WHAT IS A FIXED-PRICED HOME BUILDING CONTRACT?

 Fixed-price home building is a construction agreement where the custom home builder commits to complete a project for a predetermined price, regardless of the actual costs incurred during the construction process. This model provides homeowners with financial certainty, as they know the total cost upfront and can budget accordingly. This requires a comprehensive and detailed project plan. We will work with you to put that plan together, helping from design to interior finishes.  By putting in this effort up-front, you can have peace of mind that the home you dream of is the home that is built. 

1. Market Changes: Market fluctuations can affect the cost of materials and/or services. In a fixed-price contract, if market forces cause prices to rise dramatically, the homeowner benefits by having prices locked in during the planning process. 
2. Your vision versus the builder's vision: Without a fixed-price contract, homeowner faces uncertainty regarding costs. They may be told that the budget that is agreed upon in their contract will cover a certain level of materials and finishes.  Unfortunately, we all have unique tastes, and your choices may be considerably higher than what the builder has budgeted.  Additionally, if you need to make money saving decisions, you are already in the thick of your custom home project when you have to give up certain ideas for cost saving. A fixed-price contract eliminates these concerns by setting a predetermined cost upfront. If adjustments need to be made for budgetary reasons, you will know before a contract is signed.
3. Appearance of Lower Total Cost on Contract: While a general contractor that does not used fixed pricing usually has a lower bid for the project, this is based on allowances and open-ended costs.  That contractor will often come with their hand out for expenses that you assumed were include.  Fixed-price contracts provide the homeowner predictability.
4. Budgeting and Ability to Pay: A fixed-price contract allows buyers to budget and ensure they have sufficient funds to fulfill their end of the agreement. It is not unheard of for homeowners to end up paying hundreds of thousands more than they were expecting.  This can bring a project to a halt if those funds are not available.  Fixed-price contracts avoid these hurdles.

Remember that each situation is unique, and the choice between fixed-price and other contract types depends on specific project requirements and risk tolerance. Weighing these disadvantages can help inform your decision-making process.

Even though a home building contract is a "fixed price" agreement, meaning the initial cost covers a specific set of deliverables, change orders are a common occurrence in the construction process. These written amendments to the contract serve to address situations where the scope of work needs to be modified.

Here's a breakdown of change orders in the context of a fixed-price home build contract:

What are they for?

• Adding features or upgrades: If you decide to add features like a granite countertop or a finished basement that weren't included in the original contract, a change order will be required to reflect the additional cost and work involved.
• Addressing unforeseen situations: Sometimes, unforeseen circumstances like encountering soil issues during excavation or needing to reroute plumbing due to code changes may arise. These changes would also necessitate a change order to adjust the contract accordingly.
• Reducing the scope of work: Conversely, if you decide to remove certain features from the original plan, a "deductive" change order can be used to reduce the contract price.

Key points to remember:

• Always get everything in writing: Never agree to changes verbally. Every modification, big or small, should be documented in a formal change order signed by both you and the builder.
• Clarity is crucial: The change order should clearly outline the specific changes being made, the associated costs, and any adjustments to the completion timeline.

By understanding the role of change orders and following best practices, you can ensure a smooth and predictable home building experience even in the presence of alterations.