I can't believe that we will be making the decision on who will be building our house in just a week or less! I am completely excited and probably still a little naive as to what it ALL entails. It seems similar to child birth...if we really knew EVERY detail we might not choose to do it. Nonetheless, we have been doing as much up front work as we possibly can so that we have some anticipation as to what various items cost and can make a more informed decision when the "real" time comes.
A key difference in the two builders we have narrowed it down to is their pricing. Builder #1 uses a "cost plus" formula. The basic explanation, as far as I understand it, is he will give us estimates as to what various materials/labor will cost. Then when the actual building process begins Builder #1 makes the purchase of the materials (and installs it) then sends us the bill for it. We can do a comparison at that time to see if the final/actual price was right on target with his estimate, under, or over it. Whatever the case may be we are responsible for the final price...if it's equal then no harm no foul, if it's under then it is in our favor, and over we must pay the difference in price. Therefore, you never really know what the final price will be until the bills start rolling in, and you have to trust in your builder that his estimates are fairly accurate or you could end up spending way over your budget. Obviously, Builder #1 has a great reputation and has been in the business for 20+ years so trust isn't a concern for us. However, we are concerned, that the price can fluctuate by a significant amount, and we have to decide if we are okay with that. The positive side of "cost plus" is we have a direct say in some materials so if the budget is going over we can scale back where we want on cabinets, countertops, flooring, etc.. and directly reduce our cost.
Builder #2 uses "fixed cost" pricing. He basically sits down and reviews every detail (and more) about the house. He then gets a cost on every material (plus labor) and comes back with a total price for the house. If we agree then that IS the price...it doesn't fluctuate when the actual buying of materials begins, and you can plan your budget according to it. In this scenario, the only way the price changes is if we choose a different material than we originally planned or at excavation time if the land we have purchased has "issues" regarding laying foundation. The positive of this builder is we know up front what we are getting and there aren't any surprises with price, but the down side is the price is a little more because you are paying the builder a higher percentage for doing all this work up front. Of course, it is important to have a "fixed cost" builder who has a positive reputation and isn't gouging you from the beginning to make sure all prices cover his costs. We aren't concerned in our situation because Builder #2 has been doing this for 20+ years and doesn't have one complaint filed against him from the BBB, and you can contact absolutely anyone he has ever built a house for and get their honest opinion of him.
There are definitely pros and cons with each scenario, we leave heavily towards one over the other, but I won't comment on which one until we have a signed contract with our builder.
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