One of the biggest decisions you’ll face when building a custom home is this: do you gamble with a variable price or lock in a fixed one?

Variable pricing may sound tempting—after all, you only pay for what the project actually costs. If materials or labour come in under budget, you pocket the savings.

But talk to anyone who’s built recently, and you’ll hear a different story. Inflation has sent material costs soaring, and unpredictable supply chain issues have blown budgets to pieces. What starts as a flexible solution often spirals into a financial disaster, with homeowners left holding bills they never saw coming.

Despite this, variable pricing is a common practice that often leads to unexpected costs, financial strain, and even incomplete projects. 

With Variable Pricing, the Initial Quote You Receive is Often Just a Starting Point

And it’s not just budget overruns you need to worry about with costs increasing throughout the project due to unforeseen challenges, changes in materials, or additional work. 

These unanticipated expenses can also stall progress, potentially stopping the construction altogether if additional funds can’t be secured. What’s more, it doesn’t exactly help the relationship between the builder and owner – trust can erode quickly when the financial aspect of the project becomes unpredictable.

Take the case of a young family in Perth who set out to build their dream home — a four-bedroom, open-plan house with all the modern features they had envisioned for years. 

They signed a variable pricing contract with their builder, drawn in by the promise of paying only for actual costs. At the start, their budget seemed reasonable, and construction began smoothly. But halfway through, the price of timber shot up by 40%, and labour costs spiked as shortages hit the industry hard. Suddenly, their original estimate was no longer enough.

When the family approached their bank for additional funding to cover the rising costs, they were denied, leaving them stuck. The builder had no choice but to halt construction. Their half-finished home sat exposed to the elements, while their mortgage payments continued on both the unfinished build and their temporary rental. 

The financial stress mounted, and the dream home they had so carefully planned turned into a nightmare—unfinished, unaffordable, and uncertain when it would ever be completed.

This isn’t just a rare horror story—it’s happening all too often in today’s construction industry.

5 Reasons Fixed Price Contracts Will Save You From Stress & Heartache

Reason #1: Financial Predictability

Fixed-price contracts ensure you know exactly how much your project will cost from the outset. This transparency prevents budget blowouts and financial strain. 

Reason #2: Thorough Planning

By investing time in detailed upfront planning, every aspect of the project is accounted for. From material choices to design elements, nothing is left to chance.

Reason #3: Contingency Budgets

A fixed-price contract encourages you to keep a personal contingency budget for any desired changes. This safeguard allows flexibility without compromising the core budget.

Reason #4: Detailed Drawings and Selections

Before the contract is signed, detailed drawings and selections are made. This thorough planning phase identifies all elements involved in the project, capturing the true scope of work and associated costs – and ensuring nothing is left out.

Reason #5: Transparency

Transparent communication during the planning phase ensures all parties understand what is included in the budget. This eliminates surprises and additional charges down the line.

Finally, don’t overlook the importance of setting aside a contingency budget. Even with the predictability of a fixed-price contract, having a personal buffer allows you the freedom to make enhancements — whether it’s upgrading to premium fixtures or adjusting design elements—without throwing off your financial plan. This added flexibility ensures that even if you want to make changes during the build, your core budget remains intact.

Bottom Line: Upfront Planning Will Save You From Unwanted Problems Down the Track

By opting for thorough planning and a transparent approach from the beginning, you can avoid future complications and financial strain. So make sure you engage a builder who discusses the costs upfront, explains the entire building process, and provides a realistic budget and timeline. 

If you’re ready to sidestep the traps and embark on the journey of building your dream home with confidence, download our free guide: 

Build with Confidence – 7 Things You Must Know Before Designing a New Home

This resource will help you stay within budget, and create the perfect space for you and your family.