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- Good for large custom homes with levels of finish that might change during the build<\/li>\n
- You’ll know your actual costs as you go along, and can decide where you want to inject the most cash<\/li>\n
- Your best interests are considered, as you’re paying for all the labour costs and materials<\/li>\n<\/ul>\n
If you trust your builder and know that they are working with your best interests in mind, a cost-plus contract might work best for you. <\/p>\n
Disadvantages of a cost-plus contract<\/h5>\n
The disadvantage of this type of contract is that if you’ve only got a set budget with not much leeway, you could run into problems. Although you’ll be updated with costs throughout, they can still change. <\/p>\n
You need to ensure you have more budget than the estimate to be on the safe side.
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<\/p>\nFixed-price contract<\/h3>\n
A fixed-price contract is where the contractor gives you an exact price for the work that covers all risks accepted by the builder under the contract. <\/p>\n
If the cost of the actual building work exceeds the agreed price, the builder will have to pay for the additional costs. It sounds like a no-brainer – you should definitely go with the fixed-price contract. But is that true?<\/p>\n
Advantages of a fixed-price contract<\/h5>\n
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- You will only pay the sum that the builder quotes you at the start of the project, even if the work exceeds the price<\/li>\n
- You’ll know exactly what you’re going to spend right at the beginning of the project<\/li>\n<\/ul>\n
Disadvantages of a fixed-price contract<\/h5>\n
One large disadvantage of this type of building contract is that the builder will factor in lots of risks that may not be likely to happen. This is to cover themselves from ending up making a loss at the end – so you can end up paying much more.<\/strong><\/p>\n
Lump sum contracts<\/h3>\n
So you might think that a lump sum contract sounds the same as a fixed-price contract. The difference is, there is room for the price to change in a lump sum contract. Your builder will agree a ‘lump sum’ with you at the beginning of the work, but there is room for the price to go up or down depending on how the work goes.<\/p>\n
Advantages of a lump sum contract<\/h5>\n
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