Fixed Price Vs. Cost Plus in Remodeling

Fixed-Price Quotes

• A fixed-price quote provides the buyer with a flat price for the work to be done, much like a sticker-price on any other product.

Cost-Plus Quotes

• A cost-plus quote states that the buyer will pay all costs involved plus a specific fee or percentage above that.

Fixed Price Uses

• Fixed-price quotes are more common for small jobs or for projects that the builder or remodeler is very familiar with. He knows the average cost to complete such a project and can safely estimate a reasonable but profitable quote.

Cost-Plus Uses

• Professionals often use cost-plus bids for more complicated projects since these can involve unexpected expenses that will have a dramatic effect on the final cost.

Advantages

• Fixed-price quotes can give the buyer a greater sense of security in budgeting for a project since the builder is obligated to charge no more than the quoted amount. A cost-plus quote, though, allows the buyer more control of the project’s final cost since he must approve any charges applied to his job.

Disadvantages

• Fixed-price quotes can end up costing the buyer more than necessary. If materials cost less than anticipated or the job is completed in a shorter period of time, he can ultimately pay a higher rate than he would have paid on a cost-plus job. The cost-plus option, though, requires more involvement and oversight on the buyer's part since he will need to be much more aware of expenses in order to control the budget.