Heard of someone’s new house going over budget? Scared this might happen to you?
Building or renovating your new home is a lengthy and expensive undertaking due to its size and complexity. It presents ample opportunity for pricey mistakes and cost overruns. Nobody likes to pay more for something than they should, and given the cost to build a house or renovate, such overruns really hurt. Yet sadly I hear of this happening all too often. It’s no wonder people fear the building process.
Is going over budget avoidable? With Myki apparently not, with building projects, yes it can be avoided. The key is to manage costs throughout the process.
As this is such am important topic, I want to explore it in the depth, therefore part two will complete this blog topic next week.
The Architectural Design Phase:
When working with your architect its imperative they are constantly giving you cost estimates with each new design. Two things control the cost of a building: its size and its level of finish. All projects begin by discussing with your architect your brief, which is your wish list. If this amounts to more than your budget can afford, then together you must discuss ways to bring costs back.
Cutting costs is a team effort. It’s also easier to do whilst you are still working on paper not on site; at that point there is no turning back. Be prepared to make some tough decisions, hopefully your architect told you before starting how realistic your budget was, so surprises at this point won’t be too drastic. You must either reduce size, or take out some features. We all dream, and would love to have it all, but that’s not the reality for most of us. However great design is possible at any price point. Whilst smaller budget projects may not have all the bells and whistles, they can still look beautiful.
The Tender Process – selecting a builder:
The tender process involves several builders pricing your project in the hope of winning the contract. Without all the necessary information present, the builder cannot prepare an accurate price; cost overruns are already well in motion and coming to bite you later.
Two things are required for a builder to accurately price a project. Highly comprehensive architectural drawings, and thorough specifications. The drawing set is literally the instruction book that explains to the builder how to build your home. The ‘specification’ defines the level of quality and what each fixture and fitting is, eg type of bench tops, door handles etc.
Without everything shown in the drawings and called up in the specification, the builder won’t know to quote them, and wont. You will select a builder whose price looks to be on budget. Later these omissions will come up on site; and with them extra bills with your name on them. I tell my clients: spending that bit extra on highly comprehensive drawings ensures you avoid tens of thousands of dollars of additional costs later. An accurate builder’s price at Tender time, is your best bet of the final bill meeting the agreed contract price.
Things can still go wrong: weather causes delays, and there will always be some additional costs, it’s inevitable, buildings are extremely complex, not everything can go perfectly. It’s for this reason that building contracts have a contingency sum written into them allowing for this; usually 10% as a buffer for clients to dip into should they need. Here’s an example: if your budget were $550,000, you would select a builder for $500,000, then add the 10% contingency on top. The contingency is usually enough to cover poor weather and the problems that arise on site, however it will not be enough to cover omissions from poor drawings and incomplete specifications.
Lastly pay your architect to thoroughly scrutinize the builders’ quotes. Don’t save money on taking the project over at this point. The builders are competing on price and I am sad to say but many will look for things to leave out to bring their price down to win the job. Later on the bills you thought were included start filling your mailbox.
Tune in next week where I cover what not to do during construction, to avoid your project going over budget. If there are any questions on this matter, please ask in the comments section below. I would love to discuss it with you all further.
Click on the image below and zoom in to see an example of a comprehensive construction drawing. This is one drawing of a set of 20 sheets like it for this renovation project.