If you’re looking to build a custom home and want to be sure your project will complete within your budget goals, then you need to know the difference between a fixed price contract versus a cost plus.
A fixed-price contract determines the total project cost to build up front. The builder guarantees to build and deliver the home, with all of the inclusions, for the agreed upon price. A cost-plus contract is the cost of the project itself – materials, trade contractor labor, etc. – plus the percentage the builder will charge to manage the project. The “plus” percentage is up to 30% of the project cost to clear a profit after overhead.
Now our primary objectives as a homebuilder are to deliver every home on time, on budget, with expert craftsmanship and max value. We can accomplish these through either type of builder contract, fixed price or cost plus. The reason fixed-price contracts are often preferred, is that they clearly map out the project and keep progress on track to complete at the agreed upon price. This approach is the ideal way to determine feasibility before ever beginning a project.
Our fixed-price builder contract eliminates the misrepresentations and uncertainties that can result in costly cascades of change orders common with cost-plus builder contracts. Our conceptual estimate is followed by a 4-point cost review to dial in the final contract price, aka fixed price. Beware of some builders that promise one price initially, begin building, then see costs jump from an avalanche of change orders that leave the customer frustrated with the actual cost of their project in the end.
Cost plus contracts can be used effectively, but are often a crutch for poor estimating. This is the litmus test that separates home builders with proven systems that can precisely estimate, versus other builder’s “guesstimating” that results in disastrous budget failures. This is where being knowledgeable about the type of builder contract offered, as well as reviews and testimonials will help you filter and discern home builders you can trust.
Through our 35+ years of home building, we have become very skilled at creating systems for estimating, project planning and cost control. This is why we won the America’s Best Builder award by Builder Magazine, only awarded to a few builders each year from across the country. Our award-winning process ensures your home building experience will be easy, simple, enjoyable, on time and on budget. Reach out to us today and discover The Intelligent Way to a Luxury Home.
Found the perfect lot? Already own land? Call us today to schedule your free feasibility estimate! Know your total project cost before you commit to any decisions. We pride ourselves on a customer-oriented experience, always putting your needs first. You can reach the Thomas Sattler Homes Sales Team at Call (720)449-3562 or online at ThomasSattlerHomes.com.