Why and how do wholesale builders do fixed site costs?

Wholesale builders offer fixed site costs to simplify the sales process, build buyer confidence, and improve the marketability of house and land packages. However, offering fixed site costs also involves calculated risk and strong backend processes.

✅ Why Do Wholesale Builders Offer Fixed Site Costs?

1. Investor-Friendly Selling Point

• Investors want certainty—they don’t want to worry about unexpected construction costs.
• Fixed site costs make it easier to calculate yield, cash flow, and loan approvals.

2. Simplifies Channel Partner Sales

• Marketers and aggregators can sell with confidence, knowing there won’t be post-contract blowouts.
• Helps standardize marketing materials and packages across multiple partners.

3. Valuation and Loan Approval Support

• Valuers are more confident with fixed total build costs.
• Lenders prefer predictable pricing—fewer variations mean faster approval.

4. Market Differentiation

• It’s a competitive advantage in markets with many builders.
• Seen as a premium, all-inclusive offering, especially in new estates.

⚙️ How Do Builders Actually Fix Site Costs?

🔍 1. Data-Driven Risk Management

• Builders work with developers to pre-study the land:
  • Soil type
  • Contours and slope
  • Service connections
  • Easements and overlays

🧾 2. Tiers and Allowances

• Some builders offer “fixed site costs” within a reasonable allowance, e.g., up to 500mm of fall, M-class soil.
• Costs beyond that (rock excavation, deep sewer runs) may still trigger a variation clause.

🏘️ 3. Volume Agreements with Developers

• Builders often know the land in bulk estates and get engineering plans early, letting them pre-price confidently.
• May get early access to civil and contour plans from the developer.

🔒 4. Buffering and Contingencies

• Builders include risk buffers in pricing to cover unknowns:
  • 5–10% contingency in costings
  • Adjusted across multiple packages to average out

📄 5. Tight Scope of Works

• Clear inclusion and exclusion lists define what is covered (e.g., includes rock excavation up to X cubic metres).
• They may limit fixed pricing only to pre-approved lots with known characteristics.

⚠️ Risk for Builder

• If the block has unusual conditions (deep sewer, high fill, hidden rock), the builder bears the loss.

  Builders manage this by:

  • Accepting risk on select, well-understood lots
  • Spreading risk across many builds
  • Adjusting future pricing after losses