The House That Wisdom Built - EP05: How To Avoid Bad Contracts

In this episode of Building, Brews, and BBQ: The House That Wisdom Built,  we’re getting real about contracts — and yes, Vince is salty about it. We break down the good, the bad, and the downright ugly side of Cost Plus contracts (spoiler: we think they’re lazy, risky, and often misleading).

Whether you’re building a $500K home or a $5 million estate, the contract you choose can make or break your experience. We’re pulling back the curtain on what builders really mean when they say “Cost Plus,” why it’s become so popular (even when it shouldn’t be), and how Fixed Price contracts might just save your sanity.

We talk trust, transparency, builder accountability, and why pre-construction matters way more than most people think. If you’re starting the custom home journey — or you’re a builder navigating client expectations — you’ll want to pour a strong drink and tune in.

📥 Download the FREE Freedom Guide:

This companion resource includes bonus tips and more info on selecting the right team for your build.  DOWNLOAD HERE

Building Brews & BBQ
Instagram: @buildingbrewsandbbq
YouTube: YouTube.com/@BuildingBrewsandBBQ

Hosts:
Vince Longo
longocustombuilders.com
Instagram: @longocustombuilders

Nathan Walters:
massarossa.com
Instagram: @massarossa

Produced by:
Michael Newman
michaelnewmanfilm.com
Instagram: @michaelnewmanfilm

Transcript

Vince (00:00)
I'm gonna say the ugly about a Cost Plus contract because I think it is the laziest contract. I also think it's unethical.

Welcome back to Building Brews and Barbecue, where we're talking all things custom building of homes and renovations. Today, we're going to be talking about something very, very somber.

Nathan (00:30)
It's it's ⁓ it's gonna be entertaining but it's definitely ⁓ it's definitely not the most fun part of

Vince (00:39)
Yeah,

this is horrible. I can just feel overwhelmed with sorrow and that's what I'm feeling today. So if I look a little down it's because of what we're talking about.

Nathan (00:48)
we're talking about today. It's today, ⁓ audience and listeners, we're going to talk about contracts.

Vince (00:56)
So, open up your favorite brew and if you're listening to this, you might want to open something really strong. Maybe go right to the tequila or the Jack Daniels.

Nathan (01:04)
Yeah,

the bourbon, one of them for sure.

Vince (01:06)
Good night. So yeah, so sit back, grab a free of a brew or barbecue, and we hope to be able to hit some of the major points with types of contracts and what makes one better than the other and what maybe you should ponder if you're thinking of building. Now, jumping into that, Nathan, you're gonna deal with contracts in the pre-construction phase, right? It's gonna be looming the whole time. Our hope and you know,

And hey, listen, I've gotten a lot of feedback where they say, Vince, slow the down. You're talking too fast. You've actually no longer a guide. You're actually, past episodes, you've just tried to make yourself the hero of the story. And I apologize if we overwhelmed you all with so much information, but we get to talking and we just want to give out the sauce. So you're not going to get that this episode.

Nathan (02:01)
You're not gonna give them the sauce. It's gonna be me. Yeah

Vince (02:04)
No, you're not either. I'm We're just gonna give you teasers. And the reason why I say that is not to be a jerk, but this all relates to your market. Contracts are different in every market. That's right. It's different where you are in Oklahoma, Nathan, it's different here in Atlanta. It's gonna be different if you're building your home in Wisconsin, Minnesota, California. They're all different.

Nathan (02:26)
It's also different types of home you're building. If you're building more production style, if you're building more high-end luxury, usually the contracts differ in those areas as well. ⁓ So where you're at, what kind of home you're building, it's the kind of contract that you're gonna see or maybe looking for is gonna be different.

Vince (02:46)
Yeah, yeah, and that's exactly right. so I'd love, and like we just talked about, contracts are gonna be the underlying tone, probably during all of pre-con. Yep. Right? At what point, the way we do it, and we've talked about in episodes, I think, again, we beat that pretty good. mean, woo. ⁓ But the idea is, during pre-con, you've got a builder you really like. Now, maybe you approach this early in the game.

Because you just say, you know what? I love that builder. I love that remodeler. Because we have this happen all the time. They come. They see our office. They see our processes. They see our communication. They see how we operate. They talk to other customers. And this is the same thing for you. We talk about it all the time. They've seen our job sites. They've seen how clean they are. You can eat off the floors during framing type of thing. And now they're saying, well, we don't need to do a pre-construction consulting agreement, which is what we always recommend.

which is independent of a contract, they say, no, let's just jump right to contract, right? And how do you handle that if a customer says, hey, Nathan, we don't want to jump right to contract. We want to do our pre-construction. How do you do that?

Nathan (04:01)
Do you mean they don't want to do pre-construction and then try to construction?

Vince (04:04)
No,

they don't want to do a ⁓ construction contract. want to go, they want to try and buy.

Nathan (04:11)
well, that's all we do. That's all we do. I've never had, ⁓ I've never, I don't even allow to go to construction. ⁓ The way we handle it, if you come in, we don't go straight to contract. We're going to do what we call design contract is pre-construction, just different terminology. We call it a design contract, but we do a design contract to then get to a construction contract because when I tell our customers is it's being engaged on both sides.

Hey, you want to see if we as your builder are going to please you. We want to see if working with you is going to be good for us. It goes both ways. Sometimes it's not a fit either direction. So no, if you're going to come to us, it's going to be design contract, then construction contract because again, like you said, we've beat the dead horse. Pre-construction's imperative. We won't do it without it.

Vince (05:04)
Gotcha. you ever make, so you just do that totally separate contracts. You've never like melded them together. Never. We've just recently started doing that where we've melded them together. it's, know, cause listen, the bottom line is if you go to you as a builder or someone else as a builder, really that contracts at the start of constr, that contract resume, you know, basically starts at the start of construction. And that's the idea around most contracts, right? Is you're paying the builder.

to physically build the home. That's right. You know, because you can quantify that. A lot of times it's hard to quantify all the pre-construction time and effort, but it's massive. Yeah, it's You know, there's many hours with real professionals. You know, I look at it this way, during pre-construction, you you've been doing this as your own business. You you've got over 10 years experience. I've got over 30. And we're professionals now at what we do. There's no difference.

And I know this might ruffle some people's feathers, but that's what we do. But with the amount of knowledge you have and I have in my head, there's no difference. I am a doctor of building. And I always say, try going to your doctor and saying, I want you to do all of the tests, do all of the analysis for free of what's going on, why I'm feeling this way for free. And then tell me what I'm going to need to do to fix this.

and then provide me an estimate and a timeframe, and how are you gonna guarantee that this is going to be great for five years after a warranty for this health issue I have, and present that to me in an estimate, and then I'm gonna go to three other doctors and do the same to them, and not one of you four can charge me for all this professional time you're taking and tests and things you're doing, and then at the end,

I'm going to just probably go with the guy that gives me the cheapest price. Or I'm just going to then pit one of you against the other so you all can have that fight to the death in the ring to see who will do it cheaper. That's right. Have you had success doing that at your doctor?

Nathan (07:19)
My doctor won't let me do that. CPA doesn't let you do that. Your attorneys don't let you do that. And what's funny about home building is generally speaking, the home builder is dealing with the most expensive thing in that moment that someone's going to purchase most of the time. But yet the building environment, the building culture is what you just described. Who will do it the cheapest? Who will do it that way when really

We do need to look at ourselves as professionals inside this industry, as do the listeners who want to be customers of Builders Need to Look. Hey, that's not what we're looking We're looking for a professional to take care of the most expensive thing that we're going to probably purchase to date.

Vince (08:09)
So you want a professional. That's right. And that's the way I look at it as well, is when I hear things like that, they're not our customer. We sell value. And we do things, and I know you do things, because we've elevated each other through our Builder 20 group. what we're selling is, I'm a master builder, certified by the AJC.

Nathan (08:10)
You want a professional.

Vince (08:41)
The bottom line is that's my doctorate. And I've been doing this so long that we've dedicated our lives to our businesses, okay, probably more than most people and more than our families would like to admit, because we've taken from our families to pour ourselves into our business. And people listening, they do that with all, doesn't, you don't have to be a builder.

Right. You know, that's the big problem in today's society is that, you know, people spend too much time pouring themselves into their business because they take it home with them. It's on their phone. It's on their computer. It's in their bed, you know, and holy cow, we're going to go down a whole road. I told you this was going to be somber, you know, but it's it's what we're dealing with. Right. And and that's why I think that our values in the services we provide, our systems, the way we have perfected it to make this

Nathan (09:16)
Yeah, that's right.

Vince (09:33)
an incredible experience for our customers. that's why I'm with you. We try to do our pre-construction, or some people call it a PSA. You'll hear that called out, which is short for professional services agreement. You do a design contract, which you help them with the design. And there's different types. We call it sometimes PSA, sometimes we call it ⁓ pre-construction consulting or professional services. And we want to be paid for that time as professionals. Because at the end of it,

We do want that homeowner to have not only the time with us to see the value, but they now have what we've learned in all these past episodes, the entire package to be able to move forward and get when they put us against other builders or other renovators, they're getting a true apples to apples. Cause we give them those, that information, right? It's theirs, they paid us for it. It's their intellectual property. And so they then can use that however they want.

to say, okay, these are the windows we want. So there's no, there's utter clarity in builder per builder. And then we hope that it's on what value is that builder providing. And we hope that they come back and choose us. But it also gives them that time for a try and buy. Do they even like? Right? Or vice versa, do we even like them?

Nathan (10:49)
Sure. ⁓

It goes vice versa, which is why like when you're saying do we do, ⁓ you know, if we ever just jumped a contract and that answer is no, because we want it. We have learned through the last four or five years, if someone's not willing to follow the system we've built, they're not going to like us. So there's no reason for us to move forward with them. When we, when we have people that want to go outside of our box, they, they will then

things will go poorly, they then blame us that you you get in trouble as the builder trying to catch up, but that what they're feeling is correct. We're not doing a good job because we're outside of the system we've built. we have learned that we need to go through this to see, you going to trust our process? If you trust our process, we're willing to move forward. But with that, we're kind of rolling out, we've done it. Let's move into

what these customers need to look for, what are they going to see? And you and I have kind of talked, there's really only two kinds of construction contracts. Now, some of them, you know, when you roll into a Cost Plus, which is one of them for the listeners, that's one of the contracts, there's different variables to a Cost Plus contract, but it's Cost Plus. Or you have a fixed price, which I believe you usually call lump sum, right? Fixed price, that's as a listener, you're going to see,

one of those two contracts.

Vince (12:21)
Those are the two big ones. There's also that third that's time and materials, T We do that a lot.

Nathan (12:25)
T &M, is what you

don't see that a lot. And that's kind of a variable of a cost plus a little bit. It's a, it's it's a, it's an arm of a cost plus contract. And so, but really, really is the, as the listener, when you're listening to this, you're, you're going to come across one of those two. then we're going to kind of just briefly run you down what you might see from your builder inside of those.

Vince (12:49)
Yeah,

then I like that. It's a good segue to talking about the different contracts here, cost plus, ⁓ fixed price, and then we'll just touch on T But digging in, I know what contract we both love and we'd rather do. Let's talk a little bit about, let's start with cost plus. Okay. Because that's the one, and it's the one that I hear the most.

Nathan (13:19)
Me too. You too? It's the one with our market has made our market in our industry has made that the most popular contract and has made customers believe that's the contract they want, which I try to tell my customers all the time. It's not the contract you want. We will do it. Happy to do it. It's not the contract.

Vince (13:43)
I'm not gonna give the listeners all the secret sauce that goes around it, but I think this is really an important thing to talk about. And with Klaus Plus, let's go deeper in that. The good, the bad, the ugly, right? Let's start with the ugly. And what I mean by that, and it's what you've seen, is...

I'll do, I'll take the ugly because I'm feeling it today. ⁓

Nathan (14:14)
That's the mood. Yeah started

off so somber people aren't gonna believe it's the real you

Vince (14:20)
No, yeah, but it is. I just been lying the other episodes. I'm going to say the ugly about a cost plus contract because I think it is the laziest contract. And I also think it's unethical. And I'm going to drop this mic. I think it's unethical. Yeah. And people look at me and say, why do you think a cost plus is unethical? I said, I think a cost plus contract when your builder

or if you're building or remodeling or you're in your friends and people you talk to, other people that have built a home will tell you, cost plus was great. And that's only because they don't know. They don't know. They didn't know what a fixed price was. didn't. But a cost plus, in my opinion, and I've only been doing this now as a business in my 25th year. So I would say I've seen a few.

Nathan (15:09)
you're forced to you're incorrect me if I'm wrong in your market that's pretty much what you're forced

Vince (15:13)
Yeah, yeah, yeah, and I'll get into the ugly of that. But just to start off, if I was to say what is so ugly about that is they hear, customers hear that that's the best way to go. They do. Because of transparency. Yep. Okay. And they're afraid that the builder's gonna make too much money. Yep. Or something like that, meaning live. Yeah. Because it's ridiculous. ⁓ But what I will say to that is other builders will also.

tell a homeowner, well, let's just do cost plus. And they'll say it early in the process when a customer comes to see them, because we get that all the time. What's your structure? That's right. And we'll say, we're fixed fee is our preferred. And you'll understand, Mr. and Mrs. Homeowner, once we get through this process, why that's perfect for you. I want you to talk to that, because you know a lot about fixed fee.

Inevitably, I already know that they're gonna come and say, well, we want cost plus. That's right. And I always ask them, where did you hear about that? And they say one of two things. One, we've been talking to other builders and that's what they wanted. And that's what they say is the best. The answer to that question is, yeah, that's because they're lazy. ⁓

Nathan (16:13)
So.

It's easier.

Vince (16:29)
It's easier, they don't have to go out and get real quotes. They don't have to spend the hundreds of hours it's going to take in pre-construction, that timeframe, to get that information so it's right. Because all the liability falls on the customer. That's right. In a cost plus. So of course the builder wants to hand that over. Yeah. Right? And not have to do the homework. Because guess what?

The majority of builders aren't set up with processes, procedures. They're still using a yellow notepad. They're still going from job to job every day. They're a chuck in a truck, we call them. It's one guy, and there's nothing wrong with that. I was a chuck in a truck. Right. But they don't have the systems or the people in place to do a real deep analysis, so they just fall back on the cost plus. Do you agree with that statement?

Nathan (17:20)
Yes, I do. It's funny. It's funny because that's when people come into our office, that's what they ask. Hey, what are you? You cost plus or fixed price? And what I tell them is, look, our happiest customers end up taking a fixed price contract. That's who we usually see as the happiest. Because I said, as you said, the ugly. Well, I tell them, I said, it's good and it's bad. Hey, the good thing is you get to see how the sausage is made and see all the invoices. The bad thing is

You get to see all the invoices because what they don't what you really don't understand is if I'm doing a fixed price contract I'm budgeting in drywall repairs. Okay, I'm budgeting in a contingency for the fact that Maybe maybe the roofer maybe the mason puts a tow board in that leaks. We have a heavy rain Drywall gets damaged. It's going to get repaired. Okay

So it gets repaired on a fixed price. You as the, as the listener and the, and the customer see it get repaired, never see a bill for it. Think nothing of it. Okay. Well we have that in the budget. problem with cost plus that I always see is it happens. The repair comes in, we send the repair bill to the customer and they're outraged, right? Outraged. Whoa, whoa, whoa, whoa. I shouldn't have to pay for that. That's that, that wasn't my fault.

blah blah blah and you're like, well, you're right. It wasn't your fault, but it's cost plus, right? It doesn't say, ⁓ the only cost that you agree to it's no, it's the cost to build the home. The problem is that then I know I'm off track, but you said a lot of things that lead me to think in a lot of things. And the problem why you end up all why you and I both end up always having to go cost plus is because as you said, a guy that's doing it is cost plus.

gets to come in with the original price lower. That's right. Because he knows he's not putting those contingencies in and he knows when those things happen, the bills are going to get passed through and it stinks because on fixed price, well, man, you're so much higher than this guy. Well, because I'm budgeting in the contingencies of what happens in a build. And it's the same conversation I have with my customers. Listen, if you go buy one of my spec houses, right?

and it's listed for one and a half million dollars. In that one and a half million dollars is the porta potty, is the gravel for the construction entrance, drywall repairs, water leak repairs, roof repairs. That's all in the price of that home. You're gonna pay for it, whether it's cost plus or whether it's, this is just the problem with cost plus is you see it and it's annoying and it's gonna make you angry.

Vince (20:11)
That's right. know, and it goes to further, just like you said, there's, I call it cost uncertainty, right? There's, there's, because that builder's not taking the time to really do it right. It's a race to the bottom. It's do whatever you can to win that job. And cause you don't know each builder's got a different thing happening. He might have another project nearby and he thinks that it would be great to have too. They might be short on projects. He just needs to win it. The trouble is,

I always tell a homeowner if you want to do cost plus, we'll do it. But you're going to get the best cost plus you've ever seen, you know, because we have our bookkeeper and everything that's, you know, reconciling all the accounts and we keep separate accounts for them and we don't co-mingle funds. And anyway, the idea is that builder is not going to include those things that are going to cost increase. And if you didn't plan for it ahead of time with your bank,

if you're getting a loan, you're gonna get to the point, and I see it more times than none, where you've got a house that's 95 % out of money through your budget, and it's only 75 % done, and everybody's upset. So, a lot of those are the cons, and I can go for another 80 hours about the cons, but we get forced to do it, because it's not only the homeowner or another builders that put us there, it's also architects. Architects are synonymous.

And it's not a dig on them, it's just their world they live in, right? Because they have, I call them builders in their stable. Each architect has three or four builders they love to work with and they know can build their product, right? So it's, and they don't want to show favoritism. So it's very easy for them to say, hey, Mr. and Mrs. Homeowner, we've now drawn your house. Now let's put it out to these builders, but let's do cost plus because we want you to see

and have the flexibility to make changes during, and, because we don't really know, because the plans aren't worked through yet. And they can't guarantee a price anyways, because these plans aren't done. So, due cost plus, and they sell them on the pros of it, right? And they allow them to put the builders against each other.

Nathan (22:27)
the pros sound good in theory.

Vince (22:29)
Let's go through some of those. What are the pros?

Nathan (22:31)
The pros are you get to the invoices, right? Transparency. Yes, transparency. That's what you're going to get pitched. It's what when we are put into the box of Cost Plus, it's how we pitch it on our side is the transparency due to using Co-Construct. That's exactly what we tell our customers is, listen, here's what we do inside of Cost Plus is these invoices come in. We're going to send you a draw request, OK, that

is built off of the job cost sheet that comes with the invoice packet. Okay, so every invoice in that drawl. So, hey, we're asking for $22,700. Okay. Well, the invoice is better equal $22,700. Okay, great. That happens. Then those invoices go into Co-Construct under their cost code. Okay, so they live there forever and are budgeted in Co-Construct.

is tied to our QuickBooks. So like you talked about, we have three different ways I run people through it. We have three different ways of you being able to reconcile everything and make sure that they all match. And they do all match. So that's what we do too. Well, okay, you want to go cost plus. Well then in our cost plus, if we're bidding against another builder, ours, we promise you will be of the most transparent cost plus. You will never not know where you're at. You always be.

doesn't mean let me do this because I have some customers that past customers as we've said, maybe I go, I knew where I was at, but I didn't like it. Hey, I didn't say you wouldn't like where you're at. I said, you'll always know where you're at, you know? And, and that's, that's hard because you get to see everything, you know, well, why you had to order another load of gravel. Yeah, we had to order another load of gravel, know, and you get to see all of these things in it, it upfront.

the transparency, this is amazing. That sounds so good. Until the project runs five months long and you're paying five extra months of a porta potty.

Vince (24:39)
Right. Or, where's this $5.21 ⁓ receipt from Home Depot? From Home Depot. And this was for a five pound box of screws, but it looks like you only needed one. Where's the other four pounds?

Nathan (24:44)
Yeah.

Yeah,

that's right. You're getting to see everything. You get to see everything. the upfront part of the pitch of Cost Plus is so compelling. And that's where you're fighting with a customer. And I get it. Take yourself out of our industry. I'm building a house. I want to make sure I'm not getting taken advantage of. Wow. I get to see everything. That makes you feel comfortable. Well, it's a false sense.

of comfortability. And you're right, what it is, what Cosplus really is, is it is allowing people that don't do this as their career to be able to get into the game.

Vince (25:28)
Yeah. And one of the big things that I see as another, what a lot of people call positive homeowners, ⁓ architects and this and that, they say, on the cost plus, the real pro is it gives you the ability to make changes on the fly, adjustments to things. I can see the positive in that. You know, you don't have to go through the whole process of doing change orders written and all this and that, although we still try to do, set that up in our systems like Co-Construct.

that they still need to approve that. ⁓ But the idea around it is there's a lot more movement, and that's why architects like it, because they might want to make changes on the fly. And it's not this big rigmarole, as it would be with a fixed fee, because a fixed price contract, because you've got to make those changes. And a lot ⁓ of times, you don't even want to allow that, because things have already been ordered, because it is a fixed price. So I see the flexibility in that, but I do, ⁓ because I'm ornery.

today, I would say the con that I see to that is that it leads to unbelievable cost overruns. Of course. Changes along the way. Our subs charge us more. Everybody charges us more because you're changing and you have chaos on the job site. People don't know what's going on and the project gets extended out.

Nathan (26:48)
not only cost overruns, like you just said, time overruns. And the problem in a cost plus, since you don't really, like you said, have to do written change orders in the cost plus, because it's cost plus, you made a change wherever the cost comes in, we add our fee to it and off we run. But there's no real, hey, by the way, this is gonna take three weeks. Okay, well, if you do 10 changes and they all take two weeks, we just added 20 weeks.

To a build time and and and the problem is is that's never taken into account on Cost Plus and look we've fallen victim to that because we again have to do a lot of Cost Plus Okay, well, you're right. Well, let's just make a change. We know it. Okay, you make a change Well, everybody forgets that those changes ever got made and then as you start coming up to when we thought the house would be done But we're only in trim. Hey, what whoa, what's going on here? Why is this happening and

It just, I know it sounds like we're beating it to death, but man, listen to us, please. It sounds so appealing up front to do Cost Plus. I'm telling you, will listeners, you can DM us. will send you to our customers who have done fixed price and I will send you to some of our customers who have done Cost Plus and you can ask them who's happier. My fixed price customers are always happier.

Vince (28:12)
And I will just say with one, if I was to point out, because I will tell you still as of today, the majority of the houses we built are cost plus. Same. And for two reasons. One, it's just the customer feels more comfortable and that's the road they want to go. And we will absolutely oblige. we've only talked about maybe two ounces of an eight ounce cup, two ounces of an eight ounce beer, right? Or bourbon this morning. Yeah. Of the secret sauce that goes in it and DM us.

Let us know your questions around it. We'd love to answer. Come on in the office, whether you're in Oklahoma or Atlanta. We'd love to go through it and be your guide instead of your hero, ⁓ as we're trying to be today. ⁓

Nathan (28:54)
Just so you listeners know Vinny's really salty. He got a little reprimand from you know, the team from the team and producer Yeah from the producer who he's looking at right now. So he's just real salty about it this morning He's not really into his you know, he doesn't like being reprimanded. So please forgive him

Vince (29:10)
Yeah, that's right. And I don't think that's the finger that you should be pointing at me, Mr. Producer.

But ⁓ anyway, ⁓ I would just say there's that if they just want to have it. And then two, I will recommend it if the project is not been worked through or is just that challenging. We'll have five, $10 million projects where you have to do cost plus because it is impossible to know what that carved corbel of marble that's coming from Italy is going to cost.

Nathan (29:33)
that

That is the disclaimer for sure. Where I think Vince and I both agree that we would rather do fixed price, but there comes a limit on some of these projects that they are so big, they are completely individually drawn by an architect. We don't even know where we're sourcing. Hey, we just know we're sourcing something from Italy. Don't even know from where. You have to go cost plus because it's impossible to do. And you're right.

There are such projects that get into such complexity, like in our builder group, have guys in Park City, Utah, are building on the sides of mountains. What are you going to do? You know, a one-off plan from an architect on the side of a mountain, probably not going to fix price that, right? You're just, you're not, you're not going to do that. It's too complex of a build. But if in that disclaimer and the customer doesn't want it, let's go, cause we have a little bit of time left. Let's kind of give some pros and cons of the fixed price.

Vince (30:44)
Well, we did say we wanted to do this in 30 minutes. I see the clock is minus 20 seconds. So let's just quickly talk about fixed price. This is really simple. It's very simple. The pros to the fixed price.

Nathan (31:00)
In my belief, the proto of fixed price is the builder is in essence now they're budgeting for it. customer, that is why a fixed price contract and a fixed price budget is going to seem higher because they are budgeting in the contingencies. But like we talked about on these episodes from start to drywall is really cost.

You customer you don't control those are build costs, right? That's us building your home The customer does not control that cost that is us. That's us putting in your foundation That's us put it framing your home You don't control a lot of those except for maybe you select more expensive windows things like that But for the most part we are controlling that cost on a cost plus if We miss budget your lumber pack and your lumber pack comes in over on cost plus you're paying for

Okay. On a fixed price, you never see.

Vince (32:02)
So that's predictable cost. Predictable cost. it's getting locked in. Predictable cost. So number one is predictable

Nathan (32:08)
Yeah, and we're locking that in and we're taking and we take the risk rather than you.

Vince (32:11)
We're taking the risk.

Yeah,

they just know that they're going to get that. And if like two years ago, something goes out of control or we don't know what's going to happen, we take the risk. That's right. Another one would be probably real quick. ⁓ It's simple and straightforward. Way easier. It's simple and straightforward, easier to understand.

Nathan (32:30)
Right? It's way easier. Yeah.

And as I mentioned earlier, they're not seeing the stuff that every customer pays for, whether you buy a spec, whether you buy fixed price, or whether you go cost plus. Look, you guys are paying for the porta potties, you're paying for the construction entrances, you're paying for the silt fits, you're paying for all these things, no matter what. The best part about buying a speculative home or a fixed price home, you never see that.

You never see that. But on a cost plus, those invoices are coming over and even though they're $40, hold on, we had to repair the silt fence for $97? Yeah, we did. Why do I have to pay for that, right? Those are things that, those are conversations that you don't want to have, the customer doesn't want to have, nobody wants to have during a build because there's already other conversations we need to have, but we have to have them because they get to see the invoices rather than it being inside the cost of the.

Vince (33:35)
Yeah, and I'd say number three to that is it encourages efficiency When we're when it's when it's a I would just say when it's a fixed price We're building faster because there is less flexibility. That's right in in things have been figured out so and guess what? It's not cost plus where maybe they're cost plus and you're paying they're paying for the monthly management fee and things like that That there's in cost plus there's you got a really hope

and pray and have faith that your builder really cares about efficiency. Because it's very easy to just let a cost plus project say, okay, well, that's fine. Whereas a builder is going to be way more efficient on a fixed price because they want to get it done because they're not going to ... The faster and more efficiently they get it done, they make a better margin on their profit. Whereas fixed price or cost plus, it is what it is.

I think that a fixed price is best for those customers that really want that well-defined set of scope, set of selections.

Schedule things like that. So let's let that die. So we've talked about fixed price We've talked about cost plus with the last one is time and materials. Mm-hmm Just to touch on that that time of materials is basically even more risky than cost plus because you're just you're just basically paying for that builder for their labor for the time that they're working on that project and

There's really no real liability in terms of taking responsibility. It's just, time and materials. That's my time on your project. Yeah. What are you hearing about T Because we don't even really do it that way.

Nathan (35:31)
We don't, we don't, I don't fight against it. I don't battle against it. I don't hear much about it. And, and really, like I said, in my opinion, I could be wrong, but a time and material contract is like, it's a, it's a branch of a cost plus contract. in, let me re- it's in the same vein. Yeah. But you're right. It's more, it's even more of a, I'm going to have no scopes. I'm going to have nothing. You're just going to get a bill monthly or bi-

Vince (35:55)
That's right. And the biggest con to that is, you know, with a cost plus, you're might not be with those types of contracts. You're not really monitoring hours. Yeah. Time and materials is time. Yeah, it's time. Hours. You have to be accountable. And what I've heard is customers get much more frustrated with that because there's always that debate. Well, did your site super or PM project manager or coordinators, whoever it was, really spend

three hours or five hours on the job site that day because what they did doesn't seem like it would take that long. And I stopped by at three and there was nobody there. And so there becomes more conflict, I think, between the ⁓ owner and the builder. And then again, you still, with no liability, the builder still gets sent to you every bill, you better pay it and this and that. So I even think it's more of the Wild West. Yeah. Good.

This has been awesome. Those are the three types of contracts. Is there anything else you wanted to add, Nathan, to this to put a bow on? Probably the worst thing I've ever talked about in my life.

Nathan (37:03)
I don't think I'm gonna put a bow on anything because as you said we gave them two ounces of an eight ounce cup so There is not a bow. There's just way more information to give them So all I would say is is DM us and if you got more questions Again, if you're in our markets, we would love to talk to you If you're not in our markets DM us so that ⁓ if you're going to talk to your builder, we can give you more information

Vince (37:28)
and let them know how they can find us.

Nathan (37:31)
You can find us on your normal ⁓ Spotify, your normal Apple, anywhere, YouTube, anywhere you're gonna look for podcasts, you're gonna find Building Brews and Barbeques. So however you like to listen or watch your podcast, hit us up.

Vince (37:48)
Perfect, well thanks so much Nathan and ⁓ this has been great and I might even, I'm tired of giving out bonuses to these people. Yeah. But I was thinking about doing a downloadable. Permanded. Yeah. So, okay everybody have a good day.

Nathan (37:59)
Well, I think you're tired because you can't rep.