Seeking to spruce up your home with the help of an experienced contractor? As a homeowner, there are many factors to consider when deciding on an Agreement with a contractor. In short, an Agreement is a document that settles upon completion date, services that will be provided, payment options, ect. and is to be completed before construction begins. There are two basic forms of Agreements that a homeowner can choose from including a “Cost-Plus Agreement” and a “Turnkey Agreement.”
In a Turnkey Agreement, the contractor is responsible for all material and labor costs, such as roofing and siding, with the exception of allowances. “Allowances” are detailed descriptions of flooring, countertops, and other fixtures, which can be purchased by the homeowner at or below budget. In this type of agreement, the contractor will create a “draw” schedule, or detailed payment plan, for the homeowner to follow and make payments. The first payment is made after a stage of work is complete.
In contrast, the Cost-Plus Agreement allows the contractor to invoice to homeowner as he acquires material and labor cost. The contractor also takes those costs and adds a percentage for overhead and profit. The homeowners have the option of receiving an invoice weekly or bi-weekly. The process does tend to take longer due to the use of invoices. With the Cost-Plus Agreement, there is a possibility that the actual job costs surpass the original estimated job costs established by the contractor. Although the estimated cost was calculated incorrectly, the owner is still expected to pay the actual job costs. Additionally, homeowners will be leery of the high cost presented on the Agreement due to the profit and overhead percentage.
While both Agreements are valid options, they are extremely different in regards to how much control the homeowner has over the overall price they pay. Before signing an Agreement with your contractor, make sure to thoroughly research which Agreement will save you money in the long run.
For more information on Cost-Plus contracts, contact Alan Wheeler of Coastal Design Builders at [email protected].
Posted by Ashley Grimes, Editorial Intern, Charleston Home + Design.
