The builder knew that he needed to get this guy on contract in order to do any work, so he gave him an estimate that looked good on the surface. Unfortunately, when design changes increased the cost of the project, this builder wasn't up front about it. Talk about a nasty surprise!
When you're building a home, it's important to hold your builder accountable to your budget. There are two main philosophies of building, and the way you hold a builder accountable depends on which one they work out of.
For cost-plus builders, their fee is a percentage of the cost of the house. So you'll pay the cost of the house, plus a fee. There'll be a conversation about budget at the beginning of the project, but any upgrades or add-ons will increase the final cost of the house (and the builder's fee).
Fixed-price building is what it sounds like: we decide on a plan based on what we can do within your budget, and we don't stray from it. We're fixed-price builders.
You can find honest and dishonest builders of both types, but I'll bet you want to know where your money's going either way. Here's how you can hold your builder accountable to your budget based on which philosophy they hold.
The best way to hold cost-plus builders accountable is to go through your budget line-by-line. Ask about the materials, where they're coming from, what's the plan if they're unavailable, and more in that vein. Get specific and ask about what their contingency plans are.
You can also ask if they typically offer upgrades, and let them know whether or not you're open to the added cost of those. Ask how they hold their contractors accountable for waste, because typically with a cost-plus builder, that gets included in the final price, which you pay.
When you're working a fixed-price builder, all of those things should already be specified in the contract down to the doorknobs, how many paint colors, what kind of tile—that level of detail. But by all means, talk to your builder about it and make sure you're on the same page,
The important thing to remember with fixed-price builders is that you won't get what's not in the contract. If your budget increases, you may need to create a new home design to go along with it. But on the flip side, if there's waste, your builder pays for it. So they have an incentive to stick within your budget.
Whoever you choose to build your home, make sure they take your budget as seriously as you do!