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Question DetailsAsked on 5/16/2012

What is a typical builder fee to do a major home remodel? 15%, 20%, 25%, etc?

We are doing a major home remodel and renovation and I am curious what typical builder fees run? Is 25% of a 130000$ remodel exorbant?

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1 Answer

Voted Best Answer
3
Votes

No way to answer this question with information you will actually be able to use. The location of your project, the scope of work, the existing conditions of your building all weigh heavily on fees.

There are all kinds of "rules of thumbs" but your best method is to bid the job out with clear and concise documents that clearly state the scope of work, the exact details and fixtures, etc. This way you know every builder is bidding the exact same items (there is as much as $8 difference between types of paint, within the same brand name, for example. You could see several hundred dollars difference in just the paint costs because of this).

If you do not have a clear set of plans with specifications, get with a design professional or architect. Not only will they be able to provide what you need for your project, but they will also be able to give you a budget area and help you review bids for completeness.

Most good contractors will have no problem or shame in showing you what their overhead and profit numbers are. Just don't be a jerk about it: don't try to lower that cost (they need to make money or it isn't worth doing the work). If you think the costs are high, talk with them; find out what is making it expensive: You may be able to phase that work, choose different items, or do it yourself.

Good luck!

Source: http://www.herlonginc.com

Answered 7 years ago by Kenny Johnson

1
Vote

Great answer Kenny.

I generally charge about 20-25% overhead because it's the cap to stay in competition around here which still puts me above my many, often illegal, competitors. That's not a set in stone rule though. As Kenny said there are several factors that influence my charges. If the work is in an area that permitting and inspections are more difficult or time consuming than others, for example, I'll charge extra for that hassle. Realize that the overhead charged by contractors is not pure profit. Not by a long shot. There is licensing, insurance, vehicle maintenance & fuel, worker's comp. if the guys working for him are employees, office and advertising fees, legal and accounting fees, several taxes, etc. All of that adds up quickly. Out of 20% on a job I'm tickled if I can get close to half of that in profit by the time the job is over. It's usually more like 6-7% I can clear in profit. I pinch pennies like crazy but the cost to run a legitimate business isn't cheap. So on a $100,000 job I may only make $5-7,000, of which 1/3 will go to income tax. That's not much for the months the job will likely last with planning, meeting with lenders with the customer, permitting, and the actual work. That's why most of us have to run more than one job at a time. If we only cleared $2000/month after taxes we could work many other places and not spend nearly as much time and stress.

As Kenny said, talk to your contractors and ask them how money is being allocated. Any of your mentioned overhead percentages are not out of the question. In some instances 30% or more is perfectly reasonable. I don't know where you are located but hopefully I've explained a little where that overhead fee goes. Our cost of living is comparitely low but if we were in a higher priced area I'd have to charge a higher percentage just to cover my bills.

Todd Shell
Todd's Home Services
San Antonio, TX

Answered 7 years ago by Todd's Home Services




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