Browse Forums General Discussion Re: Builder’s margin? 3Sep 06, 2021 2:39 pm Francisx Hi, We’re looking at building with Charleston and currently at contract stage. We’ve noticed on our draft contract the builder’s margin is at 30% which seems very high, I thought builder’s margin is normally around 20%. Does anyone know what the standard margin is? The builder also added many special conditions to the contract favouring them in terms of, extension of time, price adjustments events etc. Seems to be rather one sided to their favour. Furthermore the liquidated damage for building period also seems very low to cause them any pain for delays. Sorry for the multiple questions, this is our first time building with a premium builder so feedback is much appreciated. Francisx You are correct, 30% is quite high. There are builders I have heard of who do charge this much but conversely there are others who charge a lot less. When you think about it, paying an additional 30% on top of cost for a variation is quite a significant amount. We are at 10% and then 15% on variations to cover costs. On the upside Charleston do build a gorgeous home from what I have seen. If they are using the HIA contract it is a very one sided contract. It has basically been written to be mainly in favour of the builder, in my opinion the fairest contract to use is the NSW fair trading contract which gives the customers a lot more rights and recourse. Good luck with your journey. I am confident that you are going to end up with a beautiful home. Cheers Simeon Architectural Homes & Duplexes - specialising in custom designing homes to your budget Get a Free Onsite Consultation Today or send a PM for information, questions or advice. Re: Builder’s margin? 4Mar 14, 2022 7:03 pm Ashington Homes Francisx Hi, We’re looking at building with Charleston and currently at contract stage. We’ve noticed on our draft contract the builder’s margin is at 30% which seems very high, I thought builder’s margin is normally around 20%. Does anyone know what the standard margin is? The builder also added many special conditions to the contract favouring them in terms of, extension of time, price adjustments events etc. Seems to be rather one sided to their favour. Furthermore the liquidated damage for building period also seems very low to cause them any pain for delays. Sorry for the multiple questions, this is our first time building with a premium builder so feedback is much appreciated. Francisx You are correct, 30% is quite high. There are builders I have heard of who do charge this much but conversely there are others who charge a lot less. When you think about it, paying an additional 30% on top of cost for a variation is quite a significant amount. We are at 10% and then 15% on variations to cover costs. On the upside Charleston do build a gorgeous home from what I have seen. If they are using the HIA contract it is a very one sided contract. It has basically been written to be mainly in favour of the builder, in my opinion the fairest contract to use is the NSW fair trading contract which gives the customers a lot more rights and recourse. Good luck with your journey. I am confident that you are going to end up with a beautiful home. Cheers Simeon Hi Simeon, Can you please elaborate on the costs you have to cover for variations? I mean if a client is upgrading kitchen cabinets, how does this affect the builders "costs"? Not being rude here, but this whole margin on variations related to suppliers are really off putting. Consequently, I rather do everything after handover than doing it through the builder. Best MJ Re: Builder’s margin? 5Mar 14, 2022 7:32 pm MJ2137 Ashington Homes Francisx Hi, We’re looking at building with Charleston and currently at contract stage. We’ve noticed on our draft contract the builder’s margin is at 30% which seems very high, I thought builder’s margin is normally around 20%. Does anyone know what the standard margin is? The builder also added many special conditions to the contract favouring them in terms of, extension of time, price adjustments events etc. Seems to be rather one sided to their favour. Furthermore the liquidated damage for building period also seems very low to cause them any pain for delays. Sorry for the multiple questions, this is our first time building with a premium builder so feedback is much appreciated. Francisx You are correct, 30% is quite high. There are builders I have heard of who do charge this much but conversely there are others who charge a lot less. When you think about it, paying an additional 30% on top of cost for a variation is quite a significant amount. We are at 10% and then 15% on variations to cover costs. On the upside Charleston do build a gorgeous home from what I have seen. If they are using the HIA contract it is a very one sided contract. It has basically been written to be mainly in favour of the builder, in my opinion the fairest contract to use is the NSW fair trading contract which gives the customers a lot more rights and recourse. Good luck with your journey. I am confident that you are going to end up with a beautiful home. Cheers Simeon Hi Simeon, Can you please elaborate on the costs you have to cover for variations? I mean if a client is upgrading kitchen cabinets, how does this affect the builders "costs"? Not being rude here, but this whole margin on variations related to suppliers are really off putting. Consequently, I rather do everything after handover than doing it through the builder. Best MJ Hi MJ I agree with your premise. Our business model is a bit different in that if our clients are super nice we give stuff away and if they aren't nice we charge a variation. An example last week is that we are doing this reno at Turramurra and we quoted for 6 lineal meters of cabinets in the study and the clients are so nice when they chose 15.5 lineal meters we gave it too them for free. We are also tiling their laundry for free. They are a very sweet couple. My partner and I acknowledge we have a problem, but for us it's not all about money. Back to normal variations, I agree that builders shouldn't charge a margin on a variation if say the client chooses one oven versus another, or a more expensive tile etc. For these items we give a PC sum and then try and negotiate better deals from our suppliers so our clients get money credited back to them. Where we do charge a margin is if we have to do extra work that requires time and or a warranty. So for example, if a client asks us to build some retaining walls, or install timber battens internally, or add some new doors or something that actually takes time and work. In defence of a builder charging a variation on a kitchen, say you chose to upgrade to a special type of hinge, if the builder is required to give you a warranty on that item then it's probably fair that they get to charge a margin, but 30% is very high and that is how the project home guys make up for their very low upfront prices. If you can do work afterwards then all power to you I hope that makes sense Cheers Simeon Architectural Homes & Duplexes - specialising in custom designing homes to your budget Get a Free Onsite Consultation Today or send a PM for information, questions or advice. Re: Builder’s margin? 6Mar 14, 2022 7:39 pm Ashington Homes Hi MJ I agree with your premise. Our business model is a bit different in that if our clients are super nice we give stuff away and if they aren't nice we charge a variation. An example last week is that we are doing this reno at Turramurra and we quoted for 6 lineal meters of cabinets in the study and the clients are so nice when they chose 15.5 lineal meters we gave it too them for free. We are also tiling their laundry for free. They are a very sweet couple. My partner and I acknowledge we have a problem, but for us it's not all about money. Back to normal variations, I agree that builders shouldn't charge a margin on a variation if say the client chooses one oven versus another, or a more expensive tile etc. For these items we give a PC sum and then try and negotiate better deals from our suppliers so our clients get money credited back to them. Where we do charge a margin is if we have to do extra work that requires time and or a warranty. So for example, if a client asks us to build some retaining walls, or install timber battens internally, or add some new doors or something that actually takes time and work. In defence of a builder charging a variation on a kitchen, say you chose to upgrade to a special type of hinge, if the builder is required to give you a warranty on that item then it's probably fair that they get to charge a margin, but 30% is very high and that is how the project home guys make up for their very low upfront prices. If you can do work afterwards then all power to you I hope that makes sense Cheers Simeon Thanks for the clarification. I wish all builders had the same attitude as you. Re: Builder’s margin? 7Mar 14, 2022 8:23 pm MJ2137 Ashington Homes Hi MJ I agree with your premise. Our business model is a bit different in that if our clients are super nice we give stuff away and if they aren't nice we charge a variation. An example last week is that we are doing this reno at Turramurra and we quoted for 6 lineal meters of cabinets in the study and the clients are so nice when they chose 15.5 lineal meters we gave it too them for free. We are also tiling their laundry for free. They are a very sweet couple. My partner and I acknowledge we have a problem, but for us it's not all about money. Back to normal variations, I agree that builders shouldn't charge a margin on a variation if say the client chooses one oven versus another, or a more expensive tile etc. For these items we give a PC sum and then try and negotiate better deals from our suppliers so our clients get money credited back to them. Where we do charge a margin is if we have to do extra work that requires time and or a warranty. So for example, if a client asks us to build some retaining walls, or install timber battens internally, or add some new doors or something that actually takes time and work. In defence of a builder charging a variation on a kitchen, say you chose to upgrade to a special type of hinge, if the builder is required to give you a warranty on that item then it's probably fair that they get to charge a margin, but 30% is very high and that is how the project home guys make up for their very low upfront prices. If you can do work afterwards then all power to you I hope that makes sense Cheers Simeon Thanks for the clarification. I wish all builders had the same attitude as you. That's very nice of you to say. Our whole business pretty much started 4 years ago out of helping people mainly from this forum who were having trouble with their builders for free, and when we decided to formalise the business we agreed we would keep our overheads super low so we never get caught needing to charge high margins ( we are still at 10% on the contract and 15% for variations) and this way we don't need to be desperate for work. We are basically booked out for the rest of this year and are nearly full for 2023. We set a target profit for each job and once we reach that we don't get greedy but try and give some back. I understand the business models where builders get caught with really high overheads including display homes, sales staff and huge numbers of back office staff and it's just too stressful. The downside is that most people want the assurance of a big company which is totally fine. We win about 1 in 5 jobs of the potential clients we talk to, which means 4 out of 5 people are happy to pay a higher premium to go with a bigger company, or they just don't like us. Either way it is all part of the fun Architectural Homes & Duplexes - specialising in custom designing homes to your budget Get a Free Onsite Consultation Today or send a PM for information, questions or advice. Hi Mofflepop, I would recommend finding a building designer to prepare plans, they should design to your specified budget. The benefit is you can tender the project out… 9 20425 Hi, did you get any money from insurance? if you did, does it match what you've already paid the builders? 3 9571 |