When building a custom home, the type of contract used is a big decision for both the client and builder. In general, there are two types of contracts: Fixed Price or Cost Plus.
With a Fixed Price contract, the client knows their financial exposure. Their costs will only change if they make additions or changes, modify the original scope of work, or exceed the allowances listed in the contract. OR, the worst case scenario is if the builder is incompetent or downright dishonest and the owner is forced to change contractors in mid-stream. In the last 2 years we have been called in to complete three homes where the first builder was terminated or quit.
The disadvantage of a fixed price contract is that often builders will pad the bid their bid to cover for contingencies, substitute the quality of material after the contract is signed, or hire inferior subcontractors in order to save money.
With a Cost Plus contract, the builder’s fee is negotiated up front and the client knows the exact cost of that portion of the contract. The client also has more control over costs, and can freely make changes or upgrades. The builder is free to focus on delivering high quality construction without worrying about meeting his profit margin. And often a builder's fee is less on a Cost Plus contract than a Fixed Price contract.
We have a very disciplined, efficient, and transparent process to control costs. We establish budgets and work with clients to meet or beat the anticipated costs of the job. The procedural and accounting methods we use to manage budgets and job costs are unparalleled in the industry.
If you are building a custom home, be sure to evaluate the budgetary procedures we use and furnish to clients during the building of their home. We are happy to meet and make a presentation showing you the unique methods we use to control costs.