Why Cost Plus Can Be the Smarter Choice for Your New Home Build

When you’re planning a new home, one of the first big decisions—after choosing your builder—is deciding on the billing model for your project. Two of the most common are fixed price contracts and cost plus billing. Both have their place, but for many homeowners, cost plus offers greater transparency, flexibility, and long-term value. Here’s why.

What is Fixed Price?

A fixed price contract sets a single lump-sum cost for the entire project. On paper, this looks appealing: you know the number upfront, and it doesn’t change—at least not officially.

However, fixed price contracts often include:
– Built-in contingencies – To protect against rising material costs or unforeseen issues, builders typically include a buffer in their pricing. Even if those “what ifs” never come up, that cushion is still part of your cost.
– Change order adjustments – If you make design changes mid-stream, the contract usually requires formal change orders. These can increase costs and add time to the process.

What is Cost Plus?

In a cost plus billing model, the homeowner pays for the actual cost of labor, materials, and subcontractors plus a transparent builder’s fee (a set percentage or fixed fee).

This approach offers:
– Full visibility – You can see where every dollar goes, with invoices and receipts.
– Fair pricing – You’re not paying for large contingency cushions unless they’re actually needed.
– Flexibility – Adjustments during the project are handled more smoothly and with less red tape.

Benefits of Cost Plus for New Home Construction

1. Transparency and Trust
Cost plus gives you access to actual project costs. Instead of wondering how numbers were put together, you can review material and labor invoices directly. This creates a more collaborative process between homeowner and builder.

2. Flexibility for Design Choices
Building a custom home is rarely a straight line. Homeowners often make changes once they see spaces taking shape. Under a fixed price model, even small changes can trigger formal change orders. With cost plus, changes are billed fairly and openly, keeping the process simpler.

3. Potential Cost Savings
Because builders don’t need to add large contingency cushions, the starting budget in a cost plus contract often reflects true costs rather than padded estimates. This can save you money, especially if the project goes smoothly or if material prices hold steady.

4. Shared Goals
In a cost plus contract, both you and your builder have a clear, open view of costs. This helps keep everyone focused on the same objective: delivering a high-quality home within your budget.

5. Better for Complex or High-End Homes
When building a fully custom home—especially with unique materials, finishes, or site conditions—fixed price contracts can be harder to manage because of unknowns. Cost plus gives you a clearer path to handle those variables as they come up, without stress.

When Fixed Price Might Make Sense

Fixed price contracts may work well for small-scale remodels or highly standardized homes with limited custom features. But for custom new home builds, the cost plus model often provides a smoother, more transparent experience.

Final Thoughts

At NC Builders, we believe building your home should feel collaborative and stress-free. The cost plus billing model is designed for openness, flexibility, and fairness—so you can make informed choices and enjoy peace of mind throughout the process.

If you’re planning a new home in Grass Valley or Nevada City, we’d be happy to walk you through how our cost plus approach works and why it might be the best fit for your project.