Browse Forums Building A New House 1 Sep 25, 2014 1:28 pm Hi Folks, This may be a pretty naive question but I wanted to know what is Builder's Margin as mentioned in the contract? How it's going to affect me? Like, in my case, the builders margin has been modified from 20% ( default) to 35%. I was wondering how it's going to affect me? If anyone can shed some lights, that'd be really great. Thanks and best regards, Rubab Re: What is builder's Margin? How it affects me? 2Sep 25, 2014 1:31 pm Builders margin is their markup on items. For example, if you upgrade tiles and the quote from the tiler is $100, the builder will chick on their markup and charge you $100+$35 markup, so you pay $135. Re: What is builder's Margin? How it affects me? 3Sep 25, 2014 1:33 pm It means for every $1 of cost to them they charge you $1.35. If you have a fixed price contract it lets you know their profit margin. If anything is cost plus then you know it's cost + 35% Re: What is builder's Margin? How it affects me? 4Sep 25, 2014 1:59 pm Jays It means for every $1 of cost to them they charge you $1.35. Not necessarily ... it means that for every $1 of what they make you aware they are paying, you pay $1.35. They might not inform you of any discounts they get, so RRP could be $1 on something, they charge you $1.35, and they're actually paying 70c. Re: What is builder's Margin? How it affects me? 5Sep 25, 2014 2:21 pm Ive built 5 times and never heard of 35 percent markup, normally for me10-20 percent , I would pick a few expensive items and see what you can get yourself, , but been so inexperienced it will be obvious to most trades and to retailers; get yourself a good inspector, will pay for itself if not sooner then years down the track with better result due to knowledge. Re: What is builder's Margin? How it affects me? 6Sep 25, 2014 3:13 pm Also, when there is a "variation" (explicit term!), then the builder gets to charge 35% on it. We also had a builder which, when we removed something (won't go into reasons, but it wasn't our fault according to the solicitors!), wanted to keep the 20% margin on the item even though they weren't delivering it any more! Imagine if that was 35%... IMO, don't sign with 35%! Imagine - if the builder has quoted 135,000 to build your house, then its cost is $100,000 and their gain is $35,000 (yes, I know the "cost" isn't that, but let's pretend for a moment...). So another builder, with 15% margin, should be able to quote for $100,000 base + 15% = $115,000 for the same house instead of $135,000. Essentially you could be saving $20,000 which is going straight into their pocket. If you're getting other quotes of $135,000 and 15% margin, then you know that either the first builder isn't being honest in their base quote (since they say it can be built for base $100,000 whereas the other builder says the base is $117,000 + their 15%), or the second one is inflating their base from 100,000 to 117,000 but putting on a lower margin, in which case you could possibly get the first down from 100,000+35,000 to 100,000+15%=115,000. All numbers made up of course... Re: What is builder's Margin? How it affects me? 7Sep 25, 2014 7:16 pm 35% doesn't mean there making 35% profit on your build. It means if you want to change something they'll make 35% on the variation, probably to try and stop changes. Depending on the buying power of the builder there margin on the contract may be 5-7% less then a big builder. They may need to do this to stay competitive. But if there working on less margin they need the build to go quickly and smoothly, the easiest way to upset this is variations. Re: What is builder's Margin? How it affects me? 8Sep 26, 2014 10:24 am Thanks millions to all you guys who replied. It was really helpful information. However, what comes in my mind now is: If I don't make any variation beyond the contract signing and the contract says they included all the piering, Drop-edge beams and soil removal included, I was wondering what other areas I can get hit with that 35% builder's margin? I'd really appreciate if someone can answer me that. Thanks Rubab Re: What is builder's Margin? How it affects me? 10Sep 26, 2014 11:25 am There can still be variations that follow to meet council approval, developer approval, BASIX or some other authority. Even if these approvals are already in place - does your contract cover vegetaion, rock or spoil removal etc or are there limits to your peiring, soil removal etc. There are could be a few issues that affect you once you start, you might be fine or it might cost you heaps. If you can't get them to reduce it to 20% or less maybe try to at least get them to apply the 35% to changes you initiate but only 20% if its to meet an authorities requirement. http://camdenbuild.blogspot.com.au/ by invite only please pm me 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 20193 Anthony Firstly, wow you have put a lot of work into your list of questions! Great job and they are mostly valid questions that a builder should be able to answer. As… 14 10673 |