Pricing Models: Fixed Cost vs. Cost-Plus

There are two common pricing models that are used in home construction:

1) Fixed Price Contracts

2) Cost-Plus Contracts

Each model has its own benefits; let us help you decide which model is best for you.

Fixed Price Model

A fixed price contract is a set price for the construction of your home based on a set of plans and specifications. Once your plans are ready, KFA Homes will provide you a fixed price to build your house based on a standard set of specifications that we have created. Variety can be challenging and often frustrating when building a home. At KFA Homes, we have worked with our design team to create a tailored specification package that we feel will fit any floor plan and design style. Together we have gone through the endless options and selected what we feel are the best products, both in terms of price and quality to make your dream home a reality.

There are still several options available within our specification package. You will have the opportunity to consult with the design team and go over all aspects of our package including, flooring, cabinets, countertops, paint color etc. to allow your own personal style to be incorporated into your home. The majority of options within our specification package come with no additional cost.

A fully custom home build comes with a level of risk. Trade pricing, material pricing, errors and missing items can lead to unforeseen costs. Building a home with a fixed price contract shifts the majority of risk to the home builder rather than the homeowner.

The fixed price contract includes a few allowances for finishing details such as (light fixtures, plumbing fixtures etc.). An allowance is a sum of money allocated for a specific purpose. For example, our fixed price contracts include a $1.60/sqft allowance for lighting. If you’re building a 3000 sqft house, you will be able to spend up to $4,800.00 on lighting fixtures. If you go to the lighting store and select $5,000.00 worth of fixtures, you pay the addition $200 directly to the store. If you select $4,000 worth of fixtures, we will credit you the $800 off the build price.

Cost Plus Model

Homeowners who want a fully customized build will consider the Cost-Plus contract. The price of a Cost-Plus contract is not set from the start of the build but has to developed as the scope and material selections are approved. While homeowners are presented with a preliminary budget the true cost of a custom homes is estimated after architectural drawings are confirmed, and an interior design package is completed.

We provide compressive estimates that account for every aspect of the construction including new home warranty, insurance, printing of drawings, building supplies, services, inspections, cleaning etc. In addition to the associated construction costs KFA Homes includes a set builder’s fee (which is a percentage of overall budget) for building the home. This is where the term ‘Cost-Plus’ comes from as it is the ‘cost’ of the construction ‘plus’ the builders fee.

The Cost-Plus model allows for a completely transparent experience, with the homeowner making all final decisions from material selections to the subtrades chosen to perform work. We have a competitive bidding process that compares estimates and scopes of different sub-trades. Once received, these estimates are passed on to homeowners along with our recommendation on who should be awarded a contract. Ultimately the final decision rest with the homeowner.