Fixed Price vs. Cost-Plus: Why We Lock Your Number First

Many of the homeowners who come to us have renovated or built before, and a lot of them did it on a cost-plus contract. They tell us versions of the same story: a number that looked good when they signed, a project that kept costing more than anyone said it would, and no real idea where it would land until it was over. This time they want to know what they are spending before the walls come down.

Here is the difference between the two ways of contracting a renovation, when each one makes sense, and why we build on a fixed price.

What fixed price and cost-plus actually mean

The American Institute of Architects publishes standard contracts for all three: A101 for a stipulated sum, A103 for cost plus a fee, and A102 for cost plus a fee with a guaranteed maximum price. Neither approach is dishonest on its own. The difference is who carries the risk of the unknown, and how much of the project is still unknown when you sign. The AIA's own guidance is to match the contract to how complete the design is: open-ended cost-plus while the scope is still evolving, a fixed price once the design is finished.

Why cost-plus budgets drift

On a cost-plus job, the number you see at the start is an estimate, and it is easy for an estimate to look good. Then construction starts, selections get made as the project goes, and each decision adds to a total that nobody has added up yet. When the builder's fee is a percentage of cost, the fee grows right along with it, which is why even builders who work cost-plus call a percentage fee a conflict of interest. The project does not go over budget in one moment. It snowballs.

The national numbers point the same way. In Houzz's 2026 study of more than 10,000 homeowners who renovated in 2025, 37 percent went over budget. The most common reasons were choosing more expensive products than planned and changing the scope or design along the way: exactly the decisions a fixed price makes you settle first.

That uncertainty lands on you. You may have to go back to your lender mid-project, delay rooms you were counting on, or make the biggest decisions under pressure because the budget is already stretched.

When cost-plus does make sense

To be fair to cost-plus, there are projects where it is the right tool:

• The scope cannot be known in advance, as in storm or fire restoration, where nobody can see the damage until it is opened up.
• You want to start before the design is finished, and accept not knowing the final number in exchange for speed.
• You want to make every selection as you go, rather than up front.

If you choose cost-plus, ask for an open book, a fixed fee rather than a percentage, and a guaranteed maximum price. Those three things put some of the risk back where it belongs.

What it takes to give you a fixed price

For the large renovations and additions we build in Charlotte and Lake Norman, almost everything that would make a number uncertain can be settled before construction starts. That is what pre-construction is for, and it is why we do not start a project until the scope is buttoned up.

• A finished scopeEvery room, every change, written down and agreed, so there is nothing left to interpret.
• Finished selectionsCabinetry, stone, tile, fixtures and lighting chosen before the price is set. That is what makes it fixed.
• Finished drawings and engineeringArchitecture and structural engineering complete, so the trades price the real thing.
• A house we have walkedOur team and the specialty trades on site before the number is final, looking for what the house is hiding.
• Trade pricing on your projectReal quotes for your scope, not averages from someone else's house.
• A reserved slot in our scheduleOnce the price is locked, your project has its place in our construction calendar.

The fixed price is set at the Green Light Review, where we walk you through the developed scope and detailed pricing, including the options where there are real choices to make, and you choose the final direction before we sign. Every step is laid out on our process page, and the promises behind the price are in our written guarantees. You can read more about what drives the number in what a whole-home renovation costs in Charlotte.

Why a fixed number matters for your financing

Most of our clients need to know what they are spending before construction starts, because that is the number they take to their bank. Lenders want it too. A Fannie Mae HomeStyle renovation loan requires a renovation contract that itemizes the work and states the agreed cost, signed by the contractor and the borrower before closing. An FHA 203(k) loan requires a contractor to agree by contract, before closing, to complete the work for the amount of the cost estimate. Even the Office of the Comptroller of the Currency, which supervises national banks, notes in its lending handbook that a bank can limit the risk of cost overruns by requiring a fixed-price contract.

Time matters too. Most of our clients move out while we build, so every extra week is another week of rent, storage and living somewhere else. A finished scope lets us schedule tightly and keep our crews focused on your house.

What happens when you want to add something

Almost everyone does, and that is fine. Once the walls are open, most clients hand us a short list of things they would like done while we are there. A fixed price does not mean the plan can never change. It means nothing changes without your say.

1. You askAdd it to your list, by message or on a walkthrough.
2. We scope and price itIn detail, the same way we priced the original work.
3. We review it with youWhat it involves, what it costs and how it affects the schedule.
4. You decide in BuildertrendIt goes into your client portal as a requested extra to approve or decline.
5. We schedule itApproved work goes on the calendar promptly.

In practice

A short list, handled one item at a time.

On a recent primary suite renovation in Providence Springs, the owners' list included sound insulation in the wall between the bath and the bedroom, an outlet for a heated toilet seat and a light fixture in the closet. Each one was priced, approved in their portal and scheduled, and the rest of the project stayed exactly where it was.

See the Providence Springs project.

Questions we hear about fixed-price contracts

If you are planning a large renovation or addition and want to know what it will take, the discovery call below is ten to fifteen minutes with our pre-construction team.