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Want to build a custom home in Edmonton? Learn the different pricing options of Cost Plus vs. Fixed Cost

Custom homes can be quite the adventure. You'll take a look at the best of what our industry has to offer and pick the builder that fits your style. When you're thinking of building a custom home in Edmonton, the sky is the limit, you can almost do anything. One of the conversations you'll have with your home builder will be around the pricing and what process they have. The two most popular ways are called 'Cost Plus' and 'Fixed Cost.' Both have good and bad aspects that we've detailed below.

 

Cost Plus

Cost plus refers to the pricing strategy that some custom home builders use. Basically it means that once you've agreed on something for you home - like hardwood flooring - the builder will add a 'mark up' that covers their involvement with that specific piece. Typically it's between 17-25%, and can be negotiated. Cost plus offers a great way to control specific costs for specific details of your home. For example, you could want to spend more on an amazing kitchen and you're okay spending less on the carpet for your second floor. There's a feeling of transparency when going the cost plus route, as you see exactly what items cost when you choose them.

 

 

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If the above was your home and you prefer the cost plus option, you'd have to decide on the flooring budget, railing budget, closet details budget, stairs etc.

 

The process of cost plus usually starts with a budget that's established as more of a target than a finalized number. Each element of the home can dramatically add to the price, and since there's typically no base standards except for the minimum standards in the Alberta Building Code. It can become a highly involved and sometimes overwhelming process. If you'd like to be part of the project management, and be involved in many decisions this is the way to go for you.

 

Fixed Cost

Fixed cost is exactly how it sounds, the costs are fixed unless upgrades are picked when you sign the purchase agreement with your home builder. The number that you're provided shouldn't fluctuate much unless there's a gap in the planning and pricing of your home while you're reviewing the builder. Home builders in Edmonton that use fixed cost have different standards that they use, and you'll have to decide what's valuable to you. Some will focus more on reducing costs, others will focus on adding value to specific areas like a larger, more usable kitchen space.

 

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With fixed cost builders you get a standard that aligns with what you find valuable. You have the option to upgrade or use what the builder has as a standard.

 

If you're approaching a fixed cost custom builder make sure you've got a good understanding of their construction specifications. Learn more how to read them here. Typically if you're choosing a custom builder that offers fixed cost, most of their inclusions should fit fairly well within their price bracket. For example, granite or quartz counters should be included with the option to upgrade.

Fixed cost offers an easier way to build, and since the home builder is working off a pre-set standardization for the construction specifications you don't need to be as involved. If an issue arises, you also have a document to fall back upon and see what should have been done.

 

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Making sure you understand what's an upgrade, and what's standard helps you decide which fixed cost home builder will be best for you.

 

Both ways of pricing and building your new custom home in Edmonton have strengths and weaknesses. It really comes down to how comfortable you are with the home builder you're choosing, and how involved you feel you need to be. Want to know more about cost plus vs. fixed cost home building? Feel free to contact us.

 

 

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