‘Cost Plus Pricing' Gives Homeowners More Options for New and Remodeled Homes

Real Estate Agent with KC House Whisperer

In a typical new home or remodeling contract, the homeowner is given a set price from the general contractor for the entire project. If the homeowner agrees, from that point on it's up to the contractor to hire subcontractors, ensure the work is completed to their client's satisfaction and pay each subcontractor for all the work performed.

Although this is standard operating industry procedure, ‘Cost Plus Pricing' is an innovative and unique contract that is a great alternative for the homeowner.

Keith Worrel, owner of Advantage Construction & Consulting, says that ‘Cost Plus Pricing' really gives homeowners more of an opportunity to be involved, informed, flexible and much more protected throughout the building or remodeling process.  "This is a whole different avenue in building or remodeling," Worrel explains, "where the homeowner has much more control over every specific aspect of the job."

A custom homebuilder in primarily Johnson and Miami Counties for the past seven years--now specializing as a construction real estate agent and consulting on remodeling jobs for kitchens, basement finishing, siding and windows--Worrel explains that the typical process is for a general contractor to meet with the homeowner, find out what they want and give them a total cost, sans a specific cost breakdown of each job aspect. The homeowner then pays the contractor either a high percentage of the total cost or the full amount up-front, and the work begins.

However, if, for some reason, any of the subcontractors are not paid in full by the general contractor, the homeowner could be responsible for ultimate payment to the subcontractors or the subcontractors could put a lien on their home.

Worrel is quick to point out that he is not disparaging or disagreeing with other builders or remodelers who work in the traditional pricing fashion. "That's just how the construction business has traditionally done contracts, and still does, for the great majority of construction projects.

However, the ‘Cost Plus Pricing' concept means it's the cost of the house or remodel job, plus a consulting fee (usually 15-18% of the total project cost), and all costs and fees are agreed upon upfront.  "The difference is that because all subcontractor costs and supplier costs are disclosed, the homeowner is aware of who's getting paid and how much. There are no hidden costs or fees. This creates more of a comfort and trust level between the homeowner and contractor/consultant, because the labor and material costs are known."

Another important benefit of ‘Cost Plus Pricing' for homeowners is that by paying the subcontractors and suppliers directly-the drywaller, lumber company, plumber, etc.--they only pay for services completed to date, and can ensure that all aspects of the project are paid in full. "This means that the homeowner doesn't have to pay for tasks not yet completed," Worrel explains. Worrel also protects homeowners by using only subcontractors that will provide proof of liability insurance for each construction project.

Worrel has experienced great success when applying this concept to his new home and remodeling projects. In fact, all of his clients in his Olathe neighborhood where he built most of the homes chose the ‘Cost Plus Pricing.'

Alternatively, ‘Cost Plus Pricing' gives homeowners a great deal of flexibility within the process. "I bid out the project the way it is if we hired all the work," he said. "The homeowner can then look at the cost estimate, and say for painting we bid "X amount," they can say, ‘I want to do it myself.' Or if, for example, their brother-in-law is a painter...fine with me."  "I break it down so they can see the costs. But ultimately, it's their house and their call. And, it usually eliminates a lot of miscommunication issues."

Worrel also contends that in today's real estate market place, people buy "pizzazz" and the lowest estimated cost, possibly without all of the necessary and important details. However, they rarely ask questions about the foundation, framing techniques and quality, material types and sizes, insulation and so on. Yet these are some of the most important aspects of any project, and details that will sustain the integrity and beauty of the home for years to come.

"I do quality work and offer unique and flexible services. I want to be very fair upfront, let homeowners feel confident and more protected by not paying too much ahead, have more involvement and hopefully get what they really want."

For more information about Advantage Construction & Consulting and ‘Cost Plus Pricing', contact Keith Worrel at (913) 780-9663. Advantage Construction & Consulting is a member of the Kansas City Better Business Bureau.

Fast Facts

Company:      Advantage Construction & Consulting

Services:       Construction sales agent and home remodeling with ‘Cost Plus Pricing'.

Contact:       Keith Worrel at (913) 780-9663 or kworrel@sbcglobal.net


Comments (1)

R. B. "Bob" Mitchell - Loan Officer Raleigh/Durham
Bank of England (NMLS#418481) - Raleigh, NC
Bob Mitchell (NMLS#1046286)

I'm doing that on two rehabs that I have.  One has a great setup for a king sized, deluxe deck.  It would be really cool going down the back of the building to the bedroom where you could put in french doors and then steps down to a patio that would be perfect for a hot tub.  That said, there is no deck there now at all, so I left it that way and have three different designs put together for the buyer to choose.  I thought it was a neat way of doing it?

Bob Mitchell

ValueList Real Estate Services, Inc. 

May 01, 2007 03:12 AM