General Contractors Fees for Building a New House

[Audrey C.]

How much are the typical contractors fees to build a moderately priced home from the ground up and around $300K selling price?  What is the % and if so, based on what?  How do you give incentives like profit sharing, after expenses, to motivate the contractor to cut costs and save time?  If so, in what percentages? example 80/20 or 70/30?  Please help.  I have the lot and the financing ($$) but need suggestions on how to pay the GC.

[Manolo D.]

Well, if you pay a GC and he gets paid by spending, he would not like to cost effect right? I would say get an official budget, pay him fixed price, add 20% of whatever the savings, add 30% of your holding costs/time savings costs. if he is under budget but over scheduled or vice versa, you would need to balance both. for a 300k project, if actual cost is 250k, 20% of 50k = 10k in bonuses, if he is 10 days behind schedule and it costs you 100/day in holding costs = -1k, he will receive 9k bonus. Now, you need to tell him, absolute no extensions on timeline, add 1 month as buffer (official term is float) for everything -- unworkable days, inspections, hiccups, etc --, so he needs to fit everything within that float.