Your Preliminary Plans Are Over Budget, Now What?
The Owners are ready to build their new home, remodel or addition and schedule meetings with three different Custom Home Builders. Each Builder is qualified and has glowing references. You tell each Builder exactly what type of home you want. Provide a floor plan sketch, photos and many details of what you would like included in your new home. You even share what your budget is for the entire project. The Builders go off to draw preliminary floor plans and a front elevation in preparation for the next meeting.
At the second meeting, each Builder presents their interpretation of the home you would like to build. The not to scale sketch you provided the Builders turns out to actually be 1,500 SF larger than you thought when brought to scale. Two of the Builder explain the home sketch you provided with details is way over your budget but one Builder tells you, it’s no problem he can build this palace for the budget you provided. What do you do? Which Builder do you believe? The two that said, you can't afford to build the home you want within the budget requirements or the one that said, it’s no problem?
At this point, all the Builders have is a sketch of the front elevation, floor plan and a general idea of the home specifications. The Builder’s next step is to hire the Architect to actually design the home and then bid it out with the various suppliers and subcontractors. Until the Builders have a detailed set of plans and specifications bid out with the Builder’s team, nobody really knows what the project is actually going to cost? After all, this home has never been built before. The Architect charges $10,000 for a full set of plans. What should an Owner do at this point? Hire the Builder and Architect that told you what you wanted to hear or the two that said, the home is way over budget?
The risk; you may be out $10,000 or more if the Builder that told you what you wanted to hear is wrong and the home is actually way over your budget. I can't tell you how many Owners I’ve met over the years that have a rolled up set of plans they can't afford to build on a closet shelf. Frankly, it’s a common problem, Builders and especially Architects, like to tell the Owners what they want to hear.
So what do the Owners do? This is the time to pause and think carefully. First, ask each Builder to provide a set of specifications so you know exactly what they are including in their ballpark pricing. Now you have a floor plan, front elevation and a set of specifications. It’s not all you need but at least you know everyone is reading from the same sheet of music. After all, up to this point all the Owners and Builders have is conversation, without any obligation. The Builder's can tell you anything because there is no actual commitment.
Second, now is the time to speak with each Builder’s Homeowner references. Does the Builder have a history of underestimating the cost of homes and change orders? Read More- How To Select A Builder
Third, do you trust the Builder with the low price? Is he organized and shows up on time and prepared for the meetings or is he disorganized? Are there other tell tale signs that point to inaccuracy? Read More- Can I Trust My Builder?
Fourth, all the Builders are motivated to tell you what you want to hear and price your home project on the low side. After all, Owners tend to hire the lowest priced, qualified, Builder and the one that tells them what they want to here. It takes courage for a Builder to say, this home is way over your budget because, he knows from experience it’s probably going to cost him the job. If two builder's out of three tell you this home is over your budget, it probably is!
Unless, you are prepared to increase your budget it’s time to look at options that will decrease the price. Remember, this house is more than you want to spend and you haven't even started selecting the cool stuff for you new home like cabinets, lighting, flooring and interior appointments.
Let's say, I’ve convinced you that it’s time to cut this palace down to size, so where do you start? Owners typically suggest cutting the quality of interior appointments to save money but "that’s where it will help you the least and hurt you the most". Eighty percent of the home costs are in the actual structure and required items like permits, impact fees, driveways and landscaping. You are still going to need wood trim, appliances, cabinets, lighting and flooring no matter how much you cut costs. So even if you weald a meat cleaver at interior appointments you will only say about 10% unless, you were really extravagant with the up front specifications. The end result will be a house with cheap finish details and that's what most people see. That’s going to hurt you when it's time to sell!
Let’s look at where all the high cost items are when building a home, in order of magnitude:
- Building lot.
- Square foot of living area.
- Square foot of garage and porches.
- Swimming pool.
- Screen enclosure.
- Roofing choices.
Each of the above items has an impact on many building cost items or are expensive all by themselves. Every square foot of living area increases the cost of the slab, roof, flooring, paint, drywall, air conditioning, trusses, framing etc. Many of the trades charge by the square foot (SF) of living area or total SF under roof. So you can see that the SF of your home is a large cost item especially, the SF of living area.
If you want to save on the cost of building your home, don't make it any bigger than you need? Do you really need that tile roof, swimming pool, intricate roof design, boat dock, screen enclosure or 3 car garage? Follow your Builder’s lead. If he points to certain features of your home that are potential cost saving measures, there’s a reason. After all, he’s on your team! If you design a home that you can't afford in the end, nobody wins. The Owners don't get their new home and the Builder doesn't get to build it for you. The end result, another set of rolled up plans on the closet shelf.
The best Owners are those that are willing to be guided. No matter how experienced you think you may be, you are dealing with professionals with decades of home building experience. They do this every day! If you get to the point where you feel you know more than your Builder, it's either time to find a new one of question whether you are really listening.
Have an awesome day!
Mike
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