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Old 11-21-2009, 01:27 PM   #1
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Is this "Contractor fee" resonable and how much?


I have a neighbor who has helped me renovate my home. I fired my first contractor choice because I thought they were overcharging me.

I have a bank renovation loan that I am using to fund this. The bank says the work is supposed to be done first by the contractor then he is to get paid after the work has been done. I have been paying him myself and then getting reimbursed by the bank.

When we started this project we didn't have anything written down, it was a verbal agreement that he would charge me for any work he did and mark everything (work and materials) up 10% and would give me his warranty on the materials and work.

I liked the fact that I could purchase any materials I wanted myself and he would not mark them up or warranty them. I could then save money shopping around.

So we start the project and get through about 80% of what needs to be done and he has been paid for that 80%.

He then leaves me a voice message that he needs to now negotiate his "Contractors fee" with me.

I told him that I thought the 10% was his fee, but apparently he wants to charge an addtional sum for his project management piece.

I told him I thought it would be reasonable to pay him for his time, but he said he normally charges $5k a month (I choked) for being the contractor on the job.

I kind of feel like I am getting screwed because he never mentioned this fee until near the end and it was never agreed on what he would charge and he has yet to tell me what he thinks he is owed and I am afraid of the number he is going to pull out of thin air.

I warned him I am a reasonable guy and would only pay would is fair and reasonable.

So I am here to ask you guys what would be fair and reasonable beyond the 10% he has already been charging me.

BTW, I have already paid him directly for his time and work. He was forced to get a permit by my bank and charged me $200 for his time to go down and get the permit.

He has also done alot of the work himself and not quoted me on the work and just charged me what he thinks he should be paid. (I know I should have demanded a quote first, did for inital work but didnt for later work.

Please advise... Thanks!

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Old 11-21-2009, 01:40 PM   #2
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Is this "Contractor fee" resonable and how much?


I have seen "cost plus" rates anywhere from 10% to 35%. That is the total cost of labor & materials to complete the job, plus that percentage mentioned being paid to the PM (overseer) above and beyond that. With you having already paid him directly for some work and also having bought some materials yourself, it's going to get confusing.

And the 10% markup for materials is not part of his contract. You just lose that money for handling and delivery costs. It's bull, because all he's really doing is marking the discount he gets from the lumberyard right back onto your bill. But that's how it goes. He can get the discount, and you can't.

But the "cost plus" concept is a valid procedure for paying a supervisor.

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Last edited by Willie T; 11-21-2009 at 01:53 PM.
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Old 11-21-2009, 06:25 PM   #3
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Is this "Contractor fee" resonable and how much?


Thanks for sharing. Can I get another opinion?
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Old 11-21-2009, 06:30 PM   #4
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Is this "Contractor fee" resonable and how much?


What was the verbal agreement ?
He can't simply pull additonal charges out of thin air
Has he ever mentioned any additional fees at any time in the past ?
Your neighbor is the new contractor ?

If the verbal agreement was the 10% mark up + what you have paid him for his time then that's it
If he wanted more then he would have been required to state that up front, not when the project is 80% complete
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Old 11-21-2009, 06:48 PM   #5
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Is this "Contractor fee" resonable and how much?


well, do you want to pay him more or not?


I take it that this guy is the GENERAL contractor and not simply a contractor doing work. If so, it is not unusual for a GC to be paid a percentage above the trades contractors fees plus a GC fee. Without knowing how big of a job this is, there is no way to tell if the $5k/month is excessive or not. If this was a full time job and he was the actual GC, $5k would be cheap BUT it would not be proper to charge you for the actual work he did because you would already be paying for his services. (that is what it typically called "double dipping" and really unfair to the customer)

so, here is what I would consider.

take the $5k/ month and subtract any payments to him for any actual work performed and pay him the remainder.

Now, since you did not have a contract for his services for the "GC" services, you really can simply refuse him payment above what you had already agreed to.

It's up to you.
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