ᐅ Developers with Limited Fixed-Price Commitment – Price Increases
Created on: 27 Sep 2022 21:42
D
DominicHannove
I would like to ask for your advice.
I am currently in contact with developers and facing a problem.
The developer I prefer only offers a limited fixed-price guarantee...
This means they cover price increases up to 10% until construction starts (the foundation slab). Any price increases beyond that I have to cover myself.
Example:
Construction starts in February 2022
Price increase for concrete blocks is 17% in January 2022
The developer covers 10%, I have to pay 7%.
And they intend to apply this to all materials.
It is already clear that price increases will occur. Does anyone know about the announced price increases and have an idea of how many additional percent I should expect? And can anyone roughly estimate the extra total costs I might face based on an original build price of about 350,000 Euro?
Unfortunately, I don’t believe we will be able to start construction this year.
I would be very grateful for any support.
PS: And before someone says, “Find a different developer”: This developer offers very competitive prices compared to others and, in my opinion, treats me well. I do not feel taken advantage of. He also says that his limited fixed-price guarantee is the only “fair” option for both sides, which I understand. I simply want to estimate the expected additional costs with your help! Thank you 🙂
I am currently in contact with developers and facing a problem.
The developer I prefer only offers a limited fixed-price guarantee...
This means they cover price increases up to 10% until construction starts (the foundation slab). Any price increases beyond that I have to cover myself.
Example:
Construction starts in February 2022
Price increase for concrete blocks is 17% in January 2022
The developer covers 10%, I have to pay 7%.
And they intend to apply this to all materials.
It is already clear that price increases will occur. Does anyone know about the announced price increases and have an idea of how many additional percent I should expect? And can anyone roughly estimate the extra total costs I might face based on an original build price of about 350,000 Euro?
Unfortunately, I don’t believe we will be able to start construction this year.
I would be very grateful for any support.
PS: And before someone says, “Find a different developer”: This developer offers very competitive prices compared to others and, in my opinion, treats me well. I do not feel taken advantage of. He also says that his limited fixed-price guarantee is the only “fair” option for both sides, which I understand. I simply want to estimate the expected additional costs with your help! Thank you 🙂
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xMisterDx28 Sep 2022 10:39mr.xyz1 schrieb:
You simply use the construction price index. Take the value at the start of construction (or whatever is defined in the contract) and compare it to the value at completion. It’s that simple.No. If things proceed as the original poster described, the developer wants to use their actual purchase prices for individual orders as the basis. Bricks, stones, mortar, cement, timber, reinforcing steel, windows, etc.
This is not only very difficult for the homeowner to verify, but in the current situation, it also carries extremely high risk. As I already mentioned, if the situation escalates further, if we have a harsh winter and the building materials industry has to shut down plants due to insufficient gas supply… then the prices for bricks, cement, stones will skyrocket to levels we can hardly imagine today…
My advice: don’t do it. This will almost certainly lead to disputes… and I have always been very reluctant to argue with my general contractor, because they usually hold the stronger position.
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