Re: Cost plus, builders risk and other questions

If you cannot work out a lock and key price, how can you establish a
cap that is fair to both of you?

Generally, I fall back on cost plus when a project is so complex and
unpredictable that it is not worth anyone's time to try to  figure out
a fixed price.    

Cost plus works best either between parties with equal knowledge or
parties with a history of trust.  If  his current clients and a couple
of his previous clients were happy on a cost plus basis,  perhaps you
can consider it.

It's common.   Your project,  your risk.    You should expect to pay a
marked up  price for everything directly associated with the project,
but not for anything that is normal operating overhead --  truck, cell
phone, business insurance, office overhead and so on.  That is
included in his mark up.

Not enough info here --  There is not  twice as much work for a
builder in a 500 thousand dollar home as in a 250 thousand dollar
home.    Eleven percent of a l00 thousand dollar project would be very
low --  eleven percent of a two million dollar house  would work just
fine, thanks.  

Builders here look for fifteen percent or so on a two hundred thousand
dollar  home ...  your mileage may vary so ask around.

I have a builder who wants to give me a cost plus price ,with cap, on
building my house.  Is this a sensible approach if a lock and key price
would be, IMO, too hard to arrive at by either of us?

Also, he wants me to pay for the builder's risk insurance.  How common
is this? Should I say no?

I assume the "plus" part of cost plus is negotiable as well.  Does
anyone have a clue as to what that should be in the rural deep south?
He threw out 11 percent as a wild guess for a house this size.