Tips from a Builder: Save Money With a Fixed Price Quote
Before you sign a building contract, it’s incredibly important that you’re confident the quoted price is accurate.
Although it is impossible to estimate the cost of building to 100% accuracy, a fixed price quote will ensure that your contract is as close as possible to what you will pay at the end.
What is a fixed price quote?
A builder should take many things into consideration to reach the final price in their quote —such as the style of home design, the type of lot you are building on and the level of inclusions you want.
Fixed price quoting (sometimes known as lump sum), is where you, the owner, get a quote based on actual costs rather than an estimate. This is the safest option because you can plan your budget, secure in the knowledge there will be no hidden extras.
Time and effort
A fixed price quote means time has been taken to assess the job including every aspect of the build from siteworks to finishing. It can be a timely exercise to collate all the costs, however the wait, and peace of mind is worth it.
To conduct a fixed price quote, your builder will need:
- The results of your soil test, site survey and levels, and a detailed site plan or property report
- Your complete choice of fixtures & fittings
- The details of your custom or modified plan
- Specifications to your requirements
As part of the fixed price quoting process, you should also get a concept plan of your house.
What’s the alternative to a fixed price quote?
Most contracts allow for some extra charges for things like hitting rock, extra foundation work, interest on overdue payments, etc. A Cost-Plus contract has no fixed price, rather you agree to pay for the material, labor cost and a fee. The builder essentially provides a rough estimate of what the job may cost, but the true amount will not be known until the build is finalized. This means you must be actively involved in the contract, budget and reviewing construction costs which can add a level of complexity to the build.
This style of contract allows for added risks like overruns, indirect costs and mistakes which can quickly chew up building budget. A Gross Max Price (GMP) may be included with this style of contract, but this generally includes a higher fee as there then increased risk for the builder. A fixed price quote will help you avoid any surprises like these.
Fixed Price Inclusions
In addition to reducing or eliminating estimated costs, a fixed price quote should clearly detail all the inclusions of your build.
The type of inclusions offered will vary from builder to builder—depending on the most common style of housing and the market—but some of the high-quality inclusions to look out for are:
- Ceiling height
- Quality of roof tiles Level of quality of plumbing fittings
- Ceiling and wall insulation
- Quartz/Granite countertops
- LED lights
Any additional inclusions or customization that you require should be negotiated and included in your fixed price quote.
Tip from a builder: make sure you get a complete fixed price quote that covers all stages of the building process. Some builders will offer a fixed price quote from the slab stage up—the foundations/slab stage is the highest risk area for cost overruns, meaning that this type of quote isn’t truly reflective of your final costs.
The Benefits of a Fixed Price Quote
A fixed price quote will undoubtedly save you time in the long run, and potentially tens of thousands of dollars. The benefits of a fixed price quote include:
- Avoiding difficult decisions that arise from ‘unknowns’. If there is $20,000 surprise 3 months into your build, you will have to decide to compromise or accept a higher price (and potentially apply for additional finance). Avoid this difficult decision with a fixed price quote.
- Helping you to accurately compare builders to one another. It is important to consider the quality of the materials when comparing the quote amount
- Reducing the build time and time spent going back and forth for pricing and decisions
- Potentially eliminating the need for expensive lawyers and your state’s civil and administrative court of justice
- Reducing stress, as the risk is transferred to your builder
- Getting exactly what you want!
When you first start considering your futurebuilder, make sure they have a fixed price policy. Otherwise, your dream home might end up costing you more than you think.
Learn more about what questions to ask your builder, before signing a contract here.