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Builder Selection

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Top Five Things to Consider When Selecting a Builder

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1. Experience & Reputation

2. Licensing, Insurance & Credentials

3. Quality of Work & Materials

4. Communication & Transparency

5. Pricing & Contract Structure

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1. Experience & Reputation

Look at how long they’ve been in business and the types of projects they’ve completed. Ask for references from past clients, check reviews, and drive by homes they’ve built to see quality firsthand. A reputable builder will have consistent positive feedback and a portfolio that aligns with your style.

 

2. Licensing, Insurance & Credentials

Ensure the builder is properly licensed and carries liability and workers’ compensation insurance. Membership in professional organizations (e.g., NAHB – National Association of Home Builders) is a plus. This protects you legally and financially if issues arise.

 

3. Quality of Work & Materials

Ask about the brands and grades of materials they typically use. Tour model homes or current projects to inspect craftsmanship, details, and finishes. A good builder won’t cut corners on structural integrity, even if some finishes can be customized.

4. Communication & Transparency

Pay attention to how clearly they explain timelines, budgets, and change-order policies. A builder who is transparent, responsive, and willing to put details in writing will save you headaches later. Ask how often you’ll receive updates and who your main point of contact will be.

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5. Pricing & Contract Structure

Understand how they price: fixed-price, cost-plus, or allowances. Make sure contracts include clear scopes of work, warranty terms, payment schedules, and allowances for materials. The cheapest bid isn’t always the best—it may mean cut corners or hidden costs later.

Building a residential home is one of the most significant financial and personal investments many individuals undertake. The overall cost is influenced by factors such as location, size, materials, labor, and design complexity. Equally important, however, is the pricing structure established between the homeowner and the builder. This determines how costs are estimated, managed, and ultimately paid. The three most common methods are fixed pricing, fixed plus allowance, and at cost (also known as cost-plus). Each carries unique advantages and risks.  Further discussion on these below:

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Fixed Pricing

Fixed pricing establishes a single, agreed-upon price for the entire home construction project. The builder provides a comprehensive estimate upfront, covering all labor, materials, and subcontractors.

• Advantages:

• Homeowners gain predictability and protection from unexpected cost overruns. The risk of price increases (e.g., material cost inflation) falls on the builder.

• Challenges:

• Builders often add a contingency buffer to protect against unknowns, which can increase the quoted price. Additionally, homeowners have less flexibility to make changes once the contract is signed.
   

Fixed Plus Allowance

This approach sets a fixed base price for the majority of the project while including allowances for specific items such as flooring, cabinetry, lighting, or appliances. Allowances function as pre-set budgets for these categories.

• Advantages:

• Provides homeowners with flexibility in choosing finishes and upgrades without renegotiating the entire contract. The base price remains predictable while allowing customization.

• Challenges:

• If homeowners select finishes that exceed the allowance, they must pay the difference. Poorly defined allowances can lead to disputes or unexpected costs.
   

At Cost (Cost-Plus)

Under this model, the homeowner pays the actual cost of materials and labor, plus a builder’s fee (often a percentage of the total cost or a fixed management fee).

• Advantages:

• Offers transparency, as the homeowner sees detailed invoices and pays only the actual costs incurred. It can be less expensive if the project goes smoothly and without significant overruns.

• Challenges:

• The financial risk lies with the homeowner, as final costs are uncertain and can escalate if materials or labor costs rise. Strong trust in the builder and disciplined project management are critical.
   

Conclusion

Selecting the right pricing structure depends on the homeowner’s priorities—whether they value cost certainty, customization, or transparency.
- Fixed pricing suits those seeking predictability.
- Fixed plus allowance balances stability with personalization.
- At cost appeals to those who want flexibility and transparency but are comfortable assuming greater financial risk.

Understanding these models ensures that homeowners can align construction contracts with their financial goals, risk tolerance, and vision for their new home.