Turn-key Contract: This type contract is when you hire one company to be the general contractor and build your entire project. The general contractor is responsible for coordinating & paying all others involved. You will be responsible for a down payment (also known as earnest money) and for the permanent financing or mortgage. Any scheduled payments to be made during construction should be approved by the bank before construction.
Cost-Plus Contract: This type contract is usually used when a working relationship of mutual confidence exists. The general contractor will either receive a set percentage or flat fee for overseeing the project. Normally there will be a “projected cost” of the construction. However, the contractor is not responsible for the final cost unless specified otherwise in the contract. You pay all labor and material costs, and are responsible for taking title to the lot.
Be Your Own Contractor: In this case, you act as the general contractor. You take title to the lot and arrange for construction financing (along with your permanent mortgage). You must pay and coordinate all the sub-contractors of all the various phases of construction.
Being your own contractor is becoming more popular every day. However, most people are not able to judge the quality of good construction habits. As general contractor, you are to make sure everyone is performing per code. You may want to hire a home inspector or project manager to periodically observe or inspect the construction as it is being performed.