Is this a fixed price contract or cost plus?

Ask your builder what the deposit will cover. Who is paying for permits? In some areas of the country those can be large five figure amounts.

Have you talked to the references you should have gotten from the builder? Ask them about the deposit and if they felt it was fair/normal.

Thank you for your insight Chispa!

Great points, we aren’t at signing yet but believe it is a fixed price. This is a small builder company and as far as I know we wouldn’t pay for any services on top of what we are purchasing.

I believe we would pay for permits, or at least are putting fourth a separate deposit to the builder for permits (I forgot to mention that on the initial post).

We’ll work on getting some references for sure.

What is important in construction- When any statement includes the word 'believe', communicate so you can remove that from the statement for both parties.

I should clarify that we are not at the contract phase. We are still gathering information on this builder so my use of the word “believe” just reflects some things we need to clear up.

I haven’t seen any confirmation from other sources that you would give such a high deposit when you (the buyer) are also fronting so many other deposits and fully financing the construction.

These days your fixed price contract might not really be fixed price. What does it say about price escalation of materials and labor? It has been happening the last 2 years and the builder certainly isn't going to pay for price increases out of his pocket for products in YOUR house. And he shouldn't have to take any personal loses due to the current unpredictable supply chain issues and labor shortages. Read your contract carefully. Be prepared to have cash on hand to cover large unexpected expenses, because they will happen and they are yours to pay ... I'm assuming you will have an honest builder who is transparent with billing.

We obtain a deposit prior to preparing documents for the client's lender. Some builders require fees to prepare bids, some require significant deposits to reserve a schedule spot. Some require deposits to cover some of additional capital needed between draws for sometimes slow lender payments.

Besides the builder needing to set various expensive things in motion, he wants to be certain of your committment to him, and the project. It’s no different than your stylist requiring a booking deposit for involved coloring or processing services. Someone with a bit of a money committment to lose is less likely to flake out and cancel.

Thank you all.
I think we’ve found some wiggle room in the initial deposit as they have expressed a willingness to negotiate. Another option offered recently was to enter into a contract earlier with them with an initial lower deposit while they will actively help find land for us as well as that bringing us closer to final design decisions and pricing out custom options. I do believe it’s all from the builders need for commitment and they have appeared very honest and have good reviews.

My wife and I have decided to be cautious, we know going under contract with them early ties us in, but we haven’t found a better builder yet, and will make a solid decision once we see some contract terms. Whether or not we sign into a co tract earlier would be something we’d post about on a separate thread.