Five Reasons Why Your Project Goes Over Budget

  1. Not being realistic about what it costs.  When given a range of costs to expect, who doesn’t hear and remember the lower number and completely disregard the higher one?  In both remodels and new homes, just about everything is an unknown at the onset.  Even with a general contractor on board as part of the team from the beginning of design, each home is unique and there’s no way to know what it’s going to cost until everything is finally  bid and all the finishes are chosen.  That doesn’t mean that the professionals involved don’t have any idea of costs during the process, it just means there’s going to be a range  . . . which takes us back to the first sentence.
  2. Choosing the right general contractor.   Many times a contractor is called to come and look at a project where there are no plans or specifications and expected to quote a price.  While it’s important to get a feel for the cost of a project, it’s not much for a contractor to base a price on.  Many contractors will give the lowest possible price in this situation, knowing that once they’re on the job, additions will be possible because there were unforeseen challenges and expenses.  Even in this day of the internet, building is still a word of mouth business.  Contractors should be chosen based on past work, references and referrals.  Some contractors may be able to do the work for less than others, just as some do a lot of the work themselves and office out of their truck while others manage subcontractors to do the work and maintain an office space and staff.  Clients should pick the person with the approach and personality they’re most comfortable with.  After hearing numerous many stories about how a client chose the cheapest contractor and the project ended up costing what the most expensive contractor quoted, I’ve come to the conclusion that building prices don’t vary as much as people think and things just cost what they cost.
  3. Prices continue to rise.  Your contractor or architect can only base their estimate on the last similar project they were involved in, which may have been six months, or more than a year ago.  Whereas labor prices stayed flat during the recession, material prices continued to rise.  Now in a post recession economy, material prices continue to rise and labor prices are taking a jump as more pressure is put on a diminished construction labor pool.
  4. Comparing apples to oranges.  When I built my own home, I looked at the prices of similarly sized new homes on the market.  I reasoned that since these homes included the lot, I could surely build my custom home for the same price, especially if I excluded the lot in my calculations.  It turned out that I wasn’t even close.  Production builders make choices that custom home owners do not: cheaper doors and windows, less costly finish materials, simplified structural elements.  They also buy in bulk, paying less for materials – and labor.  Have you ever noticed how much faster it is to do something the second time?  They get the advantages of speed in construction because of the multiple times a single home model will be built.  We would never expect to pay the same for anything else custom made, but there’s a common perception that a custom house is just a house like any other and that’s simply not true.
  5. Going over budget on finishes.  It’s a fact:  it’s hard to put cheap stuff in your home.  There will be items that you fall in love with and have to have in your new home.  $500 more!  That’s nothing in the scheme of things!  But in actuality, $500 here and $500 there add up to real money in the end.  When a client asks, “Can we add this?”, unless it’s not physically possible, my answer will be “Yes, but it will add cost”.  I think that every client, upon hearing that, believes that something else in the project will balance the additional expense out and the bottom line won’t change.  It rarely happens that way and in the end it’s hard to even remember how the additions happened.