What Percentage Do Most General Contractors Charge?

General contractors bring visions to life, working tirelessly to complete immaculate homes throughout Denver. Contractors can build new homes or add on or remodel existing structures. Any time you want to make changes to your home, you will need a general contractor around to help. One of the first thoughts that come to mind when you decide to update the home is the cost of the work. We all know how expensive construction projects can be.

General contractors completing home improvement projects around your home use one of several different types of contracts and payment structures that ultimately affect the cost of the job. Learn more about the payments structures and average costs charged by Denver general contractors.

custom home builder denverWhether you are building a home or have an upcoming renovation project, it is helpful to know the cost to hire a contractor ahead of time. Money impacts the entire cost of the project. Learning the costs of the project ahead of time helps better prepare a budget and ensures you are not taken for a ride by a money-hungry, scrupulous contractor. Those types of contractors are out there and getting involved with one is a nightmare come to life. How much should you anticipate paying Denver general contractors to complete work at your home? Continue reading to learn more about the average rates of contractors in Denver as well as information concerning the different types of contractors, which ultimately affect the total cost of your project.

Contractors do not have set prices available to give clients because their scope of work varies so greatly. Giving each client the same price would devastate a general contractor in Denver in many cases. The contractor handles so many different projects that are all unique it is sometimes difficult to charge a set price.

Some of the work a contractor can complete includes:

  • Wiring a home for electricity
  • Updating electrical wiring
  • Adding on a room to the home
  • Building a custom home in Colorado
  • Plumbing installation and remodels
  • Deck and patio additions
  • Basement finishing

One call to a general contractor in Denver can change the dynamics of your home as well as your happiness with the property. These services are among the many available from a general contractor in Denver. Whenever you want to update your home and create a more flattering look that satisfies the needs of your family, a contractor is an expert to call. They’ll take care of almost all the work that you want.

So, what about the rates to hire a contractor?

Contractors rarely charge for projects by the hour. Charging clients by the hour would be complicated and challenging in many general contractor situations. Instead, they opt to take a percentage of the total costs of the project, plus their costs. The costs can include anything from subcontractors hired to help complete the work to the cost of permits and materials.

The percentage a contractor takes also depends on the type of project. Residential contractors charge less than commercial contractors. The complexity of the work also affects the percentage of money the contractor charges. Building a custom home in Colorado requires more work and therefore, higher percentages than you would spend on a bathroom renovation.

The percentage a contractor takes usually ranges from 10% to 20% of the total construction costs. A luxury home build or more complex project may incur higher fees ranging between 25% and 30% of the total cost of the project.

The fee is calculated from the subcontractor labor and markup on material combined with the total cost of the job.

However, the actual amount charged by a Denver general contractor depends on the type of project and the type of contract that is used. There are three main types of contracts used.

Let’s take a look at the three main types of general contractor contracts.

Fixed-Price Contracts

The Fixed-Price contract is simple and straightforward. It’s exactly what it sounds like: a contract with the project cost outlined with a percentage payable before the work begins and the remaining balance when the work is completed and approved.

Contractors often use this type of contract because it is simple for both parties to understand and works out to a fair rate for each person. The Fixed-Price contact is rarely used during major renovations or Denver custom home building.

A fixed-price contract is difficult to use during major renovation projects because needs often change. The changes can affect the price of the project. Other unexpected problems can arise which also complicate matters for the contractor and the client, rendering them difficult to use during major construction and renovation projects.

When contractors used fixed-price contracts and changes occur, they draw up a “change order” listing the materials that it requires as well as the additional work, along with the cost. This can be costly to builders since there is no incentive from contractors to give you a good price on this additional work.

We know that changes are a big part of any construction project. No matter how well you have prepared the blueprints, changes are just part of it. All contractors know this and understand that the wrong contract can make changes a big challenge. The fixed-price contract allows the builder or contractors to easily incorporate changes and the costs thereof in the contract.

Time and Materials Contracts

The second type of common contract used by general contractors is the Time and Materials (T&M) contract. This contract works best on projects where the scope of work is not easily defined. Using the T&M contract, contractors create a schedule listing the hourly charges, mark-up fees for subcontractors, mark-up fees for materials and labor, and details of the work that is being performed.

Contractors are reimbursed for materials and establish an hourly or daily rate of pay they earn during the completion of the project. The T&M contract is more beneficial to contractors than to homeowners.

One of the advantages of the T&M contract is the ease of adjustments. Since the homeowner reimburses the contractor for all materials, unexpected delays and changes do not affect the contract and can easily be added as they occur.

This type of contract is not right for every type of construction project. It benefits the builder and contractor more than the homeowner. Additionally, contractors may be less motivated to complete the project or complete it with expertise when working under the T&M contract.

Cost Plus Contracts

The third and final type of contract is the Cost Plus contract. This type of contract is similar to the Time and Materials contract except there is no mark-up applied to each dollar you spend. Instead, the builder has a preset fee with their profit already affixed to the number.

The more time a contractor spends completing a Cost Plus contract, the less profit he earns. For example, if the contractor fee is $1,000, they earn 10% on a $10,000 job. However, the same $1,000 fee yields only 5% profit on a $20,000 job.

Homeowners who need their project completed on a timely basis without the fear of working with a contractor who cuts corners can benefit most from the Cost Plus contract, which also happens to be the most commonly used type of contract available.

Make Sure You Hire the Right Contractor

Working with the wrong contractor is a nightmare no matter which type of contract they use. While most general contractors in Denver provide honest work, there’s still a handful of dishonest, money-hungry contractors looking out for their bottom line; nothing more. You need a contractor that looks out for your interests and needs, too! All that it takes to get this contractor is a bit of research. Ask around to find out what other people think of a specific contractor. Hea online and research social media, reviews, etc. to find out more.

  • Choose a contractor that is interested in your project and your needs. This is your dreams come to life, after all.
  • Look for experienced contractors. The more experience the contractor brings to the job, the better!
  • Choose contractors registered with the BBB and that have other special certifications and qualifications.
  • Ensure the Denver general contractor stands behind their work. They should offer some type of guarantee of the work in the contract. Look for this guarantee before signing on the dotted line.

As long as you research contractors and trust your needs to a name like Denver Urban Builders, any type of contract can go smoothly and avoid exuberant costs.

custom home builder denverWhich Type of Contract is Best?

The three main types of contracts each have advantages and disadvantages that homeowners should learn before hiring a contractor. The more you know about the contracts, the easier it is to hire a general contractor in Denver that completes the work as expected, at an affordable rate.

Most contractors use the Cost Plus contract. It is simple, straightforward, and gives homeowners the best options. Though it may not be the cheapest way to complete a project, it definitely helps homeowners get the best end of the deal and get the work done on time.

The best type of contract varies from one project to the next. The type of contract for one project may be the worst type of contract for the next project. You can find out more about contracts by reaching out to the experts at Denver Urban Builders. Information about the types of general contractor contracts is also available online. Take time to research to learn the pros, cons, benefits, and disadvantages of the contracts.

Once you find a contractor and a contract, do not skimp out on reading the information you are signing. Contracts are binding agreements that are enforceable in a court of law. You must ensure the wording in the contract coincides with your needs and does not contain wording or clauses that can create confusion or unwelcomed surprises mid-project.

What Percentage do Most General Contractors in Denver Charge?

Since most contractors use the Cost Plus contract, homeowners can anticipate fees ranging from 10% to 25% to complete their project. Simple, quick projects usually earn the 10% charge while more complicated projects cost 20% to 25% of the total cost of the construction project. You can also expect to pay closer to the 25% fee during major home construction and renovation projects.

To learn the exact percentage you’ll pay to complete your project, request estimates. It is important that you get estimates from at least three contractors and compare costs before you hire. Comparing is the best way to find a worthwhile contractor that charges rates comfortable for your budget.

Most contractors like Denver Urban Builders, provide free, no-obligation estimates upon request. We’ll help you learn more about the different types of contracts and other costs associated with a building project. Our goal is to make the entire project as straightforward and cost-effective as possible.

Find out more about general contractor contracts, request a free estimate, or speak to one of our experts today by calling Denver Urban Builders at 720.902.5773.