Building your custom home is one of the biggest investments many people make – and choosing the right contract type with your builder is crucial. At Blue Mountain Custom Homes, we almost primarily use Cost Plus contracts, and rarely use fixed‐price contracts. Understanding why helps homeowners make better, more confident decisions before breaking ground.
What is a Fixed Cost Contract?
A fixed cost contract (sometimes called lump‐sum or stipulated price) is an agreement where the builder commits to completing the project for one set price. That price includes labor, materials, subcontractors, overhead, and profit. Unless the homeowner changes the project scope, the price is locked in.
Advantages of Fixed Cost Contracts
- Predictable costs up front, which makes budgeting easier.
- More of the financial risk is carried by the builder if unexpected issues arise.
- Simplicity in billing, with fewer moving parts to track.
Drawbacks of Fixed Cost Contracts
- Builders aren’t in the business of taking risks, meaning the worst case scenario is priced in, protecting the builder’s interests.
- You could end up paying for the perceived risks, even if they are never encountered during construction.
- If the builders have priced the build incorrectly, you could face a scenario where the builder is incapable of finishing the project.
What is a Cost Plus Contract?
A Cost Plus contract means the homeowner pays for the actual cost of materials, labor, and subcontractors, plus an agreed‐upon fee or percentage that covers the builder’s overhead and profit. Instead of a lump sum, you pay for what is truly spent.
Advantages of Cost Plus Contracts
- Complete transparency: homeowners see real costs as they occur.
- Flexibility to adjust finishes, materials, or design without major renegotiations.
- Better quality control, since builders don’t have to cut corners to stay under a pre‐set price.
The financial picture offered to you every step of the way. We are obligated, by contract, to share with you all expenses and request approval for any expenses that are over the estimated values. Giving you complete control.
You’re going to pay “fair Market Rate” for labor and materials without the worst cost scenario priced into every step.
Drawbacks of Cost Plus Contracts
- Less cost certainty since final totals depend on actual choices and conditions.
- More homeowner involvement is required to track expenses and approve changes.
- The final cost may be higher than initial estimates if many changes are made.
How Fees Are Determined
At Blue Mountain Custom Homes, the “plus” portion of a Cost Plus contract is calculated to cover overhead – such as supervision, insurance, and project management – along with a fair profit margin. The percentage is clearly stated in the contract, and we take pride in keeping this process transparent so homeowners know exactly what they are paying for.
Why Blue Mountain Custom Homes Prefers Cost Plus
Every custom home we build is unique, and Colorado projects often involve unpredictable factors such as terrain challenges, fluctuating material prices, and complex permitting. A fixed cost contract forces large buffers into the price or leads to tension when surprises arise.
With a Cost Plus approach, we can:
- Adapt to changes in design without stalling the project.
- Maintain the highest level of craftsmanship without cutting corners.
- Keep homeowners in control by showing them the actual costs and helping them make informed decisions.
This approach results in greater trust and collaboration, which is at the heart of how we do business.
What This Means for Homeowners
When deciding which contract model is right for you, think about your priorities. If your design is finalized and your highest priority is locking in a firm number, fixed cost may be appealing. If you want flexibility, transparency, and the ability to shape your home as it comes to life, a Cost Plus contract is often the better option.
At Blue Mountain Custom Homes, we are here to guide you through the process, explain both options in detail, and help you choose the model that best fits your vision and goals.
