Friday, August 5, 2016

Building a Log Home: Contract Types

Advantages and disadvantages of the two most common types of log home builder contracts.

Financing the cost of your log home can be a stressful process for some, but it doesn’t have to be. When entering into a contract with your log home builder there are typically two types of contracts they offer: Cost Plus Contracts and Fixed Rate Contracts.

Cost Plus (Cost+) Contracts

Also known as build plus contracts, cost plus contracts are a great option if you aren’t building on a tight budget and deadline but want to have some flexibility as you build. These contracts start off with a basic design and log shell price. As you start to build and construct your log home, materials and other add-ons are chosen and added to the budget. Your builder can likely provide you with a very rough estimated cost for the overall project but without identifying the exact materials it’s likely that you will exceed your original budget.

Advantages

If you don’t know exactly what type of flooring, cabinets or amenities you want to have in the home and you’re not ready to make those decisions at the design phase, a cost plus contract is a good fit for you. You can confirm material and amenities as the project moves along, giving more flexibility to the entire project. We also find that clients who prefer higher end finishing’s prefer cost plus contracts so they can budget accordingly and ensure the custom work aligns perfectly.

Disadvantage

A proposed budget is often in place but majority of the time you will see project overruns because clients tend to upgrade more often and make last minute changes that can cause revisions to already completed work. Secondly, because materials can’t be purchased at the beginning of the project you may run the risk of having items being slightly more expensive at the time you need to purchase them. Just like any project, when changes occur, timelines need to be adjusted and can extend the project completion dates.

Fixed Rate Contracts

If you are one of those types of people that like to know all of the details, costs and timelines of a project before you start then you will want to have a fixed rate contract. Before the building of your log home starts you will have a detailed budget and timeline for the overall project. It is extremely important that you know what is included in your budget and what isn’t and we also recommend reviewing all of the subcontractor quotes so that you don’t have any surprises.

Advantages

If you have a set budget or timeline for your log home to be completed, fixed rate contracts are more likely to stay on time and on budget. If you have a simple design or know exactly what you are looking for you may even notice some cost savings since your log home builders will already know all of the details for the project before they start so materials can be purchased in bulk or they can identify the best time of year to buy specific materials.

Disadvantages

All of your building and finishing material have to be chosen before the projects start to allow for the project to stay on time and budget. Making all of these decisions at the start of the project can be overwhelming so make sure you talk to your designer, log home builder and other trades to have them answer any questions or concerns you have. If you realize after the fact that you do need to make a change you likely can still do it but it may affect the overall project cost and deadline.

To sum it up, if you have a tight budget, timeframe and know what you’re looking for, a flat rate contract may be best for you. If you aren’t exactly sure what you want all of your finishing’s to look like and are still considering additional add-ons but don’t have a tight budget or deadline ,cost plus may be the best option for you. Regardless of the type of contract you enter into with your log home builder make sure you ask a ton of questions, review all of the quotes, budgets and arrange to have weekly or monthly budget update meetings with your general contractor to ensure there are no last minute surprises.

Have a question or want to learn more? Contact Artisan Log Homes at info@artisanlog.com and we’d be happy to help you out

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