’s Fee Overview

There are three common ways in which Custom Barndo Builders calculate their fee. A description as well as the pros and cons of each common method is provided below.

1. Cost plus a percentage

Client pays the cost of construction plus a builder’s markup percentage

Pros:

• Allows faster start date for project

Cons:

• No incentive to control cost

  • Higher costs lead higher builder’s fees

• No incentive to build on an efficient timeline

• Client must account for additional builder’s fee associated with any upgrade

  • Builder adds percentage to every dollar spent

• Crucial for client to understand construction costs when using this method

  • Some builders will include employee wages, insurance, etc. as with costs which results in higher builder’s fees

2. Turnkey

Builder provides complete price for strictly defined work scope

Pros:

• Client knows cost of home upfront

• Helps clients stick to tight budget

Cons:

• Contingency fees added to budget to account for unexpected costs

  • Higher builder’s fee relative to the scope of work

  • If contingency funds aren’t used, builder pockets extra cash

• Rapid changes in building materials may result in inability of builder to finish your home

  • Builder covers any increase in costs of materials and/or labor

• Difficulty in making changes

  • Changes or customizations require price negotiation for labor and materials along with written change order

• Incentivizes builder to use cheaper products

  • Less expenses in building the home result in higher builder profits

3. Flat Fee

Builders establish a flat builder’s fee, generally based on square footage and scope of work. The fee is established at the beginning of the project and will not change unless the square footage of the home or the scope of work changes. The client pays the exact cost of construction plus the flat fee.

Pros:

• Allows client to customize however they like

  • No additional costs for material upgrades if scope remains identical

  • Example: if you want more expensive flooring, you pay for the additional flooring at cost with no additional builder’s markup

• Full cost transparency (no hidden costs)

  • Client sees every invoice for the home and approves before it’s paid

• Incentivizes builder to build the home on an efficient timeline in order to receive final payment

Cons:

• Exact project cost is unknown at the beginning, but it can generally be estimated within 10%

Our Preferred Option

SETX Steel prefers the flat fee method. This approach allows clients to more tightly control final build costs, whether they decide to be budget friendly or have gold toilets in every bathroom. Communication regarding budget is fully transparent. It empowers people to upgrade anything they want without the worry of racking up additional costs in builder’s fees.