Do I tell my contractor my true budget?
I feel like I am at a loss. I am about to start building my own house and I have no idea if its good or not to tell my contractor my true budget for this place. I feel that I’ve picked a olid GC but I dont know if I should tell him my full budget or give him one thats 10% less and expect that 10% to be eaten up by potential issues.
Any advice would be greatly appreciated.
Replies
This is a question that might never be truly answered correctly.
You evidently are going to receive a bid on this house according to a set of specifications. It will not include potential issues.
Well, sort of.
Just as you don't want to pay extra for things that should have been included, your contractor sure doesn't want to eat extras.
My estimates (and I'm a remodeler, not a home builder) usually include space for what less experienced operations my want an extra charge for. I try not to be surprised by what "couldn't be seen". This is more of a realistic approach in remodeling. Too many of the competition seem to make the real money on that "couldn't be seen" part.
A good builder will have assembled a good group of subcontactors that know how to price out all the portions of your home. It usually only takes changes on your part to alter that initial cost, but you can expect the potential for other charges as a result of things that happen during the building. Here is where you can get in over your budget.
There are some that say expect the final cost to exceed the original estimate by 10 % and you should budget accordingly. The thought is that this should cover both your changes and those other construction overruns.
Are you done with the design stage? Has he bid it according to all the specs necessary?
The question is, do you tell yourself your true budget? How much do you think the structure is actually worth? How much extra could you scrape together if you found something "extra" you really wanted?
Probably better to express to him how firm your budget is. And have a good contract that spells out what's covered and what isn't.
You 'budget,' or your general finances, have nothing to do with the contractor.
Don't put the cart before the horse.
You know what you can afford, or what you want to spend. Perhaps you want to share this information with your designer / engineer / architect. Do you expect the contractor to be the designer? Then he has a need to know your desires, the scope of the job, and your expectations.
Otherwise, here's the way it works: you present him with your design, and let him give you a price. If it's within your expectations, you agree to the deal. If not, it's time to re-evaluate the design. At this point, it's perfectly proper for him to want some assurance - bank financing, for example - that you have the funds available to meet your agreement.
OK, you've agreed to his price, and work begins. He begins presenting you with 'change orders,' or talking about unexpected complications, etc.
NOW is the time to slam on the brakes, and determine, for yourself, if his cause is just. It might be; material prices can be quite volatile. Other times, the guy never had any intention of doing anything but getting every last penny from you. Never be afraid to stop the job and pay up.
I mean ... look at it this way ..... who ever said you MUST spend every last penny in your budget?
It's all about keeping your eyes on YOUR target. He got a great deal on marble, but you want Formica? So, what do you care about his 'deal?' You want Formica. He "always" just does one coat of mud? Do your specs call for three? Or, did you leave that to his discretion? Permit cost more than he expected? Call the city and find out.