A cost overrun is an amount over your original budget that you’re charged by the contractor building your custom home or renovating your house. This might include changes, additional work, low estimates, or unforeseen conditions. When you are planning the project and considering your budget we always recommend you have a contingency to account for these types of things, which could crop up.
Unfortunately for some of the reasons discussed before in this blog it isn’t uncommon that residential construction projects go over budget. Unforeseen conditions include items like soil conditions, which require changes in the design of your foundation or insect damage behind existing walls. These are called latent conditions and unless you pay to do exploratory work before the construction begins, neither you nor your contractor would know these conditions existed. That is why you have a contingency. The unforeseen will always show up unexpectedly. So expect it. As much as possible have your contractor get real bids and quotes from his trades before the project begins.
Changes and additional work can be kept to a minimum by fully understanding what you are building before you start. If you can’t read plans, then have the architect or contractor explain to you everything that is on the plans. Once you have accepted the design then you have to maintain the discipline to enforce the budget. You can always make the house nicer and nicer; but that costs money and its often surprising to clients how it adds up in the end.
If you’ve enjoyed this post, take a look at our FREE e-book, Your Guide to Feeling More in Control of Your Construction Project. It will help you understand the construction process and give you tips each step of the way.
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