What should a Builder’s Margin be?

And is your builder making too much money?

Learn more about builders’ margins, whether you’re entitled to know what they are, and what else you need to know about this cost in your renovation or new build project.

Listen to the episode now.

Hello! This is Episode 283. In it, I’m going to discuss builders’ margins, what they are, what they should be, the difference between markups and margins, how much you should be told, and what this information all tells you when choosing a builder.

This will be really useful for you if you’re frustrated that a builder isn’t telling you their margin, or if you are simply expecting it to be 10% and that’s it.

It’s also going to be helpful in providing some great questions and opportunities for discussion with potential builders, so you can find out more about their business and how it operates.

Now, let’s dive in!

I often get asked questions like this: 

• How much is a builder’s margin? 
• What should it be? 
• Is there an industry standard for builders’ margins? 
• Why won’t my builder tell me their margin? 
• If it’s my house and I’m paying for it, shouldn’t I get to know what the margin is?

And I get asked this so often, I thought I’d dedicate a podcast episode to answering it, so it’s here as a resource for anyone who is wondering about this for their project.

I’m often asked what the ‘standard’ builder’s margin is. And you can also hear figures such as 10% or 15% spoken about, as though it’s some standard amount as well.

I think this happens for a few reasons.

Firstly, the standard Master Builders Contracts (or MBA contracts) in most states have 10% actually written as the default into the contract.

I know a lot of architects and designers tell their clients that builders should only charge 10% or 15% as a margin, or actually instruct builders they’re working with to only add that much. “Take it or leave it” I’ve seen architects say!

And, interestingly, I recently found out that the Cert 4 courses being run for builders and construction management advise that the overheads percentage is 10%, without giving any grounding or tools to work this out.

So, it’s no wonder that this perception has proliferated the industry and has set the expectation for what builders should charge as their margin.

I know that many homeowners are concerned about just how much money their builder is making. 

Are they really making a lot of money? Are they making too much money courtesy of the funds we’re paying them to build or renovate our homes?

Well, given all the builders going out of business, and the fact that the industry has a disproportionate amount of insolvencies compared to other industries, I don’t think that builders are really making a lot of money.

I do see homeowners even trying to negotiate with various builders, pitting them against each other to make them more competitive with their margins and get them to reduce their margins as an incentive to secure their project.

When it’s such a significant investment for you, and it’s personal funds, that any margin can feel really, really significant. And so it stands to reason that you want to know that the margin being charged is reasonable, and that you’re not being ripped off.

However, if you’re just asking them what their margin is, and then comparing builder to builder based on their margin, it doesn’t really give you a clear picture of how they’ll be as a builder, whether they’ll be great to work with, and the quality of home they’ll build you.

Learn more about builders’ margins and what to expect when building or renovating.

LISTEN TO THE EPISODE NOW.

RESOURCES: 

Comparing builder’s quotes: How to understand pricing >>> https://undercoverarchitect.com/comparing-building-quotes/

How to choose the right builder (3 things to know) >>> https://undercoverarchitect.com/podcast-how-to-choose-the-right-builder/

Your building budget: Should you tell your builder? >>> https://undercoverarchitect.com/your-building-budget/

Episodes on the PAC Process, or Paid As Consultant Process (where you bring your builder on board doing pre-construction to collaborate with you and your designer and provide input on cost and buildability) start with Episode 201 >>> https://undercoverarchitect.com/podcast-home-design-on-budget-pac-process/

And if you’re thinking about supplying your own fixtures and finishes to save money (or your builder is even suggesting it to you), these episodes will be helpful:

• Part 1 >>> https://undercoverarchitect.com/podcast-supplying-own-fixtures-finishes/
• Part 2 >>> https://undercoverarchitect.com/podcast-supplying-own-fixtures-finishes-three-reasons/

Access the support and guidance you need to be confident and empowered when renovating and building your family home inside my flagship online program, HOME METHOD >>> https://undercoverarchitect.com/courses/the-home-method/

Learn more about how to interview and select the right builder with the Choose Your Builder mini-course >>> https://undercoverarchitect.com/courses/choose-your-builder

Access my free online workshop “Your Project Plan” >>> https://undercoverarchitect.com/projectplan