Today, we’ll examine the differences between standard fixed fee and cost-plus models and how we approach each type at Tennessee National. Then, you can decide which one is right for you and your family.
The simple definition of fixed-price contracts is that the home is guaranteed to be built for a set price agreed upon at the time of the contract signing. The fixed fee will typically include materials, labor, fixtures, and finishes, along with some or all appliances and a builder fee. Many large production builders build the same few floor plans repeatedly using the same materials, color choices, and finishes using this model. They will also offer a few options for upgrades, which add to the base price.
On the surface, it seems like this approach is a no-brainer. Who wouldn’t want to know how much their house is going to cost upfront, right? In these situations, however, the risk for rising costs is placed on the builder since actual costs of labor and material can vary greatly. Some companies mitigate that risk by cutting costs through lower quality finishes, paint, flooring, or other fixtures. Make sure you know what your allowances in each category will be to clearly understand the quality of what’s included in the price.
Many custom home builders offer a cost-plus approach to building your home. Typically a builder or custom home specialist will create a proposal for you based on your unique needs. The proposal includes estimates for each component of your interior and exterior, plus a builder fee percentage, often between 10% to 20%. This number is not just a rough estimate though, builders who use a cost-plus model keep abreast of fluctuating costs of materials, labor, and trends so they can still have a pretty keen sense of how much your project will cost.
These types of models can be great because you, as the buyer, have complete control over what you add to your home and you can upgrade or downgrade, saving money in areas that are less important to you while splurging on what matters most. However, like with any other agreement, do your homework.
Some builders will severely underbid your project to get your business. Then, in the end, your actual cost is significantly higher. That’s why it’s best to know how your budget will be managed, how often you’ll receive updates, and to ensure you feel comfortable before entering into an agreement. Bottom line: If it sounds too good to be true, then it probably is.
We know that fixed price agreements can be appealing to some home buyers, and we provide an opportunity for you to get a beautifully outfitted home at the quality level you would expect to see at Tennessee National. We deliver both with our fixed price contract, known as a developer home. A developer home is built by the Tennessee National team using a design we select. Like any other fixed-fee contract, you will know the expected total cost upfront, and you won’t need to be concerned with things like fluctuating labor or material costs. You will also save time, with fewer decisions to make along the way, as many have already been made and included in the base price.
That doesn’t mean you’re getting the exact same house as your neighbor (or 10 others in the community!). All Tennessee National developer homes are still custom-built with a plan especially selected to fit each one-of-a-kind lot, and are designed by our on-staff interior design team, with fewer decisions for you to have to make.
Like with other custom home builds, you have complete control over every aspect inside and outside your home. Splurge where you wish, cut corners where you choose, it’s all your decision. Our Tennessee National home specialists and designers guide you through every step of the process, lending advice and expertise, and of course, keeping you apprised of cost fluctuations and comparisons to budget.
But that doesn’t mean you’re going to spend more than you expect. Our team works feverishly on your behalf, saving money for you wherever possible without sacrificing quality, and keeping you up to date on cost overruns so that you can decide whether to increase your budget or adjust elsewhere.
As the developers of the community, we treat your budget like it’s our own, and are committed to making this process easy and enjoyable for you and your family.
Whether it makes sense to choose a developer home or opt for a fully custom home really depends on you. If you prefer to have more input and influence into any and all decisions in the building of your home, then a custom home might be perfect.
If you would prefer less involvement, allowing your home design team to use their expertise and current trends to make decisions for you, with more understanding of how much you’ll pay upfront, then it’s possible that choosing one of our Tennessee National developer homes is right for you.
Take the next step
Schedule a time to visit Tennessee National to view our current developer homes and learn more about building in our community.
