About the Author: Kevin Reed is the owner and president of Bluestone Construction, with nearly 30 years of experience building luxury custom homes. He’s also a member of the NAHB’s Builder 20 group, where he shares insight on construction, finance, and building performance.
Cost-plus home building means that the homeowner pays whatever it costs to build the home, plus a markup to cover overhead and profit.
Though it may seem more expensive, this is the best scenario when you are building a truly one-of-a-kind custom home with the highest quality because you’re assured the builder won’t be looking for shortcuts. Cost-plus home building allows homeowners to make adjustments as they build, see the breakdown of costs, and be part of evaluating options.
Let’s take a look at cost plus home building versus fixed price home building, understand their benefits for homeowners, and see why Bluestone Construction chooses cost plus.
Fixed Price Vs Cost-Plus
Fixed price (also called lump sum) home building means a predetermined price is agreed upon by the builder and homeowner. The builder agrees to complete the home for a set, predetermined price based on detailed plans and specifications. Unless the client requests changes or the scope is formally altered, the price does not change—regardless of actual labor or material costs.
Fixed-price building is far more common with spec homes or semi-custom homes than with truly one-of-a-kind custom builds. Spec homes are designed, engineered, and sometimes partially (or fully) built before a buyer comes along, so the builder already knows exactly what materials, finishes, and labor will be involved. That makes it easy to set a firm price and stick to it. Learn more about how fixed price housing works.
With a fully custom home, there are too many unknowns, unique design requests, specialty materials, and site-specific challenges to confidently lock in a fixed price without adding a hefty contingency. That’s why many high-end custom builders favor cost-plus or hybrid contracts instead.
It’s also important to know that the word “fixed” is also a little deceiving because it doesn’t actually mean unamendable. With fixed price home building projects, builders often use change orders to make up for under-pricing and request additional funds. It can also be challenging for homeowners to sort through the allowances added to fixed price bids. Some may be reasonable while others aren’t in your best interest.
When is Fixed Price Home Building Best?
Fixed-price home building is ideal when you’re building with a spec home or semi-custom home builder and you want absolute clarity and control over your investment from the very start. With the full scope, materials, and finishes defined upfront, you lock in a set cost that won’t shift with market swings or hidden “surprises.” This approach protects your budget, keeps decision-making focused, and ensures your builder is fully accountable for delivering exactly what’s promised—on time and on budget. For homeowners who value peace of mind, transparency, and craftsmanship without compromise, a fixed-price agreement is the smartest path to a stress-free build.
When is Cost-Plus Home Building Best?
Cost-plus home building is best when you’re creating a truly custom, one-of-a-kind luxury home where flexibility is essential and design decisions may evolve during construction. Cost-plus is ideal when your project’s scope isn’t fully locked in and allows you to adjust materials, finishes, and layouts without renegotiating the entire contract. This model gives you complete transparency into the actual costs, including luxury home features, so you see exactly where every dollar goes, while paying the builder an agreed-upon fee for their expertise. For discerning homeowners who value freedom, control, and the ability to pursue bold design ideas without being boxed in by a fixed budget, cost-plus offers the creative breathing room to make your vision a reality.
Cost-Plus Home Building with Bluestone
At Bluestone, we offer full transparency for the cost-plus home building on your project. In fact, we store your custom home invoices in the cloud each month, so you can review them anytime. As you are researching luxury home builders be sure to ask potential builders exactly how project management costs are accounted for because every builder will do things a little differently. While fixed cost housing can be great if you want minimal tracking of your expenses, there are trade offs when it comes to craftsmanship and materials. If your priority is building a legacy home for heirloom stewardship at the highest level, always choose a cost-plus builder.
