How to Price a Change Order on a Custom Home (Markup, Overhead, Time)

Short answer: To price a change order, list every direct cost the change adds or removes: subs, materials, your own labor with burden, equipment, permits and the supervision and admin time it takes. Add the markup your contract allows, or your normal job markup if it is silent. State the added days, then get it signed before the work starts.

Why change orders lose money

Most change orders do not lose money because the markup is too low. They lose money because costs are left out, the price is a guess made in the field, or the work starts before anyone signs. A change also costs time you do not see on the bill: pricing it, reordering, rescheduling trades and extra site visits.

Before you price anything, read your contract. It often says how changes are priced, what fee or markup applies, and who must sign. The AIA A201 general conditions, for example, say a change order states three things: the change in the work, the change in the contract sum and the change in the contract time.

What to include in the cost

Subcontractor quotes for the added or changed work, in writing
Materials, including delivery, restocking fees on anything already ordered, and waste
Your own crew's labor at a burdened rate, meaning wages plus payroll taxes, workers' comp and benefits
Equipment rental, dumpsters and temporary protection
Permit, plan revision, engineering or design fees the change triggers
Site supervision and project manager time directly tied to the change
Credits for work or materials the change removes

AIA A201 Section 7.3.4 lists a similar set of costs (labor with burden, materials, equipment rental, bonds, insurance, permits and taxes tied to the change, and supervision attributable to it) for changes priced after the fact. It is a useful checklist even when you price up front.

Add markup the way your contract says

On a fixed-price home, the change is usually a lump sum: your cost plus your markup. On cost-plus work, the change is often the cost of the work plus the contract fee, so the fee percentage is already set. If the contract states an amount for overhead and profit on changes, use it. If it is silent, AIA A201 Section 7.3.4 falls back to a reasonable amount.

Builders disagree on how much. Buildxact recommends pricing every change off the original estimate with the same markup, overhead and labor rates. Michael Stone of Markup and Profit argues changes should carry your normal markup plus at least 10 points, because small changes cost more to manage. Pick a rule, write it into your contract, and apply it the same way every time.

Markup is not margin. A 20% markup gives you about a 16.7% margin on the change. See markup vs margin before you set the number.

Lump sum or time and materials

Use a lump sum when the scope is clear, like a fixture swap or added outlets. Use time and materials (actual cost plus markup) when nobody can see the bottom yet, like rot behind a wall. If you use time and materials, put a not-to-exceed amount on it and send the client the actual costs as they come in.

Credits and swaps

When a change removes work, the credit is usually your actual net cost for what was removed. When a change adds some work and removes other work, AIA A201 Section 7.3.8 figures overhead and profit on the net increase only. Check what your own contract says before you net them.

Name the schedule days

Every change order should say how many days it adds, even if the answer is zero. Extra days carry real cost: supervision, insurance, temporary utilities and, on a spec or client-financed home, more loan interest. If the days are not in the signed change, they are hard to recover later.

A worked example (SAMPLE, made-up numbers)

On a fixed-price custom home, the client asks to vault the great room ceiling. The builder's normal job markup is 20%.

Framing sub quote: $6,200
Lumber and hardware: $3,100
Drywall sub, added scope: $1,400
Supervision, 6 hours at a $65 burdened rate: $390
Direct cost total: $11,090

At a 20% markup the price is $13,308, and the change keeps $2,218, about a 16.7% margin. Using the normal markup plus 10 points (30%), the price is $14,417 and the change keeps $3,327, about a 23.1% margin. The change order also states 4 added working days.

If the client also drops a built-in bookcase in the same room with a $2,000 net cost, the net added cost is $9,090. With markup on the net increase only, the price at 20% is $10,908.

How the change shows up in the books

Add the signed amount to the house's contract price and the cost to its budget the same day
Code the change's costs to the house and the right cost code, tagged to the change order number, so budget vs actual shows whether the change made money
Bill it on the next draw or invoice, and log the billed and paid dates in your change order log
Update estimated total cost and contract value on the WIP schedule, so percent complete and over or under billing stay right
At closeout, compare the change order's price to its actual cost and adjust your pricing rule if changes keep coming in under margin

If you run changes in Buildertrend or JobTread, make sure each signed change reaches both the job budget and QuickBooks, so the books match the software. See Buildertrend and QuickBooks.

How we help

Each month our team codes change order costs to each house, ties every signed change to the contract price and the next draw, and shows on your job cost report whether each change made or lost money. Our founder reviews every close before it reaches you. This is part of Builder Books, $1,500 a month for up to 5 active homes. Builder Controller, $2,900 a month for 6 to 10 active homes, adds a monthly WIP schedule and a 13-week cash forecast. See pricing, construction bookkeeping or request an introduction. We do not give legal advice on contract terms.

Sources

Common questions

What markup should I use on a change order?

Use what your contract says. If it is silent, many builders use their normal job markup, and some add more for small changes because they cost more to manage. Pick one rule and apply it every time.

Should I charge for the time it takes to price a change?

Many builders include estimating, supervision and admin time in the change price. Whatever you do, say it in your contract so the client knows up front.

Do I need a signed change order before starting the work?

It is the safest practice. A signed change states the work, the price and the added days, and it is far easier to bill and collect than a verbal yes.

How is a credit priced when the client removes work?

Usually at your actual net cost for the removed work. When a change adds and removes work together, AIA A201 figures overhead and profit on the net increase only. Check your own contract.

By John Mos, Founder. Updated October 29, 2026. We do not give tax or legal advice. Please ask your CPA or attorney.

How to price a change order on a custom home