Cost-Plus Or Fixed Price For A Custom Home

A custom home builder gets paid in one of two ways. With a fixed price, you agree on one number for the whole build. With cost-plus, you pay what the work costs plus the builder’s markup. We build cost-plus, and we show you the invoices. Here’s how each works and what to ask about either.

Fixed Price

A fixed price is one number for a finished set of drawings. You know the total at the start, and the builder carries the risk if lumber or labor goes up. To cover that risk, a builder usually adds a cushion, and you won’t see how large it is. Changes after signing are priced as change orders. Allowances for things like flooring and fixtures can still move the total, so ask what each one covers.

Cost-Plus

With cost-plus, you pay the real cost of the labor and materials, plus a markup for the builder. The total moves with real costs, up or down. What you get in exchange is the ability to see where the money goes, if the builder opens the books. Ask whether they do.

How We Do It

We do our construction work on a cost-plus basis with a standard markup. When we get an invoice for construction work, you get to see it. You can see what the framing cost and how much you’re paying us on top of that. Billing is available as the work moves along, so you can follow the costs while the job is happening.

That visibility doesn’t make the total fixed. If material or labor costs change during a project, the change shows up in the billing. We also study that cost data, which helps us forecast where prices are heading on the next job. Alec wrote about this in open-book construction means you see the invoices.

How We Keep It Predictable

Before work starts, we write the scope out trade by trade and build a budget you can track against. Because we design the house too, cost comes up while the plan is still easy to change. Once the build is under way, a change is priced and approved before the crew builds it.

What To Ask Any Builder

Is the price fixed or cost-plus? What is the markup, and what does it apply to? Will I see the invoices from subcontractors and suppliers? What do the allowances cover? How is a change priced once work has started? Our guide on how to choose a custom home builder in Lincoln has the rest of the list.

For planning numbers, see what it costs to build a house in Lincoln, or book a 30-minute call with Alec.