Contract Price vs Final Price

Introduction

The contract price is the figure you agree to when you sign. The final price is what you actually pay by the time the home is finished. On many builds the two are not the same, and the gap can run to thousands of dollars.

The contract price is only a starting point

The contract price reflects the scope, allowances and assumptions known at the time of signing. Several contractual mechanisms can move it before the work is complete.

What can move the price?

Variations, Prime Cost Item and Provisional Sum adjustments, owner changes, latent or unexpected site conditions and rise-and-fall clauses can all change the amount ultimately payable.

Allowances are estimates, not fixed costs

Prime Cost Items and Provisional Sums are allowances. If the actual cost exceeds the allowance, you pay the difference - so generous-looking inclusions can still push up the final price.

Budgeting for the gap

Understanding what can move the price lets you set a realistic contingency rather than assuming the contract price is the final figure.

Questions to Ask

What is the contract price and what does it include?

What can increase it before completion?

Which items are only allowances?

How are variations and adjustments calculated?

What contingency should I allow for?

The key lesson

The contract price is where you start, not necessarily where you finish. Know every mechanism that can move it - variations, allowances, site conditions and rise-and-fall - before you sign. Cost-plus pricing, and how a final price is built up from actual cost, is examined in a separate guide.

Before You Sign

This guide provides general educational information for South Australian homeowners. It is not personalised legal advice. The effect of any issue depends on the wording of your own contract, schedules, Special Conditions, plans, specifications and the facts of the project. A good builder and a well-understood contract should work together. Before committing to one of the largest financial transactions you may ever undertake, consider having the actual contract reviewed so you understand the obligations, notice requirements and consequences before they are tested on site.

Before You Build. One Signature. One Chance.