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How To Avoid Costly Change Orders When Building a Home

Building a custom home requires making a lot of choices about the layout and size of rooms, the exterior look of the home, the materials used inside and out, and the colors for everything in the house from paint to tile to flooring. It's a lot of choices—often more choices than people realize when they first dream of building a custom home.

Costly Change Orders

And change orders can be costly. In fact, saying "costly change orders" is redundant on its own, because every change order will come with a cost, whether it's related to budget or time.

Many change orders can be prevented with proper planning up front. That's not to say that there won't still be change orders, but you can certainly decrease the number and the total cost of them.

Let's look at two different examples to illustrate this.

Example 1

In the first, the contract cost to build the house is $280,000. By the time the house is finished, there have been more than 70 change orders at a total cost of more than $40,000! That's about 15% of the original contract, and it delayed construction for a combined six months of time.

How do that many change orders happen? Poor planning. The client was in a hurry to start because she thought the sooner she started the sooner she would finish. But she didn't take the time to think through her needs, wants, and what life would be like in that house. As the house started to take shape, she realized how many things about the original plan didn't fit her goals and requested changes.

Example 2

The second house was originally contracted at more than $1 million. They ended up with 40 change orders at a total cost of $55,000, which is less than four percent of the original contract. Most of those change orders were little things like colors and fixtures rather than structural decisions or changes that required undoing finished work, so there were very few construction delays.

The owner of the second home invested a lot of time up front to ensure she fully considered every construction-related decision. The pre-construction period lasted two months, but her investment of time paid dividends in avoiding delays and saving money on construction loan interest.

The most important factor in avoiding change orders is proper planning up front.

Be sure you factor that time investment into your decision to build a custom home or you may end up paying more than you budgeted for initially.

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