You’re smart. You plan ahead. You budget for vacations, max out your TFSA, and research the heck out of every big purchase; cars, Pelotons, espresso machines…
So why is it that when people build a custom home, they get started without knowing their exact price?
Let’s paint a picture: You fall in love with a floor plan. A builder nods enthusiastically and says, “Looks great! We think it’ll cost around $900K.”
Sounds fine, right?
Fast forward six months and you’re staring at a spreadsheet that says $1.1 million and counting. Drywall just wrapped up and you’re hit with another invoice due to an extra 10 sheets of board plus delivery and your dreams of an on-budget home have crumbled faster than a poorly laid paver.
Here’s the truth: There are two ways to price a custom home – Cost-Plus or Fixed-Price – and only one of them provides peace of mind.
Cost-Plus: The Industry’s Typical Way
The building industry is old school. Like… fax machine old school. Most builders still use a cost-plus model, which goes something like this:
You show them your floor plan.
They say, “Looks good! We think this house might cost around $X.”
You say, “Hey, that’s in our budget!”
They start building.
Seems simple enough, right? Here’s the issue with that:
That “estimate” is just that… a guess. It’s not based on hundreds of hours of quoting or design work. It’s not based on actual selections or defined specifications. It’s a ballpark.
What happens once construction starts?
- “You don’t like where that window is framed? We can move it, but here’s an extra invoice from the framer.”
- “Oops, we had to order extra tile because some pieces got broken. We’ll bill you for each box plus shipping.”
- “You wanted dimmers with your pot lights? Oh yeah, that’s a change order.”
With cost-plus, YOU take the risk. You pay for the builder’s underestimates. You pay for every change. You pay for the lack of planning.
And that little budget you thought you had? Poof. Gone.
The Harsh Truth: Cost-Plus is Just Delayed Pain
On average, cost-plus projects go 20% over what you were told.
And guess what? That original “estimate” wasn’t worth much in the first place. It wasn’t based on actual design work with a clear scope of work. It was just an educated guess and maybe some outdated square foot math.
We’ve asked the question on our own Instagram polls:
Would you rather find out the total cost of your custom home upfront or at the end?
Every. Single. Time. The vast majority choose upfront. They want clarity. They want confidence. They do not want a surprise six-figure invoice halfway through construction.
But the only way to get that? Work with a builder who uses fixed-price contracts and has the business systems in place to earn that number.
Fixed-Price: The Grown-Up Way to Build a Home
Fixed-price means exactly what it says: Once the design phase is complete, the price can be figured out. Like the exact price. No surprises. No games. No “gotchas”. Here’s how that happens:
- Design – Floor plans, elevations, interior and exterior details consisting of 400+ selections are all finalized.
- The scope of work is black and white; not clear as mud.
- Weeks of time is invested in quoting every bit of material and labour properly.
- A 3D model of your home is created where you can tour around and zoom into every nook and cranny; it’s an exact replica of your soon-to-be real home.
- Then, and only then, is it possible to truly know the exact cost of your custom home.
A full-blown design phase really is the secret sauce to a clear scope of work, removing all assumptions between you and your builder (because assumptions are the root of all conflict and unmet expectations in construction). That’s when you and the builder know how much your home will cost down to the penny. But what if the builder screws up? Say they were short on lumber and need another 80 2×6’s delivered to site… That’s on them. With a fixed-price, the risk shifts from you onto the builder. Which means your builder better have their sh*t together. They are the professional, and mishaps happen, but a fixed-price builder has the robust systems in their business and quoting process that mishaps are minimal.
Why Most Builders Don't Do a Fixed-Price
Because it’s hard.
To offer a fixed price, a builder has to run a tight ship:
- Bulletproof systems
- Efficient processes
- Documented standard operating procedures and templates
- In-house design team
- Centralized communication
- Continuous improvement mindset
So Which Type of Builder is Best Suited for You? Cost-Plus or Fixed-Price?
As a client, you’ve got 2 choices:
Option A: You pay upfront for design and get a smooth, stress-free construction experience with no surprises.
Option B: You pay later when the “estimate” balloons 20%+ and you’re fighting with your builder on where those costs came from.
Either way, the price is the price. The difference is when you find out and how painful it feels.
Here’s Your Next Step:
Before you even think about a floor plan, invest in a design-build firm who has the ability to do the legwork to figure out exactly how much your home will cost before diving into construction.
We’ve put together an easy-to-follow eBook, “The Ultimate Guide to Choosing a Home Builder”
It walks you through everything you need to know about what to look for so you can find a custom home builder that suits you best before committing to construction.
Click on the link below to download the The Ultimate Guide to Choosing a Home Builder now.
Make your future self proud and confident tat you chose the right builder for you.
