Difference Between Cost Plus vs Fixed Price When Building A Custom Home
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- čas přidán 20. 10. 2022
- Cost plus vs fixed price.. it can be a complicated topic but in this video I will explain the difference!
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I am a couple years away from a custom build so your channel is very helpful for long-term planning.
Awesome! Thanks for watching :) Let us know if you have any questions you'd like us to answer in future videos!
We are building a home and business in Mexico so a lot of what you talk about doesn't apply but much of it does. Things are very different here, and that can be frustrating itself until you get used to it. Our builder is actually from Poland but used to build homes in California so we mostly speak the same language. Time is the biggest difference here. Everything takes FOREVER!! You are doing a great job with this new channel. I predict fast progress and much growth soon!
Thanks for watching!! Hope your build goes well :)
There are two scenarios that I'd love to get your feedback on.
In a cost-plus build, it seems like it would be in the builders best interest to have all the subs charge as much as they can get away with. How do you make sure each line is getting done for a fair price?
On the fixed-cost side I worry that it's in the builders best financial interest to cut corners and hire the cheapest subs. How do you ensure your custom home is being built to the expected standard of quality?
I agree that the builder wins every time on a cost plus. He doesn`t have to try and get the subs to work for less and he get to be lazy when trying to find the best deal on materials and labor. The cost plus builders have gotten huge raises the past 5 years since they have kept their % the same while homes have increased huge amounts.
Excellent point and my main concern. Trusting a builder to actually bid out the work on a cost plus and getting you the best price and value vs using his one and only sub and letting the sub charge a premium and having the sub do the builder a favor on another project he took a loss on. Fixed cost - is he cutting corners on cheaper material and labor?
I was going to use my cousin who only build cost plus. He had been using the same subs for over 20 years and never bid a job. He said that the only fair way for everyone. I went with another builder for almost 10% less to build and I got much more for my money. The person I used got 3 bids for everything. @@russ320
What if you want to do some of the labor yourself to save cost, which is better fixed or cost plus in this instance?
I think fixed fee is the most honest. Cost plus always incentivizes the home being more expensive.
Building cost or labor doesn’t come down? Depends on economy. Slow economy and slow housing new builds - depends on how hungry you subs and manufacturers are and if they want to keep their workers working. So long term cost go up, BUT, in the right market cost will come down.
We only do cost+.. we are in a service driven business, we provide a service and want to be paid for our services down to the $1, we don't finance a single $1, and put the risk on the owner not ourselves. we work with the budget, we categorize stages and items and ensure we stay within that approved budget as a financial planner per say, but at the end of the day it is their call if they want to exceed the budget, they get the home they want and we get paid for every min we work. fixed price is only good for subdivision homes not custom homes.
Go advertise elsewhere. Y'all sound about as warm and accommodating as an icecube
@constructionxinc-I’m coming at this from the owner’s perspective and I agree with you 100%. I was an owner’s project manager in the commercial sector for almost 30 years and the worst projects were almost without exception the ones that were done on a fixed-price low-bid basis. I ALWAYS preferred using a qualifications-based selection process and a cost-plus contract. This didn’t necessarily result in the lowest cost, but it ALWAYS resulted in the best value. I’m applying the same concept to the construction of my personal residence: interview general contractors to find the most qualified best fit for my particular project and then work with them in a collaborative relationship that results in a win-win for both of us. This is by far the funnest way to execute a project, too, both for me and for the contractor. And believe me, good contractors will do a better job if they are working on a project they enjoy for an owner they appreciate (and who appreciates them).
@@MichaelJ674 cost plus is BS. You bid product, I buy product, the end. All you should do is piece the thing together. As a buyer, I have just as much right to know WTF I'm on the hook for out the gate. I don't see what's behind the stage and I don't care. Give me a bid and pad it if you have to, but day one bid has to be the same as the price on keys in hand day. Y'all make it too personal. Get in, get out, goodbye.