What is the difference between a construction fixed price and cost plus pricing?
Fixed cost pricing provides an upfront total construction cost. Many homeowners’ prefer this model because they know the amount of loan to pursue and as long as there are no major change orders, the cost should not vary significantly. However, because there are so many unknowns with many aspects of construction such as “will you hit rock”, “will the price of a material (concrete, sheet rock, etc.) change dramatically”, a builder must build in contingency costs in order to protect himself. In this market, many builders will not even consider providing a fixed cost purely based on the financial risk they assume. If a fixed price is provided, it is likely the home will cost the homeowner more in the end unless a very detailed set of plans is available.
