Building your dream home should be exciting — a time filled with possibility, creativity, and anticipation. But what if that dream suddenly turned into a financial nightmare? What if your everything spiralled out of control, going over budget as your builder kept coming back with unexpected costs, and you were forced to make impossible financial decisions just to get the job finished?
That’s the risk you take when you choose a cost-plus contract instead of a fixed-price contract. And unfortunately, many homeowners unknowingly skip down this yellow-brick road, believing they’ll get a better deal — only to find themselves walking a financial tightrope, constantly worried about going over budget.
But it’s easy to see why some homeowners fall into the trap of cost-plus contracts. On the surface, they sound flexible: you pay the cost of labour and materials plus a percentage markup for the builder’s profit. But here’s the reality:
- There is no upper limit to how much your home will ultimately cost.
- If material prices increase (which they often do), you’re footing the bill.
- Builders have zero incentive to keep costs down or speed up the project.
Truth is, cost-plus contracts shift all the financial risk onto you while giving the builder a guaranteed profit — regardless of how efficiently they work. This often leads to situations where costs spiral over budget unexpectedly.
That’s why…
If Anyone Offers a Cost-Plus Contract — Run the Other Way (Fast)
Imagine investing your life savings into your dream home, only to watch the final price balloon tens of thousands of dollars beyond your budget. Suddenly, you’re scrambling to secure additional loans, making painful cutbacks, or, worst of all, forced to halt construction altogether — leaving you with a half-built house and a mountain of unexpected debt.
So why do homeowners still fall for cost-plus contracts?
It often comes down to misinformation and wishful thinking. Some believe they’ll save money by sourcing materials themselves. But in reality, you can very rarely purchase something at a better price than a builder due to their industry discounts and buying power. What feels like a clever cost-cutting move can actually end up pushing you over budget.
Likewise, others think they’ll have more control by hiring their own tradespeople. But this DIY approach often backfires, leading to higher costs, miscommunication, and serious delays. Then there are those who simply don’t realise how unpredictable — and financially draining — a cost-plus contract can be… until they’re drowning in unexpected expenses with no way out.
Why Fixed Pricing is the Only Safe Bet
If you want to protect your budget and your sanity, a fixed-price contract is the way to go. Unlike cost-plus contracts, a fixed-price agreement gives you certainty and control from the very start:
- You know exactly what your home will cost before construction begins.
- The builder is responsible for sticking to the budget — not you.
- Any cost overruns come out of the builder’s pocket, not yours.
A fixed-price builder shoulders all the responsibility, whereas a cost-plus builder puts that responsibility onto the client. That’s why reputable builders take the time to carefully estimate costs upfront, ensuring there are no surprises down the track.
When It Comes to Your Home, Certainty is Everything
At the end of the day, your home is one of the biggest investments you’ll ever make. Do you really want to gamble with its cost? The promise of a ‘better deal’ with a cost-plus contract is an illusion — one that has left countless homeowners in financial distress.
The smart choice? A fixed-price contract that guarantees peace of mind, financial security, and a smooth home-building experience.
Of course, there’s more to a successful home building experience than choosing the right contract. That’s why I’ve put together this free guide for you to download:
Build with Confidence – 7 Things You Must Know Before Designing a New Home
Inside you’ll find exactly what to look for when choosing a builder, how to lock in pricing to protect your budget, and the key mistakes that leave homeowners paying thousands more than they should.
Don’t gamble with your dream home — grab your FREE copy today and take the first step toward a stress-free, budget-secure build!
Get to know the man behind your dream home, Norm. Norm Wales Constructions is honored to be APB, and MBA members.
