Fixed Fee Pricing Program

The path homebuilders take to determine how they price your home is paved with many intentions, some good and some not so good. There are two main ways to come up with a cost to build your home - fixed cost and cost plus.

Below is an explanation of both.

Fixed Fee Method
This requires the builder to obtain bids upfront from their subcontractors, before construction starts.  The builder then sets their fee based on the cost, complexity, and estimated time to complete.  The builder fee is fixed and is set up front.  The fee does not change unless the homeowner changes the scope of work.  The advantage to the homeowner is the fee to build is determined before you even begin.  You know the subcontractor costs and what the builder is making for profit before you start construction.   There is a draw schedule based on benchmarks of construction.  The builder only gets paid when a benchmark has been achieved, not based on how long it takes.   

Cost Plus Method
This method uses a percentage above the cost to determine profit for the builder.  The builder and homeowner agree on a percentage to build the home, usually between 15-25%.  The homeowner pays all bills for construction plus the agreed upon percentage.  This method is inherently flawed in favor of the builder because there is no incentive to keep the price down.  The more the subcontractor charges, the more money the builder makes!  Some builders love this method because they are not responsible for any budgets, upfront bids, timelines, etc.  They usually give an estimate that is always lower than a fixed cost “bid” to get your business.  When the final bills come in, and they are more than the estimate (and they are always more) there is little a homeowner can do.  There is no accountability.  We have actually finished many homes for our customers who “fired” their builder because of this method.

Olson Defendorf Custom Homes uses our Fixed Fee Pricing Program to price our homes.  You will know the fee to build a home before we begin construction, or even sign a contract for that matter.  Our program will keep you on budget and worry free.