Building new home. Cost Plus vs Turn Key (modular homes, construction)

[Kenlorz]

Looking for advice. We have purchased a lot in Sevier County and are in the planning process phase of construction of our new home. We have chosen a builder (who has come highly recommended and we have toured many of his finished houses, spoken with home owners, and the warehouses we have visited to make our finishing selections have all stated we have chosen a great builder). To fit our tight budget, he has recommended we do what is called "Cost Plus" construction. We pay for all materials and he adds on for labor. He has told us that if he were to build our desired house as a "Turn Key", he would have to pad the price to offset any unforeseen potential costs and we would be 40k over our budget. He feels the only way we can do build our house in our budget is to do Cost Plus. I have a former banker friend who is telling me never to do Cost Plus, that it is a construction trick that contractors play and that you will end up paying more in the end then if you just did Turn Key to start. Looking for feedback and thoughts for one versus the other.

[Barking Spider]

Did you ask any of his previous clients what they did? I would start there.
Pad the price? That's what change orders are for - changes.

[geranium]

It does sound as though the builder is pushing you toward Cost Plus. Will you have any control over how high costs can go?

[BigJack]

Cost Plus.........
Tells me to look for another builder. Be wise.......
Hind site is always 20/20.

[High Altitude]

Your builder is basically saying that he isn't confident he can build what you want for the money and isn't willing to take the risk.

I would never do cost plus. The builder has ZERO incentive to do anything efficient since all costs are on you. At the same time you don't want the builder cutting corners (we will get to that).

Since you own the land, YOU are in control. Don't ever forget that.

Put the risk on the builder. Cost plus puts the risk on you.

Get a design, spec out all the finishes and materials, get bids from various builders, hire builder and then hold them to building to the exact design and specs. The more builders you talk to the better.

You need a contract that spells out exactly what you are going to get for a fixed price.

[Kenlorz]

Thanks for all the advice everyone!

[SJCINTN]

I agree. Don't write your builder a blank check!! We've been considering a new home and I've been intrigued by the new modular homes. They're nothing like the ones of two+ decades ago. Oddly enough, I became interested in this after watching the HGTV show called Breakneck Builds. If I hadn't seen the quality and variety of modular homes that are being built across the country I'd laughed at the suggestion of a modular home.