If you have a fixed price contract and there were no changes then this is unacceptable. Have you discussed the bill with your builder and sought clarification? What does four contract say about allowances and overages?

Builders will not typically fix excavation and foundation because of unknowns below ground. What does the contract say?

Was the window bid based on a window schedule that included brand, line, and particulars? If so that should not change. If not...

I do not think you understand the terms and conditions of your contract. I recommend spending a few hundred dollars on an attorney who can advise you.

“The contractor should not be allowed to charge us overages . . . “. Says who? You? Do you have something legal to base that on?

That’s what allowances mean. When real world costs are more than the guesses, you get charged the difference.

You need to sit down and look at all of the rest of the allowances. Because you’re going to need to come up with money to cover what you really want for them too. Instead of builder grade dreck that is what those allowance prices are based on.

Youre buying a 1.1M house by the time it’s all said and done and you put in everything you really want.

We built our first house in 1988 on fixed price with ridiculously low allowances for a few things that were specifically designated such as cabinets, flooring, plumbing fixtures, etc.

We added three extra windows and went over on the cabinet and plumbing allowance. Otherwise the price of the house was exactly what the fixed price of the bid was. I still remember the amount.

Has the definition of a fixed price bid changed?

Wait...are you saying you had an allowance for excavation and foundation???

What is included in the base price of the house? I know my excavation and foundation were included in the base price. It wasn't an allowance.

What does your contract say? Time to read it...

In my experience, allowances are for finish materials, appliances, cabinets, lighting and plumbing fixtures and anything else that hasn't been selected yet, but there needs to be some money allocated for them.

Perhaps you have a cost plus contract?

If those were truly allowances and not fixed, you are responsible for any overages. I feel your pain because it is the same way in my contract. I am working with a smaller builder who can't spread the risk of basement construction snafus over an entire project. All I could do is make sure that it was appropriately priced (compared across bids) and now cross our fingers we don't run into any boulders.

I find it peculiar that excavation, foundation, and windows were by “allowance” and not part of the base price in a fixed price contract. I have a fixed price contract too and it means just that - that price is fixed EXCEPTING for those things I add by change order (i.e. upgraded finishes above and beyond allowances we built in for interior finishes, electrical, energy allowance, etc). Excavation, foundation, and windows were all included in the base price (though we added some windows which were added to the fixed price before signing). The only other unknown at the time of signing was if a retaining wall would be required, and we had to sign an agreement that if one was necessary we would be liable for the costs.

I think you need to really review your contract and see exactly what is going on there.

FWIW,

We built our current house on a fixed price contract and that's what it was to the dollar. We had allowances for things that we'd select but everything else was fixed. Just before signing the contract we had him double the plumbing, lighting, flooring and paint allowances because we knew we'd be over on those and even so we still went over a bit on lighting. We had 4 change orders (enlarge garage 4', add 2 windows, add a cabinet, and something else) along the way. Each was for a fixed amount that we approved before they were done. The only unexpected cost was electrical because we wanted more outlets and fewer outlets per circuit but here again it was a change order that we approved before they began electrical work.

The house we're building now is cost+. We approve each contract (sub, amount, etc.) before the builder lets each one. We've a budget from the builder and hopefully everything will be close to his budget. Most of the budget items are based on bids from the subs that are guaranteed so we s/b good on those. We did have some unexpected costs for some retaining walls and stormwater mgmt that are giving us more than a bit of concern though. Our builder has a good reputation, we quite like him, and he knows I'm a journalist so that helps.

As others have said, make sure you understand your contract and go over it with a good real estate attorney.

A contract can be written any way that someone wants it to be written. That’s why having your lawyer review it is so important. That’s called due diligence.

I think that's the most important first step.

Yes, Sophie is correct a contract can be written any way the parties want it to be (as long as compliant with other legislation/law where you are...for example a criminal interest rate where I am remains a criminal interest rate even if “agreed to” in contract). Well, I guess correctly said it can be still written that way, just not all parts of it, or maybe no parts of it, would be enforceable.

However, agreeing to an allowance for excavation and such in a fixed price agreement to me is risky unless you go in having a very good idea of actual costs beforehand. My bet is OP did not have a lawyer look at contract before signing; in my own experience as a lawyer many people seem to prefer to skip lawyers before signing residential purchase/build contracts. I see it everyday with people asking after the fact what certain clauses and so on in their signed purchase contract mean. It seems many don’t really connect “a contract to buy a house” as a “legally binding document that maybe I need legal advice on”. Part of it is just the way the real estate market works - realtors help prepare offers (that become contracts once accepted) and things can move fast, there is pressure to get offers in, to compete with bids, to accept an offer, and so on. Before one knows it, they are in contract to buy or sell a house. With builders, the meetings to go over paperwork and sign things can seem “informal” and even friendly and somewhat understate the legal consequences of that paperwork. For many (the majority in fact) it works fine not to see a lawyer before signing, but others end up spending a lot more on lawyers than they would have if they just went and saw one before they ever signed a thing.

The OP is definitely running into a case of paying more now for what they did not pay for earlier. Not just lawyers, but overages and costs associated with being 6 months behind schedule too, and yes, there is a real risk of the subs putting liens against the property. Hopefully there have been appropriate holdbacks on amounts paid so far...

However, agreeing to an allowance for excavation and such in a fixed price agreement to me is risky unless you go in having a very good idea of actual costs beforehand.

I suspect that many people are assuming that the norms in their area are the norms everywhere. In my area, no one (attorney, client or contractor) wants a fixed price for excavation. Here, about 1 in 10 homes hit solid rock during excavation which drives up the cost significantly. Contractors could smooth that, but clients generally don't want that, as they don't want to pay for someone else's excavation.

My father put an equine exercise pool in at the farm and excavation allowance was $10,000 but it was noted in the contract to expect to hit rock and spend significantly more, I think he ended up spending about $80,000 on excavation alone.

Funny in NY nothing in real estate is done without lawyering up so I find it odd that in so many areas, lawyers are not expected. Even with having a lawyer look over our contract, we have had some issues.

Our excavation was in the base FFP bid, but our foundation was an allowance like yours. Our foundation went $7k over the allowance without any changes or selections. This was extremely frustrating and I had several chats with my builder about it, but at the end of the day I'm liable for the money. He poorly estimated this part of the work (and a few other allowances) but at least I know I am paying the actual direct cost and not being ripped off.

The competing bids I received, which were higher, did have foundation in the fixed bid. I am guessing this was one of the reasons why.

Our allowance for excavation was off by 30k! Thanks mountainside creekside lot for your intense ongoing water issues lol. Lots more gravel, far deeper excavated than expected, more cement, shoring plan with lock blocks and more.

That is true, @bry911. Your explanation of excavation in your area was informative :)

cpartist: In NY, in my experience, outside of New York only very standard residential real estate purchases are not handled by attorneys because the statutes cover the issues and the realtors have duties to disclose and fiduciary duties to their respective clients. New York is sui generis in having real estate lawyers mandatory for simple real estate transactions that are typically handled by experienced brokers/agents other places. The mandatory requirement to purchase expensive title insurance also prevents there being any kind of legal issue on the title in California.

However, I know of no jurisdiction in which legal advice would not be advised for a contract dealing with the building of a new home unless the purchaser was extremely sophisticated and knaew the implications of every legal term as well as understanding "custom and practice" in the specific locality. In my experience, having a lawyer familiar with business practices and custom is critical for those kinds of real estate transactions.

Hidden conditions, acts of God and allowances.

Hidden conditions are all those things a reasonable person could not predict such as clay soils, bedrock, asbestos (in the case of a remodel) etc.

Acts of God. No responsible builder will guarantee against the vagaries of the weather. If a tornado demolishes the house half way through, how can the builder be responsible?

Allowances. This is the area in which the client has the most control. The contractor will (hopefully) give you a reasonable allowance for your finishes even though you haven't selected them yet. This is a stake in the ground that requires a certain degree of trust between the contractor and the client.

I hate to say it but GC's try to improve profit 'anyway' they can get away with. It's sickening!!!!!! As I've said before, 'numerous times', around 99.9% of people have NO idea what it cost to build a house.

I've bought a lot of homes in a lot of different states. Without a doubt, New York is the most screwed up process. This is due to the bar association convincing the legislature that assisting in any contract process is practicing law. Thus, the need four different attorneys to complete a home sale. It takes twice as long to complete even the most simple sale.

I will also state that builders sweat the foundation stage of building more than any other. The risk of the unknown gives them nightmares. In my last custom build, once the foundation was completed, the builder was able to reassess the cost of the build in my favor. I got about $20,000 to apply to other areas. That's because we didn't encounter any problems. My guess is the original poster has a situation where the builder had to deal with some significant issues.

The same advice holds, ask the builder about the costs. The builder needs to be able to explain to the customer in great detail the costs and present actual bills. Also, read the contract and have an attorney review the contract.

Unexpected cost which are difficult to predict...

that is why most of the good builders around here will not do fixed price. They do cost plus.

why even try to do fixed price?