What Is A Fixed-Price Home Building Contract?

Owning a home is one of the most important financial and emotional decisions of your life. If you are looking for a flat/apartment then the entire buying process is straight-forward. But if you are planning to construct a home for yourself, it is a different game altogether. It requires thorough planning as well as directed execution. Every construction contracts falls on fixed-price or cost-plus category. A cost plus contract means that the cost of construction includes material & labour cost and an additional fee. The fixed price contract on the other hand includes material & labour cost along with an overhead for indirect costs. Both of these contract types have their own pros & cons.

Fixed-price home building contracts have become very popular as it is transparent and sticks to your budget. The uncertainties of material costs and labour availabilities seem to have been taken care by fixed pricing. Isn’t it? But there is a catch! The term ‘Fixed Price’ used by builders is rarely binding and often misleading. At best, it says that the construction cost is “Fixed” under certain conditions. What happens when these conditions are changed? Let’s find out:

A. Provisional Items and Allowances
Majority of builders’ use the terms ‘Provisional Items/allowances’ in their contract as it is difficult to plan the entire ‘scope of work’ required for the project to begin with. These items could be either materials like tap ware, floor tiles etc. or services. Usually, a nominal figure is allowed to cover the basic items and when you make the selections for your home, you pay the difference between their costs.
B. Variations
“Variations” are often another vaguely used terms in a building contract. It is defined as the changes in the original contracted work which involve either as addition or reduction of the in the scope or value of the work. Site preparation, slab piercing etc are a few items mentioned under “Variations” category. This category might sound trivial but can easily dent your budget by hundreds of dollars.
How to avoid them? 
These are just a couple of factors which can cause stress in your mind and hole in your pocket. These loose terms and shoddy practices have often resulted in disappointed buyers. It would be unfair to expect these buyers to marvel the intricacies of house construction and contract. The best way to make sure that this does not happen to you is to hire a professional. For example, ‘Provisional Items/allowances’ is a lazy way to quote and shows lack of systematic approach while preparing quote for you. “Variations” again can be attributed to lack of planning and improper site survey.
If you are looking to find a reliable partner to build your dream home in Australia, you are in for luck. Bellriver Homes excel in curating customized projects where every minute details are worked out in depth while preparing quote for you.
How is it done? 
It requires a lot of effort, diligence, time and teamwork to work out the fixed price for your home. Several field works such as rock tests, soil tests, contour surveys etc performed at the actual site. Then a dedicated civil engineer works on the best practices to build your home. This includes proper estimation of driveways, paths, piers and slabs. They have enough experience and expertise to for-see any variations and account for service connections. When a price is calculated to such a detail, there is hardly any room for error and the price that you are quoted is the price you pay.
A few last words
Constructing a home is perhaps the most important decision of your life. It is always helpful to have an expert partner to carry on this project so that you don’t get any nasty surprises on the way. All the best for your new home!

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