Home Building Contracts
Home Building Glossary · Last updated 2026-07-01
What Is a Home Building Contract?
The construction contract is the document that defines what you’re buying, what it costs, how changes are handled, and who carries which risks. For most Minnesota custom builds it comes in one of two shapes: fixed-price (the builder commits to a total for a defined scope) or cost-plus (you pay actual costs plus a stated builder fee, typically 10–20%).
How the Two Models Work
Fixed-price puts pricing risk on the builder — lumber spikes are their problem — in exchange for a built-in contingency you don’t see. It works best when plans and selections are complete before signing; vague specs get papered over with allowances (placeholder budgets for undecided items like cabinets or flooring), and low-balled allowances are the classic way a fixed price quietly grows.
Cost-plus puts pricing risk on you with full transparency — you see every invoice — and suits projects where scope will evolve. The protection to ask for is a guaranteed maximum price (GMP) cap or, at minimum, detailed monthly cost reporting.
Either way, payment flows through a draw schedule tied to milestones (foundation, framing, enclosure, mechanicals, completion), usually administered through your construction lender with lien waivers collected at each draw.
Why It Matters for Your Minnesota Build
Minnesota law bakes in specific protections worth confirming rather than assuming. Residential contractors must be licensed (BC number) — verify it at MN DLI, since license status is what connects you to the state’s Contractor Recovery Fund if things go badly. Minnesota’s statutory new-home warranty (Minn. Stat. ch. 327A) guarantees 1 year on workmanship and materials, 2 years on plumbing/electrical/HVAC distribution systems, and 10 years on major structural defects — a contract can add to this but can’t waive it. And Minnesota’s mechanic’s-lien regime is why you should insist on lien waivers with every payment: subcontractors your builder didn’t pay can lien your house.
Before signing, make sure the contract nails down: the complete plans and spec book by reference, every allowance amount, the change-order process and pricing, a construction schedule with a substantial-completion date, warranty procedures, and dispute resolution. A builder who welcomes those questions is telling you something; so is one who doesn’t.
Related Terms
Change orders · Custom home budgeting · Permits & inspections