If your builder gives you a low initial quote for your custom home, you might think you’ve landed a once-in-a-lifetime deal. In reality, it’s more likely a ticking time bomb — counting down to unexpected expenses and a blown budget.
Two things could be happening here:
- Your builder failed to do the proper groundwork before quoting you, so they underestimated the scope of the project, pricing it too low.
- Your builder intentionally left out critical expenses so they could lure you in with a low initial figure and win your business.
Both situations are more common than you might think.
Take Emma’s* homebuilding story, for example.
What Really Happens When You Sign a Low-Cost Contract
Emma thought she was getting a great deal when she signed a low-priced contract to build her dream home in Bundaberg.
But things quickly took a turn.
First, rocky soil appeared during the excavation process — something her builder would’ve detected if they’d conducted a proper soil test before starting the job. “Just a minor oversight,” they said. “We’ll sort it out.”
In the end, “sorting it out” meant a $12,000 bill for extra slab work. A shock, sure, but Emma managed to adjust her budget and keep the project moving — just with a little more stress than she’d anticipated.
A few months later, another surprise: the initial plans lacked the tie-downs and bracing the house would need to meet compliance. This meant more delays, and more money.
And then, just when she thought it was over, Emma found out her builder hadn’t factored in energy efficiency requirements either. “We need to change the insulation to meet the new standards,” they told her. “Not much we can do about it.”
Now, Emma’s budget had stretched to breaking point. And without a little luck securing a second bank loan, she would’ve had to pull the plug on the entire project.
Fortunately, there’s a relatively simple way to avoid this mess.
The Solution: Fixed-Price Contracts
The benefits are clear:
Benefit #1: Budget certainty and peace of mind. You’ll know exactly what your home will cost before the work begins. For example, If timber prices rise or extra structural elements like tie-downs are needed, your contract price remains unchanged. No surprise bills halfway through. This allows you to focus on the enjoyable parts of the process — like choosing finishes and watching your dream home come to life — without the constant stress of unexpected costs.
Benefit #2: Room for flexibility. Prime cost (PC) items are set amounts for finishes you’ll select later, like tapware or tiles. Provisional sums (PS) are estimates for work that can’t be fully priced upfront, like excavation. Both are common in fixed-price contracts, offering flexibility while keeping your budget steady. For example, if you decide to upgrade to a more premium tile (a PC item), you’ll know the exact extra cost upfront. Similarly, if unexpected ground conditions require additional drainage (a PS item), the extra cost will be clear before work begins, preventing financial surprises.
Benefit #3: Staying on schedule. Fixed price contracts ensure everything is planned upfront — from engineering requirements to site assessments — cutting out last-minute changes that could throw off your timeline. For example, if insulation or bracing is sorted from the start, there’s no scrambling for approvals halfway through. It keeps the tradies moving, deliveries on track, and your move-in date secure.
You might be thinking, “Isn’t a fixed price a big risk for a builder?”
And sure, it can be. But only if they haven’t done the groundwork to set that price with confidence.
How Good Builders Nail Down Accurate Fixed Costs
Detailed plans and specifications. Before quoting, builders make sure every detail is sorted — from your home’s foundation to the plumbing layout to the window trims and everything else. For example, if you decide to upgrade to a premium kitchen countertop finish during planning, the cost is built into the fixed price from the start, so you aren’t blindsided later.
Proper site assessments. Quality builders don’t just eyeball things; they do the hard yards up front with soil tests, energy reports, and engineering checks. This stops unexpected costs from creeping in halfway through. For instance, if they find the site’s natural slope needs extra drainage, that cost is built into the contract right away, keeping things clear from day one.
Accurate PC and PS allowances. Builders set realistic PC and PS allowances to prevent budget blowouts. They aim for a fair middle ground based on market rates and your preferences. For example, if the tile allowance is $80 per square metre, it’s set to cover quality finishes typical in your area, so you won’t get caught short.
Transparent variations. If changes come up during the build, builders call them out clearly as variations, with exact costs upfront. No hidden extras, just straightforward pricing. For example, if you decide to add skylights for more natural light, the builder will tell you the cost straight up, so you know exactly what you’re in for.
Bottom Line: Fixed Costs Are More Than Just Numbers
In the end, fixed-price contracts aren’t just about locking in costs; they’re about making the whole process clearer and more predictable.
But there’s more to building a custom home than just managing costs — which is why we’ve put together this free, comprehensive guide for you to download:
7 Things You Must Know Before Designing a New Home
It’s loaded with tips to help you avoid the common pitfalls so you can build a home that truly aligns with your budget and vision.
*Disclaimer: Names and identifying details have been changed to protect the privacy of individuals. These stories are based on real events, and any resemblance to actual persons is coincidental.
