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Basics of Pricing New Homes From a Custom Home Builder

By

Home Building in Oregon

 

When it comes to new homes there are actually two kinds of contracts that your builder uses when it comes to pricing them? These contracts are either fixed price contracts or cost-plus.  If this is your first time buying a home read on below to know more.

Fixed Price

One contract your home builder in Portland Oregon will use is the fixed price contract. The builder like Creekside Homes basically will factor in all of the possible costs that will be incurred in the construction of your home. This includes both labor and material costs and then he will present you with the total cost.  The price at the bottom is the amount you will pay him once the home is done.

Benefits

Probably the biggest advantage you will get from the fixed price contract is that it protects you from cost overruns.  Say, your project goes over budget for some reason like price of materials going up or the builder did not foresee any material shortage and have to buy more expensive ones, he will be the one to absorb the expense not you.

Drawbacks

While it is true that your builder will absorb any cost overruns or extra expenses he will pocket all the money should he come in under budget.  The other issue with this contract is that you will just be presented with the final price of the home so to speak and you will never know the cost of labor and materials he actually incurred. If the builder is unscrupulous he could cut corners and use substandard or cheaper materials or lower quality workmanship in order to come in under or at budget.

Cost Plus

Another type of contract your homebuilder in Portland Oregon will offer you may be the cost plus type contract.  Unlike the fixed price contract, the final price may go up or down depending on what costs are actually incurred.

Benefits

With this, you will know all the cost and profit of the builder and if the project comes in below the budget you will pay less money once construction is completed.  The fact that the builder’s profit is not threatened if the project goes over budget, chances are he will not sacrifice quality to protect his profits.

Drawbacks

If the contractor fails to estimate accurately, you could end up with a much more expensive home than you thought.

In Conclusion

Both contracts are ok in their own right; it really depends on what is comfortable for you and your custom home builder.  In the end, the contract that is right is the one that you sign without any apprehensions.

Filed Under: Household Tips

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