6 Things That Could Blow Your Building Budget
There are many aspects of the home building process that can cause your budget to blow out, resulting in stress and heartache. However, if you take the time to properly plan your project and understand the potential risks involved, your build should run far more smoothly.
Keep reading to discover six things that can wreak havoc on your building budget – and how to avoid them.
1. Not engaging a builder early
All too often we have clients approach us to completely redesign their home after initially engaging their own architect or building designer but being left extremely disappointed. These homes were never going to be built within the clients’ budget because in most cases, the client or architect became swept up in the fun and all the possibilities of designing the home and lost sight of the project budget.
There are two ways to address this risk:
1. Engage a quality custom home builder from the outset to design and construct your new home and be clear about your budget upfront. Home builders are in the business of building homes (not selling plans) so it’s in their best interest to ensure that your design proceeds to construction.
2. Engage your own architect or building designer directly, however, also engage a quality custom builder at the beginning of your project and involve them throughout the design process. Most quality builders will charge a fee for this service, but it’s well worth it and will likely save you money in the long run.
2. A poorly run tender process
Another pitfall we see is where clients believe that they are saving money by controlling the pre-construction process and engage their own architect or building designer before requesting multiple builders to provide quotations on their design. Many people who want to build homes are not experienced project managers and don’t understand how to run an effective tender process.
If you’re planning to run a tender process, the best way to mitigate issues is to first ensure that you’ve engage a qualified and reputable architect or building designer and ensure that the quality of their construction documentation is complete and of the highest standard.
Then, produce a detailed specification document listing every selection and inclusion for your project so each builder quoting the job is making the same allowances and assumptions in their quote.
While this is a time-consuming exercise, it’s a worthwhile investment and will mean that you’re comparing apples with apples (not apples and oranges) when it comes to the resulting quotations. You’re also less likely to encounter any unwanted budget surprises down the track.
3. Exclusions in builders’ quotes
It’s critical that you’re aware of exactly what’s included and excluded in your builder’s quote, as some builders have many exclusions in the small print of their contracts. This could cost you significantly down the track if you haven’t budgeted from them.
4. Variations
Variations are changes that are made to the project scope after the building contract has been signed, which often lead to increased project costs. The best way to avoid variations is to be well prepared, thorough and not rush. Take the time upfront to properly plan and specify your project and don’t assume anything.
Make sure that your builder provides you with a very detailed project specification detailing all selections and inclusions in your building contract and never sign a contract until you’re certain it includes everything required for the project.
5. Prime cost and provisional sum items
Unlike variations, Prime Cost (PC) and Provisional Sums (PS) are included in a contract. Sometimes you may not be in a position to choose every item for your new home when the building contract is signed, so a PC or PS allowance may be included to enable these selections to be made during the construction phase.
The important thing here is to ensure that a reasonable amount is included in the contract for these items to minimise the potential for a budget blowout. You should also plan for these contingencies by having a ‘buffer’ amount in your financial budget to cover any unexpected PC or PS over-runs.
6. Extensions of time
An extension of time is a delay that could not be reasonably foreseen at the time of contract signing, which relieves the builder from liability of damages such as liquidated damages from the original date of contract completion for the period of the claim.
There are a number of causes for extensions of time, including inclement weather days that occur over and above the allowance made in the contract, variations to the project scope, unknown conditions (i.e. your builder encounters rock, which causes project delays due to the extra time required to excavate and remove it from site) and delays caused by the client.
If you’re looking to work with a builder who can ensure your budget is adhered to throughout your build, get in touch with the expert team at ARCA today.