When faced with putting down 200k plus for a new single family home, some buyers may wonder if their builder is walking away with huge profits. Although the builder may very well be making a good profit on the home, many buyers forget the organization and costs required to subcontract out the work needed to build the best home possible—tasks best done by experts in a specific industry. Buyers want to know that their home has been wired, plumbed and floored with the best of them, but having that guarantee does come with a higher price tag.
Builder’s use of subcontractors is clearly as strong as ever. Now, according to the National Association of Home Builders, builders hire (on average) 22 subcontractors to build a new, single family home. Not only that, 70 percent of homebuilders use at least 11 and sometimes use up to 30 subcontractors on a given home.
16% use 0 to 10 subcontractors
36% use 11 – 20 subcontractors
34% use 21 to 30 contractors
9% use 31 to 40 subcontractors
4% use 41 to 50 subcontractors
2% use 51+ subcontractors
Even if a builder does not subcontract a job on a specific home, he may subcontract that task on the next one. Two thirds of builders said they generally subcontract 75% of the construction costs in a build.
So for homebuyers, remember that homes, like many human inventions, have a lot more subtlety and work put into them than what first appears to the untrained eye. Although home costs appear high, sometimes those profits are split among a wide group of people. It is up to the builder to determine how those profits are split and how much help he needs to build a quality home, while remaining competitive in the housing market.
Hart Real Estate Solutions