Don’t Be Fooled: The Hidden Risks of So-Called Fixed Price Building Contracts

The Hidden Risks of So-Called Fixed Price Building Contracts -

Building a new custom home is one of the most significant investments you’ll ever make. It’s a journey filled with anticipation, dreams, and countless decisions. To ensure transparency and peace of mind during this process, it is vital you choose a professional custom home builder who offers a TRUE fixed price building contract.

But what does a fixed price building contract mean, and how can you ensure your contract is a TRUE fixed price building contract?

What is a True Fixed Price Building Contract?

A true fixed price building contract means that the price you agree upon at the start of the project is the price you will pay at the end. There are no hidden costs, no unexpected expenses, and no surprises. However, with many builders claiming to offer fixed price contracts, it’s essential to understand the fine print to avoid any variations down the line.

The Problem with Provisional Allowances

The Problem with Provisional Allowances

One of the common pitfalls in the building industry is the use of provisional allowances. These are a set amount of money to cover the estimated cost of specific items or works where the exact cost is not known at the time of signing the contract. While they might seem convenient at first, they can often lead to unexpected costs if the actual expenses exceed the estimated allowances.

For example, if the provisional allowance for tiles or kitchen cabinetry is set too low, and the actual costs are higher, you could be left with a significant additional bill. This uncertainty can cause stress and financial strain, turning your dream home build into a nightmare.

Some unprofessional builders will include low provisional sums to make the contract price sound low and enticing. It is not until after the contract is signed, when you begin to make some selections, that you discover the low provisional sums will not get you the dream kitchen you envisioned or the builder’s range of tiles are just plain boring. Builders who do not put the time into accurately quoting your project and doing their research will throw in an allowance here and there. This is a big red flag.

Ensuring a True Fixed Price Contract

So what if you find a builder who says they offer fixed price contracts? How can you be confident that you are signing a genuine fixed price building contract?

  1. No Provisional Allowances: Check that the tender and contract do not include any provisional allowances. Every aspect of your build must be accounted for from the start, ensuring there are no hidden costs.
  2. All Selections Made Upfront: Ask the builder about their selection process. If they get you to sign a contract before locking in your selections, that is not a fixed price contract. Before you sign any contract, ensure you make all necessary selections. From fixtures, fittings, and finishes, everything is chosen upfront. This means the contract price reflects the exact specifications of your dream home.
  3. Detailed Planning and Site Assessment: Ask the builder whether they conduct thorough site assessments and planning before providing a quote. This ensures that all potential challenges and costs are identified and included in the price.
  4. Transparent Communication: Ask the builder how they intend to maintain open and honest communication throughout the entire process. How will you be informed and involved, ensuring there are NO surprises?

Building your dream home should be an enjoyable and rewarding experience. By choosing a professional builder who offers a true fixed price contract, you can avoid the pitfalls of provisional allowances and unforeseen variations. Make all your selections upfront and ensure complete transparency from the start, allowing you to focus on the excitement of building your new home rather than worrying about unexpected costs.

Learn more about Toby and Elizabeths Story. Highwater Homes are proud APB and HIA members.

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Elizabeth Searle

Elizabeth Searle

Elizabeth is the business manager and is involved in a wide variety of roles within the office. Elizabeth will often be the first point of call between you the client and Highwater Homes.

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