Deciphering the True Cost of “Cost-Plus” Contracts

When builders talk about “cost-plus 15%,” many customers don’t fully grasp the impact. This structure means you’re paying the actual costs plus 15% in builder profit. On a $400,000 home, that’s $60,000 tacked on top. But here’s what you might not realize: that 15% markup applies to everything, including mistakes and inefficiencies.

If a builder mistakenly orders too much concrete, you’re charged for the waste plus 15%. If they choose a more expensive subcontractor because competitive bidding wasn’t done, that higher cost also means more profit for them. In a cost-plus scenario, every dollar spent—wise or wasted—generates additional revenue for the builder, even if it’s due to poor management.

On the other hand, a fixed-price contract shifts this incentive. Poor planning and waste cut into the builder’s profit, so there’s motivation to manage the project efficiently. This ensures your interests align with the builder’s interests, minimizing unexpected costs on your end.

At S. Clements Homes, we offer fixed-price contracts so what you sign is what you pay. Our transparency keeps our interests aligned, which is why we’ve built trust over more than 2,000 homes. For honest prices and expert guidance, call me directly at (469) 853-7952.