Saratoga Springs Lots

We have two lots in Saratoga Springs that we would love to build a custom home on for someone. The lots are available without the build job too. Please view our “Available lots” page for details.

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Cost-Plus vs. Fixed price

So, you think you want to update your exhausted kitchen and add on a family room. One of your neighbors recently did the same thing, and you love how theirs turned out. You have begun your research, and keep hearing the terms “cost-plus” and ”fixed price”. What does it all mean?!

Lets have a look-see at the two of them. Cost plus is where the contractor agrees to do the job at cost, and then you pay him an agreed upon percentage, the “plus”, as his profit. You get to see all the bills and know exactly what the job is costing, which can be a huge benefit to you. If the job goes smoothly, and there are few hiccups, you stand to save a lot of money with a cost plus contract. The downside however, is that the contractor has little incentive to keep his costs low. Also, if the job does not go smoothly and surprises keep popping up, what you thought was going to cost you 120k, is suddenly running closer to 150k. When a contractor is presenting a cost-plus contract to you, his proposal will typically look considerably less expensive than a fixed price contract. This is because he is usually presenting a best case scenario. Keep in mind that with the cost-plus contract you burden all the financial risk.

The fixed price contract is different in that the contractor gives you a price for doing the entire project, and then sticks with that price. He takes all financial risk, so his bid is usually higher than the cost-plus because he is giving you a worst case scenario, so if the job goes great he might make some money, and if it doesn’t, he could lose money. Keep in mind that most fixed price contracts include a clause that protects the contractor from spikes in supply costs, that he may pass on to you.

One of these contracts is not necessarialy better than the other because every situation is so different. Be sure to do your homework on the contractors you invite to give you bids. Call references and ask as many questions as you can think to ask.

One possible solution to calming some apprehension on your part may be to do a hybrid contract and get a fixed price on the items that may run over, and cost-plus on the rest of it. One rule of thumb would be to get a fixed price on all earthwork, foundation, framing, rough electrical, plumbing, and HVAC.

Hope this helps…