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A new home build offers the freedom to choose every fixture and finish, yet that freedom fades fast if the contract behind the project quietly drains your wallet. Long before concrete is poured or cabinets arrive, the paperwork spells out how costs are shared, capped, or allowed to balloon. Understanding the clauses that steer money will save you from sticker shock and sleepless nights.
Fixed-Price Contracts: Predictability Comes at a Premium
A fixed-price, or lump-sum, agreement feels comforting because the bottom line is stated up front. The builder absorbs overruns on materials or labor, while you pay only the agreed figure unless you request changes. That certainty often commands a higher markup; builders pad the price to cover unknowns such as sudden lumber spikes or weather delays.
Budget wisely by comparing several bids, asking exactly what grades of material are included, and clarifying allowances for finishes. If the scope is crystal clear and the site is straightforward, the slight premium of a fixed price can still protect your bank account from mid-build surprises.
Cost-Plus Agreements: Flexibility With a Moving Target
Cost-plus contracts reimburse the builder for actual expenses, then layer on a fee that is either a flat amount or a percentage. Homeowners love the transparency—they see invoices for every nail, beam, and permit—but the final number is elastic. Without disciplined oversight, small upgrades compound quickly.
Insist on detailed weekly cost reports, set a not-to-exceed ceiling, and reserve the right to approve any single expenditure above a threshold. That structure keeps creative tweaks possible while capping runaway costs. Remember, your vigilance replaces the safety net a fixed-price contract provides.
Allowances and Change Orders: The Hidden Budget Busters
Even airtight contracts can leak money through allowances—placeholder sums for yet-to-be-chosen items such as tile or light fixtures. If an allowance is unrealistic, every showroom visit turns into an overage. Negotiate realistic amounts based on middle-tier options you would actually select. Similarly, change orders rewrite the contract mid-stream.
Each revision triggers new labor, delivery fees, and administrative time, all billable. Protect yourself by finalizing design decisions early, confirming shop drawings promptly, and treating change-order forms with the same scrutiny as the original contract.
Payment Schedules and Retainage: Cash Flow vs. Cushion
Contracts divide the total cost into progress payments—percentages tied to milestones such as foundation, framing, or drywall. A fair schedule aligns payments with completed value, ensuring the builder never runs far ahead of the work. Retainage, typically five to ten percent withheld until final punch-list items are complete, motivates quality finishes.
If payment disputes surface, a construction attorney can review lien waivers and state statutes to resolve issues before work stalls. Clear financial checkpoints keep everyone accountable and your contingency fund intact.
Conclusion
The contract is not merely paperwork; it is the financial blueprint of your dream home. Choose the structure that matches your risk tolerance, police allowances, and track progress payments with the same care you give to color palettes and floor plans. By mastering these clauses now, you safeguard both your budget and your peace of mind long after the keys are handed over.
