Have you ever reviewed a quote or invoice from a contractor and noticed a markup on the building materials? Did you wonder why that extra charge was there? Maybe you even thought to yourself, "Is this really necessary?"

It’s a common reaction, and many homeowners in New Hampshire feel the same way. After all, why can’t you just go to your local store or supplier and buy the materials yourself? It seems like such a simple way to save money, right?

It’s totally understandable to question whether that markup is justified. After all, it feels like it’s just extra money added on top without any real benefit. But is there more to it than just the price difference?

Before jumping to conclusions, let’s take a closer look at what that markup buys you and why it might actually be saving you more than you realize. When we’re done, you will have the information you need to decide whether paying a markup makes sense or if you should be exploring other options.

Is it normal for contractors to charge a markup on materials?

It’s entirely normal for contractors to charge a markup on materials, and it’s considered standard practice in the remodeling industry. Many homeowners in the New Hampshire seacoast, and across the country, see this markup on their quotes and wonder if it's necessary or if it's an added cost without any real benefit.

In reality, the markup plays a crucial role in the project’s success. By charging a markup, your contractor ensures they can cover the cost of handling the materials for you. This includes sourcing, ordering, receiving, and managing any issues with the materials, such as defects or delivery delays. The markup also allows the contractor to take responsibility for all aspects of the materials, which means that if something goes wrong, they’re the ones who will fix it—not you.

Why do contractors charge a markup on materials?

The key reason behind charging a markup is not to inflate the price without adding value. Instead, it covers critical services your contractor provides that go beyond simply purchasing materials. Let’s break down exactly what you’re paying for when you see a markup on your materials:

• Material procurement: Ordering and delivering materials.

• Replacement service: Handling mistakes, damages, and replacements.

• System warranty: Transferring responsibility to the contractor for all materials and labor.

Understanding these services can help you decide whether you want to take on the responsibility yourself or let your contractor handle it.

What is material procurement, and why is it valuable?

Have you ever tried loading heavy, bulky materials into your car, only to realize you can’t quite fit them? Now imagine gathering all the materials needed for a large kitchen or bathroom renovation in NH. It’s a whole different challenge.

By paying a markup, your contractor takes on the responsibility of sourcing, ordering, and coordinating the delivery of all materials. This includes working with suppliers, ensuring everything arrives on schedule, and that the materials are in good condition when they reach the site. It’s not just about convenience—it’s about saving you time, stress, and the potential logistical headaches that can arise.

In a large project, where materials need to be ordered in phases or require specialized handling, procurement can become a full-time job in itself. Your contractor’s experience and relationships with suppliers can also prevent delays that could otherwise slow down your renovation.

What happens if there’s a mistake with my materials?

Let’s say you’ve taken on the task of ordering your own materials. Everything seems to be going smoothly until the wrong product arrives or some of it is damaged. Who’s going to fix this? If you’re handling materials on your own, you’ll likely need to contact the supplier, arrange replacements, and handle the logistics of returning the damaged items. All of this can cost you time and lead to delays.

On the other hand, if your contractor handles the materials, they also take on the responsibility for fixing any mistakes, including ensuring that any defective or incorrect products are replaced quickly. This alone can save you hours of hassle.

How does a contractor’s markup protect me through warranties?

One of the most significant benefits of paying for materials through your contractor is the warranty coverage. When you provide your own materials, you’re typically covered by two separate warranties: 1. The manufacturer’s warranty on the materials and 2. The contractor’s warranty on workmanship. Believe it or not, this leaves a gap in warranty coverage that can leave you in a difficult situation if something goes wrong.

For example, imagine a scenario where you’ve provided the materials for a new shower installation. Everything is installed correctly, but after a few months, the waterproofing membrane—a product you purchased—fails. Now, the manufacturer will likely replace the defective product, but they won’t cover the cost of tearing out and reinstalling the entire shower.

So, who will pay for this? The contractor’s workmanship warranty doesn’t apply—everything was installed properly. Unfortunately, in this scenario, the cost of tearing out and reinstalling the shower will be your responsibility.

Alternatively, if your contractor had provided the materials, it would be their responsibility to cover both the labor and material costs involved in fixing the issue. By paying a markup, you shift the risk away from yourself and onto the contractor, ensuring that any material failure doesn’t become your financial burden.

In our opinion, based on 20+ years of experience in the remodeling industry, this shifting of the risk onto your contractor is the biggest, and most overlooked, advantage of paying a contractor to provide the materials for your remodeling project.

Is it better to provide my own materials or pay the markup?

So, now that you understand what a markup pays for, should you still provide your own materials? In some situations, it might make sense, especially for smaller projects with minimal risk. For example, if you’re just updating a kitchen backsplash and are confident in sourcing tiles yourself, providing your own materials could save you money.

However, for more complex renovations, especially large-scale kitchen or bathroom remodels in the New Hampshire seacoast, the value of having your contractor manage the materials often outweighs the potential savings. Here’s why:

• Time savings: Your contractor handles all the ordering and delivery, freeing up your time.

• Risk management: If something goes wrong, your contractor is responsible, not you.

• Warranties: You’re covered for both materials and labor, giving you peace of mind that any problems will be addressed on someone else’s dime.

What about special materials or large quantities?

Larger projects often require significant quantities of materials or specialty items that can be difficult to source. Your contractor likely has access to suppliers and can secure better deals than you would be able to get on your own. Not only that, but they know exactly how much of each material is needed, reducing the risk of costly over-ordering or running out of materials mid-project.

For example, if you’re planning a bathroom renovation in Portsmouth, NH and you need custom cabinetry or specialty tiles, your contractor’s established relationships with suppliers may result in quicker delivery times or access to products that aren’t readily available to the public.

What is a fair contractor markup percentage?

When it comes to material markups, homeowners often wonder what a fair markup percentage really is. If you’re like most people, seeing an extra charge on top of what materials actually cost can feel like you’re being taken advantage of. But it’s important to understand that a material markup isn’t just about making a profit—it’s about covering risk and warranty responsibilities.

A typical material markup in the remodeling industry ranges from 20% to 35%. You might be thinking, “Isn’t that too much?” But when your contractor takes responsibility for the materials, they also take on the risk if something goes wrong. If the wrong materials arrive or there’s a manufacturer defect, your contractor is the one who will deal with it, at their own expense. They’ll handle returns, replacements, and ensure everything meets the necessary standards.

Even more importantly, when you pay a markup, you’re often buying peace of mind in terms of warranty coverage. If there’s a failure with a material down the line, your contractor will typically cover both the labor and materials involved in fixing the issue. Without that markup, you may only get the material replaced, leaving you to cover the additional costs of labor and potential damage repairs.

The markup essentially acts as a form of insurance, transferring the risk from you, the homeowner, to your contractor. It ensures that if something goes wrong, you're not left dealing with the headache or footing the bill.

Should I negotiate the markup with my contractor?

While it might be tempting to try and negotiate the markup down, it’s essential to remember that the markup isn’t just about profit—it covers valuable services. Contractors in New Hampshire, especially reputable ones, set their markups based on real costs like logistics, time, and liability. Trying to cut this fee can jeopardize the quality of service or force the contractor to cut corners elsewhere.

While it doesn’t hurt to ask, reputable contractors are unlikely to negotiate much, as they won’t want to jeopardize their reputation for doing things right and standing behind their work.

How will contractor markups affect my overall renovation budget?

It’s important to understand that the markup is typically a small percentage of the total project cost. When planning a renovation in NH, most of the budget goes toward labor, design, and project management. The markup on materials is just one part of the overall cost structure, but it plays a vital role in keeping the project running smoothly.

In many cases, the convenience, time savings, and risk management provided by the contractor justify the additional cost. It allows your renovation to proceed without unexpected delays or extra costs falling on you.

Is it ethical for a contractor to markup labor?

Another common question homeowners have is, "Should contractors be marking up labor too?" The answer often depends on the contractor’s pricing model.

Many contractors roll their overhead and project management costs into their hourly rate or lump sum fee, while others present labor costs separately and add a markup to cover the overhead and project management expenses. This is where the difference between pricing structures like time and materials agreements versus cost-plus agreements becomes clearer. 

In a time and materials agreement, it’s common for contractors to include overhead and project management in their hourly labor rate. With this structure, you’re paying one hourly rate that covers both the work and the behind-the-scenes costs of managing the project. On the other hand, cost-plus contractors often present labor costs separately and then apply a markup to cover their overhead, insurance, and management costs. (To learn more about the different contractor pricing models, read the article here: Which is better: a time and materials, cost-plus, or fixed price contract?)

This distinction can also be influenced by the contractor’s quoting and invoicing software. With some software, it’s easier to handle these costs by adding a markup to both labor and materials, while others make it simpler to roll these costs into the hourly labor rate.

Whether or not there’s a labor markup comes down to how the contractor chooses to manage their business and present their costs. At the end of the day, the key is transparency. Your contractor should clearly explain their pricing model so you understand exactly what you’re paying for—whether that’s a fixed fee, a simple hourly rate, or a labor rate with an added markup. 

Summary: Pros and cons of paying a material markup

Pros:

• Contractor takes responsibility for material procurement, logistics, and replacements.

• Warranty coverage extends to both materials and labor, protecting you from unexpected costs.

• Saves you time and minimizes the risk of project delays or errors.

Cons:

• Slightly higher upfront cost compared to purchasing materials yourself.

• Less control over sourcing materials, if you prefer handling this aspect.

Conclusion: Should you pay a markup on materials for your renovation in NH?

Ultimately, whether or not you decide to pay a markup on materials depends on the size and complexity of your project, as well as how much involvement you want to have in the process. For small, simple projects, you might be comfortable providing your own materials. But for larger, more complex renovations, paying a contractor to handle everything can save you time, reduce risk, give you peace of mind, and ensure that your project goes off without a hitch.

If you’re planning a renovation in the New Hampshire seacoast or southern Maine and want to discuss the best approach for your project, reach out to us at Rothrock Kitchen & Bath Remodeling. We’ll be happy to help guide you through the decision-making process and ensure that your renovation is as stress-free as possible.