Reasonable Contractor Management Fee

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Posted by: from Calgary
2/25/2012 at 3:16:09 PM

My husband and I have been building a home for two years; the house is not complete and the builder has gone bankrupt. We are trying to determine how much it would cost to take the project over and finish it using a general contractor.

We had an appraiser come through the home as well; and he is using our contractor's quote to estimate the current value of the home. His concern is that the contractors managment fee is way out of line with the average % fee. The way this contractor works is that we get the invoices from the trades directly; pay the trades directly and then pay the contactor a percentage on top of the trades invoice.

My question is what would a reasonable % on top of the trades invoices? There is approximatley 300K worth of work to do left; and we are located in Calgary if that makes a difference.

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Date/Time2/25/2012 at 4:18:46 PM

Hi Jen

Firstly may I sympathize with your situation, from taking on jobs in the past where contractors have either failed to deliver or gone out of business I know how stressful it can be for the homeowner.

I have been living and working in Calgary for 3 years and have done lots of work for project managers and general contractors. Their mark up percentage so to speak really depends on the individual as there is no hard and fast rule to determine this.

Some of contractors and project managers that I have worked for, I have later found out mark up as much as 18% in Calgary. However as a rule of thumb the norm seems to be within 5 - 12%.

Having said that I have also done work, which I know the guys don't mark up at all and although they collate all the sub trades invoices/estimates they forward them directly to the client. They make their money charging a management fee which normally is written into the initial contract with the client.

My preferred way of working in this case is the latter as the contractor/project manager is acting more on the behalf of the client and get a better price from the sub-trades. In my view though if the client is willing to do a bit of work themselves and organize the sub-trades to a degree, as long as there are signed contracts or approved estimates then the client gets the best value for money. Please be aware if this route is taken then is is advisable that you ensure all sub-trades are responsible for pulling the required permits for the job in hand.

I hope that this initial information is a little bit useful, I would more than be happy to discuss things further with you if you require any more information or help.

Kind regards

Julian Evans (Master Carpenter)

Evans Custom Carpentry

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CPC Universal Group in Calgary
Date/Time3/5/2012 at 4:20:34 AM

Greetings to you,

As I Andreas Pirelli from CPC Universal Group of Calgary am sorry to hear for your situation. As an experienced contractor you should be able to negotiate at a maximum of 8-10% on top of your sub-contracting fees for finishing your project. I know that in Calgary fees are much more expensive on the sub-contracting. But the norm has always been cost to cost (in Canada) around the 10%. You should be able to reason this situation out.

If you need more advice I can surely help out.

Your's Truly

Andreas Pirelli

Supervisor-Coordinator-Estimator for

CPC Universal Group of Calgary

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Cindy in Calgary
Date/Time3/27/2012 at 5:36:28 PM

Hi Jen, I'm sorry for the nightmare you must be going through. I currently have a lot (land with existing old house) and am contemplating building as well but am so afraid of it going all wrong... we just simply can't afford any mistakes.

Do you have any advice for a homeowner when dealing with custom builders? Again, I am sorry for your stress and hope that all is getting worked through now. :)

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Date/Time3/27/2012 at 10:21:38 PM

HI Cindy & Jen

Please feel free to email me if you require any help or information on this matter.

Kind regards

Julian Evans

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Jen in Calgary
Date/Time3/27/2012 at 10:52:38 PM

Thank you all for your responses. The contractor we had come estimate the cost had a 26% fee on top of the trades costs.

Unfortunately as it turns out the builder committed mortgage fraud on several properties including ours. He forged fake purchase agreements stating that we'd pay more for our house than we had agreed, then forged our signatures and took out money from a private lender. It is significantly underwater and we can no longer afford to pay the lender and finish the house. We are now out our two years and our 25% deposit. There is nothing we can do to get it back as the lender will foreclose and get the property since he is owed more on the property than it is worth.

As for dealing with Custom Builders. Here is what I've learned. Do your homework. Have a lawyer pull a corporate search on the company. If we'd have done that first we'd have seen that he hadn't filed taxes for multiple years. Secondly if you go with a custom builder have your deposit in trust with a lawyer. Have a lawyer review your contract and ask for advice. Having done that might have saved us a lot of heartache. When you think of how big of an investment a house is; lawyer fees are small in comparison. Put a caveat on the property for the amount of your deposit. There are several home builders that should be able to fund the project without you paying them directly. If you can; purchase the lot and leave it with your name on the title. This particular builder had convinced another family that they should buy the lot and transfer it to him because it would be 'easier'. It was definitely easier for him to withdraw a larger mortgage on the property. Obviously talk to people who have worked with the home builder 'recently'. Any questionable feedback; find someone else.

I hope you have a much better experience than we did.

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Date/Time3/27/2012 at 11:37:15 PM

Hi Jen

Situations like these make me as a proffesional tradesman so angry, I know my words do little to ease your situation, however if there is anyway to resolve your issues with your lender to enable you to keep your property then I would like to talk to you directly to maybe help you get back on track with your build and depending what stage your home is in, possibly donating some of my labour time.

Kind regards

Julian Evans

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