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By Fred Loucks, CEO, Dunn & Stone Builders
A fixed-price custom home contract is one construction number tied to a dated plan set and a written specification. That number holds for the work those pages name. It does not hold for work the drawings never showed, items listed as allowances, or changes you ask for after you sign.
The American Institute of Architects calls this a stipulated sum: you agree to complete the project for a specific amount. Read the attached plans, the finish schedule, and the exclusion list before you treat that amount as complete.
A fixed-price custom home contract sets one construction total before work starts. The builder carries cost-overrun risk on the scope in the attached plans and specifications. You carry the cost of anything added, upgraded, or left outside that scope.
The table is only so you can tell which kind of contract you are holding. Under cost-plus, invoices are added as the work happens.
The number follows the finish level. Our contracts typically land near $180 a square foot on included features, about $213 as a portfolio average, and about $250 when the house is highly featured or the footprint is very small. Use those figures to sanity-check a quote. They do not replace the written specification.
The contract also names a $10,000 to $15,000 deposit.
Texas Property Code § 53.255 asks that a residential construction contract put four things in writing: a description of the work, the time, the cost or how the cost is set, and the method of payment. An oral promise that never makes it into the written contract may not be enforceable.
A fixed-price contract covers the work named in the dated drawings and the specification list. On a complete set of drawings and specs that usually means:
Site work is where two quotes that both say "fixed" stop matching. Many quotes price the house and treat the lot as an assumption. On Dunn & Stone contracts the base already covers silt fence, orange safety fencing, a dumpster, and a portable toilet.
If you are comparing two fixed numbers, read the site-plan drawings first. A lower number often priced only the house.
A fixed-price contract does not cover work the pages never named. Common items that sit outside the number unless they are written in:
I have watched a buyer almost sign with another builder who added about $70,000 at the final meeting because the site plan had left off the driveway and the power to the house. The original number had priced the house and left those items off the drawings.
The surprise costs that hide in incomplete drawings are the same ones we cover in hidden costs of building a house.
An allowance is a dollar placeholder inside the fixed total for a product you have not picked yet. Flooring, tile, countertops, lighting, plumbing fixtures, and appliances are the usual lines.
The contract number already includes that placeholder. Stay at or under it and the line does not move. Go over it and the difference is added. Come in under and the difference should be credited.
Ask what each allowance covers. Some contracts price material only. Others include tax, labor, and waste. A low allowance looks like a lower contract total until you pick the finish. The longer comparison of allowances against included features is a different article.
A signed fixed-price contract goes up when you add work, go over an allowance, or hit a site condition the contract listed as unknown.
Material or labor spikes on work that was already specified stay with the builder.
A change after signing is a change order. It should be written, priced, and signed before the work starts. The full change-order process is a different article.
Before you sign a fixed-price contract, the documents should answer five things without a follow-up call:
If a second builder's number is lower, ask which of those five pages is missing. Questions to ask a home builder covers the rest of the documents you should see before you sign.
A fixed-price custom home contract includes the work named in the dated plans and the written specifications: structure, specified finishes, labor, and the site items listed as included. It does not include work left off the drawings, items carried as allowances above their placeholders, or changes requested after signing.
A fixed-price building contract usually excludes landscaping after the yard is graded, fencing, window coverings, and any driveway or utility work that is not on the site plan. Soil or slope work the contract listed as unknown, and city fees on a lot priced as county, sit outside the number too.
Yes. Many fixed-price custom home contracts include allowances for finishes that have not been selected yet, such as flooring, tile, fixtures, or appliances. The allowance is a placeholder inside the fixed total. Going over it adds cost. Coming in under should produce a credit.
Yes. A signed fixed-price contract can still go up if you change the scope, go over an allowance, or hit a site condition the contract excluded. Overruns on the specified scope stay with the builder.
Permits, driveway, and utilities are included only when the contract and the site plan name them. A quote that priced only the house can leave the driveway and power off the drawings and add them later.
If a finish selection costs more than its allowance, the difference is added to the contract through a written change. If it costs less, the difference should be credited.
If you want a second set of eyes on a contract you already have, schedule a free consultation.
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