Building Cost-Plus and working with Bangerter Homes (utah home builder)

January 24th, 2014

bangerter-homes-splash

I’ve been meaning to write about our experience building our house as a “cost plus” and working with Bangerter Homes specifically. There were some great discussions in my tile update post comments yesterday about all this, so I figured this was a good time to write this post.

Okay so I’m not going to go into all the technical details of a cost plus build, pros and cons and whatnots, You can read a great article about that – Hiring a Contractor Cost-Plus – from Building Advisor.  What I am going to talk about is my personal experience building cost plus and why this was a good choice for us.

I really have to start with talking about our builder. Cost plus really isn’t possible unless you trust your builder – this should be said for any construction project actually, but I think especially when it comes to cost plus as a builder could be unscrupulous as far as marking up invoices, or not caring how much the end price is and spending way too much money putting you over your budget.   When we decided to move to Utah (so Spencer could teach at BYU, I could be in the same state and facilitate my Utah clients better, and of course our family is here too), we looked into buying/renovating, and building a tract/production home. Although we loved our renovation in California, and would love to renovate again in the future, the ability to build a home in Utah is just as affordable (if not more so, than renovating). So we looked into building with a big home builder – they build lots of homes and develop the land, and you can do some little custom changes here and there. The prices are actually really good because they make their profit on the land mark-ups and sheer quantity. They also tend to cut some corners here and there… nothing terrible, but things that would definitely drive Mr. Project up the wall. I also called a few of the builders whom people had recommended and asked if it was possible to build and install our own cabinets, trim, and built-ins. The resounding answer was “NO”. Which I can understand… that’s kind of a wildcard to have a homeowner with unknown credentials want to build their own cabinets and what-nots. But for us, it was a deal breaker. Not only could we save 10s of thousands of dollars doing our own woodwork (and by we, I mean Mr. Project), if anyone else did it, it would not be up to our standards. So we’d pay 5x as much and have an inferior product. Not an option.

So where did that leave us? Up a creek? In my estimation, we couldn’t afford a custom home builder. Everything I’d ever heard was that they have huge mark-ups and cut corners to make even more profit (maybe not all of them do this). In the end you have a beautiful home – exactly what you want, but you’ve paid greatly for it – overpaid for it no doubt. Well we don’t like overpaying for things. So I just couldn’t even go there in my mind – if we built with a custom builder/contractor, I would be constantly stressed that we were getting milked. And I know that isn’t always the case, I don’t think contractors are crooks etc. But they do make their money in mark-ups and have to have a pretty big cushion in case some part of the build ends up going over budget – which, again, I get it but I didn’t want to be the one paying the big cushion. I just want to pay what it actually costs to build the house.

What we decided on was to Self-contract. We would find and contract all the subcontractors, schedule and manage the entire build. We’d have complete control over the process. Generally self-contracting takes a lot longer though – subcontractors work for their big clients first and get to you last. It helps if you have relationships already with subcontractors, or at least know which ones have good reputations. Dealing with one bad sub can cost you a lot of money and time. So there is risk involved there.

I started calling on lots that were listed online and talking to local realtors. With land I felt I was at a huge disadvantage in being so far away. A lot of land sales are not listed anywhere. The owner will put a sign in the yard, or just tell people in the neighborhood that the land is for sale. Sometimes there isn’t even that and people will cold-call land owners based on the county tax records.  Being in California, we didn’t know what land was open even do that. My resources were limited – in many ways I wish I would have been more patient and moved here first and then looked around for land, knowing more people and the area much better. What I also found was that it was really hard to find land with no strings attached. A myriad of lots were available, but you had to build with their custom builder etc. So I found myself looking, and not finding what I wanted. Finally I found a lot online that looked great – cul-de-sac – a mile from my brother, nice looking new homes on adjacent lots etc. I had my brother go check it out and he liked it. The next day I called the number on the lot… it was a builder – Bangerter Homes. I was disheartened. I told him that we wanted to self-build. He said that they would prefer to build on the lot. I asked if they would take more for the lot than they were asking if we could self build. He said that he had a solution… a Cost Plus build, and if we built with them, he’d even discount the lot a little bit more.

So that was the start of a beautiful relationship. He told me that a homeowner can save a lot of money with a cost plus build. The basic idea is that the builder is paid a flat fee (a percentage of the estimated build cost), and then all the actual costs are paid without a mark-up by the homeowner. Bangerter Homes even includes a 4% risk clause that basically says that based on their estimated price the exact services provided wont cost more than 4% over budget, and if they do, the additional costs are split by both parties. I asked about cabinetry. He said that the homeowner can do work on the house, and use their own subcontractors/suppliers if desired. To me it sounded like a dream come true. I know exactly how much of a premium I’m paying for having someone contract my build, and I also have the flexibility to be in control of everything that goes into the build. And to be honest, with the great price we got on the lot, and the amount we’re most likely saving on having really great negotiated subcontracting rates through the builder, I doubt we’re paying much if anything over what it would have cost us to self-build (especially if we had gotten a bad subcontractor or two). And of course with a lot less headache, and none of the work that it would take to manage the entire build, and much faster (how much are we saving on a construction loan and rent not having to spend a full year building?).

That is how we ended up doing a cost-plus build… and I couldn’t be happier. It’s been a great experience. That being said, I think the experience has everything to do with what builder you choose. We kind of fell into our Bangerter Homes. We didn’t seek them out or know of their reputation etc. All we knew was that they owned the land we wanted to build on, and they were willing to do a cost plus build with us. We put out feelers, asked people about their reputation and so forth. Everything we heard was absolutely glowing. A great builder to work with. Incredibly ethical, hard working, and they put out a quality product. And now, just a month out from being done, I can happily say the same. I would build with them over and over again. They have treated us like family from the start, and have consistently gone above and beyond what is required and expected. And the best part is that we’ve been able to build the home that we want to build, exactly how we wanted to build it, and definitely for less than a custom build. For us, that is such a big deal. Mr. Project is incredibly detail oriented and picky about quality of workmanship etc. We can easily say that this is a well built home that conforms to our exacting standards – which are very high.

I’m sure a cost plus build isn’t for everyone. Sometimes traditional pricing through a contractor can save you money too. And definitely building a less custom home through a production builder is cheaper. We want to be as involved as possible, and save as much money as possible. I do want to say this about Bangerter Homes, they will go through the design/build process with smaller builds as well – possibly not a cost plus, but definitely a customized build. You don’t have to be building a big custom home – in fact that is a little more rare for them.  They have a drafter on staff who can customize existing plans – even design from scratch, and you can get exactly what you want on a smaller scale. Like their tagline says – “If you Dream it… we can custom design & build it for your life.” This has definitely been true for us – we dream big, and they have made it all come to life.

*Bangerter Homes isn’t giving me any sort of sponsorship for this post, we’ve just had such a great experience, I want to share and let people know where they can have an equally great experience. If you do end up talking to them or building with them, definitely mention my blog to them. They will love to hear that you found them through me as word of mouth is the lifeblood of their business.

6 Responses to “Building Cost-Plus and working with Bangerter Homes (utah home builder)”

  1. Cari Skuse says:

    Thank you again, Jen for all the time you give for posting all this wonderful information! I didn’t even know you could do this type of build, but it is just what we are looking for. We plan on building a hybrid log home and doing as much of the work as we can like we did on the house we live in now, but didn’t know how to do it without hiring a contractor (because most banks will not do owner-contractor loans anymore). The log home company usually has someone do the dry-in that they have or recommend. We planned on doing most of the other work with the exception of the electrical and HVAC — we have plenty of experience, just no way (other than someone looking at our house) to prove it! So this information comes at just the right time for us, so thank you!

  2. Jen Allyson says:

    I’m so happy that it’s good info for you! I had no idea about cost plus building until I talked to our builder. I know we wouldn’t have been happy doing it any other way.

  3. Carrie says:

    I love your home! You have such a great style. I wanted to find out who designed the plans for your home?

  4. Jen Allyson says:

    Carrie, we did all the design work. Bangerter homes has a drafter on staff, and she was able to do all the technical work on the plans. We were in design phase for 4 months nailing out all the details.

  5. E says:

    I Read you post about Cost-Plus building but you didn’t mention the approx. percentage we would be looking at if we decided to go that route.
    Can you provide this?

  6. Jen Allyson says:

    It really depends on the builder. I think you want to shoot for around 10% of the build cost.

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