Caught by the inflation demon

[beowulf]

Sad day here today. After signing a contract to build a second house on our 90 acre property (about $265,000 for the building only - we have to do the well, pads, septic and more) we waited for six months for the permit to be issued. Well, it was approved this week but the builder now says due to price increases it will cost us $47,000 more. My daughter and SIL (it will be their home) don't have and don't want to pay that. The conract was signed in November '21 and has no escalation clauses entitling the builder to increase the price. I know I can sue to enforce the agreement (the builder said we what we signed is not a final binding agreement but from where I sit that is BS) but suing is acually not all together a satisfactory course to resolve issues - and would take a long time - during which we could not all get along with our otherwise peaceful lives.

I am not unsympathetic to the builder - I know prices have gone crazy. The builder says they cannot afford to subsidize the new price increases. They want us to go forward but we have to agree to pay the additional $47k. Or, if we back out, they will refund our deposit ($13,000 less the $1800 permit fee they paid to the county). We have already invested a lot in a well, pump, pad, roads, tanks and more.

I am working through this now and considering: building a smaller house where they would live and then they could take over our house when we are gone and rent the smaller house (renting the main house is not an option - barn, tools, corals, animals and much more). We are 78 and 70 and so at some point would need to leave or downsize anyway. Or offering to pay $25,000 of the $47,000 they are asking for - thus helping them out a bit. Or, using the approved plans and permit and building it ourselves - though I am not certain we could save much doing that even with the general contractor's markup - they have suppliers and sources for materials we don't have. Anyway, still thinking of ways to manage this.

I guess I am not looking for advice. . .just venting a bit. The hardest part of this - it really hurts to see the daughter hit with this disappointment - this would be her first and possibly her forever home.

 

[ultrarunner]

Go ahead and vent… it’s a way to get things off your chest.

We just finished a commercial project with delays but the only saving grace is materials ordered at time of signing which worked pretty well.

If materials are really up a lot I imagine not much opportunity for savings except taking on some of the work?

 

[4570Man]

I’d want a breakdown of the 47k. As a builder myself prices soared in 2020 and 2021 and have remained fairly consistent since then. I don’t think anything has went up enough over 6 months to justify a 47k increase. Lumber has actually decreased since spring of this year. The builder should have known better than to make a fixed price contract in this economy anyway.

 

[beowulf]

I’d want a breakdown of the 47k. As a builder myself prices soared in 2020 and 2021 and have remained fairly consistent since then. I don’t think anything has went up enough over 6 months to justify a 47k increase. Lumber has actually decreased since spring of this year. The builder should have known better than to make a fixed price contract in this economy anyway.

Thanks for this information. I will ask for that. I have also started to look at log cabin kits - the daughter loves them and the mountain and hill top setting with fantastic views from the site would work out. I will visit the County Building dept on Monday to check out how the manage that.

The builder mentioned - generally - prices for electrical materials, and windows - which he said has doubled. I will do some research before contacting them about possibly offering a portion of the increase.

Appreciate the input.

 

[beowulf]

If materials are really up a lot I imagine not much opportunity for savings except taking on some of the work?

Yeah, I figured we would need to do a lot of it, and/or making some deals with locals up here in the hills - there are many with different skills. I have done a lot of electrical, plumbing, framing, drywall (hate that!), and more. So, an option. Thank you for the input.

 

[LS Tractor Owner]

There could be a substantial price difference if you build it yourself.... every builder I know of (I was a contractor for 30 years) marks up all of the materials to a little bit over what you would pay retail. On the other hand, most suppliers will give discounts for a "whole house package". Then there is the subcontractors that will also have a profit and mark-up.

I finished building our new small home the early part of 2020..... I built it for 30% of the lowest bid that I got for a 'turnkey' builder. It was hard work, and took me over a year to do, but to me, was well worth it.

Do your homework, call other builders, see if you can get some packages/prices quoted from suppliers / lumber yards. Do you have the plans? Is the permit in their name or yours? Lots more information needed for you to make a decision.

Good luck!

 

[JJT]

I'd move on, get your deposit back. Bid out the build package now that you have permits and are ready to go, see where that gets you. If it's still too much $, it's time to descope. "You can't always get what you want...."

 

[Jstpssng]

I'd move on, get your deposit back. Bid out the build package now that you have permits and are ready to go, see where that gets you. If it's still too much $, it's time to descope. "You can't always get what you want...."

He just started the thread to let out some frustration, yet has gotten several good suggestions anyways.

Sometimes stepping back as the OP is doing allows time to see other options.

 

[4570Man]

Thanks for this information. I will ask for that. I have also started to look at log cabin kits - the daughter loves them and the mountain and hill top setting with fantastic views from the site would work out. I will visit the County Building dept on Monday to check out how the manage that.

The builder mentioned - generally - prices for electrical materials, and windows - which he said has doubled. I will do some research before contacting them about possibly offering a portion of the increase.

Appreciate the input.

Log home kits are insanely expensive. That’s not the direction you want to go if saving money was the idea.

 

[grsthegreat]

As an electrician i can say prices have gone nuts over last 6 months. On one recient project the price of underground wire went up 50% over the 2 weeks we worked on the job. Heck, a piece od 2” rigid conduit went from $48 last year to $197.00 last week.

i picked a good time to retire.

 

[beowulf]

As an electrician i can say prices have gone nuts over last 6 months. On one recient project the price of underground wire went up 50% over the 2 weeks we worked on the job. Heck, a piece od 2” rigid conduit went from $48 last year to $197.00 last week.

i picked a good time to retire.

Yeah, I used to buy 2x4 studs for $1.97 and a few days ago I saw them for $7.13.
I should have mentioned - we negotiated an even lower home building price in September-October 2021 but they bumped that price twice before we worked out all the details and signed in November 2021. So in that sense, some of the pre-November 21 cost increases should have been built in.

Oh well, in the end it will all work out in some way or another. Actually, from our/their original home building budget we incrementally went up due to "wants" or "preferences" and so maybe now is an opportunity to reassess and get it done more realistically. Thanks for weighing in.

 

[BleedingOrange]

Try and get the contractor to reduce some of the additional 47K they are asking for, and kick in the 25,000, and call it an early inheritance. Would it be possible to get anyone else to give you a quote on the same plans ?

 

[jmc]

Disappointing time for builders too, I'd bet. A lot of work involved in (competitive) bidding, only to find the project is out of reach for the customer.

 

[Jstpssng]

The price of everything has gone up. Have you looked at buying schedule 40 pipe lately?
I had a septic put in last October. A couple of months ago the installer told me that it would have cost 30% more now, due to the price increase of fuel, pipe, and the concrete vault.

 

[2manyrocks]

I looked at a log home when house hunting 20 years ago. The realtor said they were nice to look at, but the maintenance on them was an ongoing problem. Probably some of the most honest real estate advice I've ever gotten.

 

[4570Man]

As an electrician i can say prices have gone nuts over last 6 months. On one recient project the price of underground wire went up 50% over the 2 weeks we worked on the job. Heck, a piece od 2” rigid conduit went from $48 last year to $197.00 last week.

i picked a good time to retire.

A roll of 12-2 250ft wire is $165 currently. It was at least $150 if not $160 6 months ago. An arc fault breaker is $54. They’ve always been $50 or so. Conduit went nuts 2 years ago and hasn’t changed much since then.

 

[plowhog]

$47k increase against $265 build cost is about 18%. But that's for six months, so figure a 36% annual increase. That seems high.

I'd set up a few sessions with the builder to go over all of the increases, line by line. This will give you an opportunity to know the numbers in the same detail as the builder.

You have 3 parties involved here. If they each contribute 1/3, thats about $16k apiece. The builder may not like it, but if he is staring down a non-performance lawsuit it may come into play.

Having said that, there is no way I would recommend insisting that the builder do the project on the original price. It isn't a house I would like to own.

Everyone needs to give a bit if this deal has a chance to come together. .....

 

[Hay Dude]

We are living in unprecedented times. No way a 6+ month old price would hold up today. Materials prices are insane now. The cost to deliver them is way up. Everyone is experiencing cost increases.

If the original contract price is your max, ask him is there are and features that can be deleted to reduce the cost? If you arent willing to cut out any features, maybe you can push them off into the future or do some yourself?
I would think his $47,000 proposed increase is negotiable. I have been in similar situations and usually able to come to a settlement of some kind.

 

[Raul-02]

The conract was signed in November '21 and has no escalation clauses entitling the builder to increase the price. I know I can sue to enforce the agreement (the builder said we what we signed is not a final binding agreement but from where I sit that is BS) but suing is acually not all together a satisfactory course to resolve issues - and would take a long time - during which we could not all get along with our otherwise peaceful lives.

Tell him you will accommodate him some but not all and offer him ten gees more - tops. If he turns you down, send him a letter he'll know is from you because it'll be framed as a summons and complaint.
The fact of you making an offer of accommodation should put you in a really fine position in court.

 

[ultrarunner]

Does the builder want out?

Maybe more lucrative jobs waiting?