Episode
Cost Plus Contract Explained: 3 Types + California Law
- Published
- May 9, 2026
- Duration seconds
- 2447
- Processing state
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Summary
A cost plus contract means your contractor gets reimbursed for every project cost plus a profit margin — but it comes in three flavors, and the structural differences determine who carries the financial risk. Download Your Free Cost-Plus Reality Check Tool Bill Reid explains cost plus percentage (most dangerous for homeowners), cost plus fixed fee (better protection), and cost plus with guaranteed maximum price (safest hybrid). You'll discover why California banned pure cost plus contracts for residential remodels under Business and Professions Code 7159.5, the industry-standard markup range (15-25%, or $75K-$125K on a $500K project), and the five drift triggers that push projects into cost plus territory. Bill shares seven critical questions to ask yourself before signing, the narrow band of homeowners for whom cost plus genuinely works, and why disaster rebuilds almost always require this structure. This is part one of a two-part series — the decide episode. Episode 57 next week covers tactical execution. Related: Episodes 50, 53. Section 3.202 of The Awakened Homeowner book. Free download: Tale of Two Homeowners story + Fixed Price vs Cost Plus micro-tool. BuildQuest beta at buildquest.co Understanding time and materials contracts, markup percentages, legal restrictions, and when to walk away from cost plus deals A cost plus contract reimburses your contractor for every project cost plus a profit margin — but it comes in three distinct flavors, and the difference between them determines who carries the financial risk. In this episode, Bill Reid breaks down cost plus percentage (the most dangerous for homeowners), cost plus fixed fee (better protection), and cost plus with a guaranteed maximum price (the safest hybrid). You'll learn why California banned pure cost pl…