Thank you, @kempek01. I have worked on the design choices, the builder has been good about allowing me to take pics, etc. I was figuring on all choices ready, but then saw this clause as an ‘any time later we can increase the price.’ I have already read where folks are being asked to pay an additional 10-30k after they signed a contract. I want to stay within the price I signed. I also don’t see an out or a time frame for this potential increase to occur. As you say, good questions for a lawyer, just curious what other folks have done in this scenario. Have a great day and thanks again.

Is this a custom build or a tract home? If a custom build this doesn't seem all that unreasonable, but you could always negotiate the terms. I'm assuming this is a fixed price contract and the builder doesn't want to end up with a loss. I wouldn't want the builder to end up with a loss either as it would make it hard to ever get them out to fix anything that went wrong or may cause the build to drag on a little longer or you'll get lower quality trades used for the builder to try to make up some of that loss.

I would negotiate the terms so that you get something that can limit the costs to you, but also allow the builder to not take a huge loss.

What I'm reading is that if the price of material went up over 5% then you would be on the hook for the extra amount and if the price of the material only goes up by say 3% then the builder will eat that.

@lyfia it is a home in a community with several of their model plans. We walked through some, chose one, and after looking at standard features sheet, decided on where we were upgrading, ie floors, nothing structural, then they gave us pricing for that, wrote a job order and sent a contract. So they offer what appears for me to be a tract home, but they are also custom builders, meaning they also build on lots outside of the community they are selling. Am not really sure how you would formally define this. I have previously purchased from Lennar and know that was tract, though we purchased a spec so not sure if their contracts would contain similar clauses. I don’t know if Lennar asks buyer to take on builders risk, for instance. Thanks for your response.

You can be sure any large builder will have that in his contract and it will be non-negotiable. They have no control over their pricing as material spikes do have. Pricing and availability of all building materials have been all over the lot this year due to covid and they do not want to take a loss for sure.

Call around and ask the attorneys what charges to expect.

That clause looks pretty standard.

Since Covid prices for materials and shipping have escalated. They are bound to keep going higher.

Good luck.

Thanks, folks, if it is standard then we are walking away. We want to know what we are paying and be done with it. I understand the builder challenge but don’t want to take it on, we want to be in control of our budget as much as possible.

If you are unwilling to accept a standard clause about materials cost increases, then you should not plan to ever build or remodel. No builder or client can control market materials pricing. Not on a remodel, and certainly not on the longer timeline of a build. Part of undertaking a project like this is accepting that there WILL be unknowns that cost you. That is the purpose of the 20% contingency fee held in reserve.

We are working with a builder we've worked with before and have a great relationship with. We still had our new contract reviewed by an attorney, who helped in negotiating the final contract we signed. I'm in technology, and I'd never submit code without getting a review from a peer. Too much is at stake. I take the same view with a construction contract - it's my money. As I said, great relationship with the builder but we've also never had a really bad time. Contracts aren't for good times. Your attorney should be handling all of this for you.

Standard. But anything can be changed if both parties agree . Good luck.

Sounds like spec or resale is what will work for us. I understand the builder side, am learning as this is a new type of contract for us. And now we know if we ever want to remodel in the future with external services, though my husband tends to be the remodeler, ha! He dreads my pinterest browsing.

You will find similar wording in almost all remodel contracts.

@ranchtastic agreed. Curious, are you also doing a new home build? And have an agreed contingency of some sort? We have a job order with costs which we were very prepared to sign off on. We had not realized that these contracts are not set in stone prices, likely because we walked into a model and thought this was more like a tract home sale, ie Lennar.

We're doing a heavy (back to studs with many additions/removals) remodel with a Guaranteed Maximum Price contract. In our area Cost+ is a common format, but establishes no upper bound so we did a GMP. There are allowances for things that the contractor expects will vary in price depending on where the final spec ends up. The contractor has specified a contingency for unforeseen issues due to it being a remodel.

That is the type of wording and process that I would have preferred to see @ranchtastic. Setting the expectation. But as you described, our first version contract has no cap. It could be a labor scenario, supplies, delays due to something that could incur any type of cost. I have no clue of what range we could even expect. But again, am learning more.

Maddie, ask if you can use a contract like:

https://www.aiacontracts.org/contract-documents/25111-owner-contractor-agreement

Thank you so much will check it out. @ranchtastic

A build isn’t like locking in a mortgage rate. You can’t lock in pricing on lumber now for next August. All contracts will have a clause about materials price increasing. Among other allowance amounts. Allowances are just cost plus amounts inside a fixed price.

To eliminate any of that in any contract, you’d need to add to a price SUBSTANTIALLY. If you want zero risk of the price moving, you’re shifting that risk to the builder. That requires much more additional compensation to assume that risk. That’s a quick way to make a 500K house into a 650K house.

You can’t contract risk away without paying a lot more for that privilege. Contingency amounts are not factored into a builders budget either. That’s your responsibility to do so, in your budget, as part of your due diligence in building, and financing that build.

Why would you even risk buying a home so close to your budget limit that you don’t have a contingency in it for cost increases? You need to move down a couple of 100K the next time you start down this road. For a used home? Buy at half the cost of what you want your end cost to be. Remodeling is more expensive per square foot than new building.

Where in FL are you building?

@cpartist Ormond Beach but does not look like we will build now. Will likely wait for a spec Or resale. We want to stick with our budget.

My brother in law is a contractor and has built many homes. He is building one now for him and my sister and through out this build he has found that anything he didn't order last fall, the prices have jumped. And keep jumping on many things. Some things they can't get in a timely manner. It's driving my sis crazy, but she just lets him go forward, as he knows what he is doing.

Lots of good info shared and I get that it all seems clear for some but it was not for me which is why I asked in the forum. I better comprehend the points about who should take risk. Based on how we prefer to buy things, a spec or resale sounds better for us. Having the money and choosing how to spend it are key for us. We did not know what a reasonable range would even be for contingency. And we always keep money for a rainy day. Have a great day.

"Tim Bell" is a spammer. Please don't click on link. Flag spam.

ETA: Looks like the spam was removed. Thank you!

Oh, it looks like HU-52713356 is also a spammer. Here is its previous work. Please flag the spam. https://www.houzz.com/activities/user/webuser_52713356/comments