Sticking to the home build budget is one of the TOP home build concerns (if not THE top concern) that I hear from my blog readers and my ‘Before You Build’ Home Build Prep clients.
This is a VERY common fear among people getting ready to build their dream home. Sooo … if you’re feeling nervous or confused about the budget piece of home building, you’re definitely NOT alone.
I think just about everyone assumes they’ll go over budget when building because all we ever hear is … ‘it’s impossible to stay on budget’ and ‘everyone goes over budget’.
I’m calling bull crap on this one!
Yes, it’s true that *most* people DO go over budget when building a home, but that doesn’t mean *everyone* does.
This is YOUR experience and you don’t have to be like *most people*. I didn’t go over budget and you don’t have to either.
But believe me … the more information you know about the home build budget BEFORE you build, the better your chance of sticking to that elusive budget :).
In this blog post, I’ll answer your home build budget questions (e.g. ‘how many builds go over budget?’ , ‘who covers the cost when you go over budget?‘, etc.) PLUS I have a special invitation for you at the end of this post because I want YOU to feel equipped and confident in your ability to build your own dream home within budget (or at least very close to budget).
HOW MANY HOME BUILDS ARE OVER BUDGET?
You can google this question and find a million different answers (and I’ll share the most common answer below), but the best thing for you to do is to ask LOCAL builders how many of THEIR builds go over budget. You can do this when you’re conducting your builder interviews.
It doesn’t matter how many home builds go over budget in general. What matters is how many of YOUR potential builders’ homes go over budget.
I know, I know … you still want a general idea of how many projects go over budget, so let’s talk about it. My research (a.k.a. Google search) consistently suggests that 85-90% of home builds end up over budget.
However, this doesn’t give us the full picture.
It isn’t clear how many of these projects are significantly over budget vs more like my custom home build where we ended about 1% over budget (which is basically ‘on budget’).
While it isn’t surprising that the vast majority of builds are over budget, keep in mind that 10-15% DO stay within budget :). So it IS possible to build a home without blowing the budget.
Luckily, I was in that 10-15% and I share how I managed to stick to budget via this free on-demand video training: 3 Crucial Steps to Build Your Dream Home Within Budget (regardless of the current home build market).
As I mentioned above, you can get general statistics via Google, but the ONLY way to get an accurate idea of how much YOUR local builders go over budget is to ask during your builder interviews.
WHY DO CONSTRUCTION PROJECTS GO OVER BUDGET?
Many factors contribute to construction projects going over budget.
Some factors are completely out of your control (e.g. rising material/labor costs and time-lags with material delivery or available contractors), while other factors ARE within your control.
Although you can’t control rising costs and other unforeseen situations, you can maintain some ‘control’ over these extra expenses by adding a buffer in your budget to cover unexpected costs that arise during your build.
The biggest issues (within your control) that lead to budget overages are a lack of planning and a lack of vision for your future home. Indirectly, these issues lead to inaccurate quotes from builders because they don’t have the full ‘picture’ of your future home.
Without a clear vision of your future home, your builder will be unable to give you an accurate bid on what it will cost to build your home.
And without an accurate bid, it’s very likely that you will go into your build without a REALISTIC budget, and, consequently, you can kiss your chances of staying on budget ‘goodbye’.
I don’t want this to happen to you and that is exactly why I created the ‘Before You Build’ Home Build Prep Program to help YOU plan for your home build the RIGHT way so that you end up with a home that you love and is within (or very close to) budget :).
WHAT HAPPENS WHEN A BUILDER GOES OVER BUDGET?
This is highly dependent on WHY your build went over budget.
If the budget overage is due to you (the homeowner) upgrading finishes mid-build or creating change orders during the building process, then these particular budget overages come out of your pocket.
However, things get a little murkier when budget overages are outside of your control (e.g. rising material and/or labor costs). And even more murky when it’s difficult to pinpoint whose fault an overage is (e.g. the builder said they would order the light fixtures, but forgot and now the price has increased).
The person responsible for covering overages outside of your control typically depends on the type of construction contract you decide with your builder.
There are two primary types of construction contracts: Fixed-Price and Cost-Plus.
With a Fixed-Price contract, your builder is responsible for most budget overages that are outside of your control (but you’re still responsible for change orders and/or upgrades).
With a Cost-Plus contract, you are responsible for nearly all budget overages (whether the overage is within your control or not).
Side note: Most builders are using the cost-plus contract option during this volatile time in the home build market OR they have to build in extra buffers if using a fixed-price model (so it gets pretty expensive). I’ve also heard of builders doing a hybrid method of using the fixed-price contract model but excluding certain items from the fixed-price (e.g. lumber).
I highly recommend that you have a lengthy conversation with your builder so that you are VERY clear on how they handle budget overages that are outside of your control (or when it appears that the builder is to blame for the overage).
Learn more about Fixed-Price and Cost-Plus Contracts in ‘How Custom Builders Charge’.
TIPS FOR STAYING ON BUDGET WHEN BUILDING A HOME
My husband and I *barely* went over budget when building our house and I’m here to help you do the same!
Believe me … I’m fully aware that the building market is volatile right now and is a completely different market than when I built my home back in 2013. It’s been a crazy two+ years of sky-rocketing lumber prices and other building material cost spikes.
However, I promise that with the right preparation, even if you go over budget due to variables outside of your control (e.g. pandemic pricing), you’ll still be WAY closer to budget than you would be without proper planning. Seriously!
I’ve used my personal experience building a home within budget to create the ‘Before You Build’ Home Build Prep Program to help YOU stick close to budget too. BTW – I didn’t actually build my home :). I used a builder and subcontractors.
It takes strategic planning and preparation (long before you break ground) to have a chance of building your dream home within budget. This prep work will be invaluable when it comes to sticking to your budget (or at least close to your budget) when building your dream home
If you want to dive deeper and learn how I managed to stick VERY close to budget when building, you’re invited to attend my *FREE* on-demand video training: 3 Crucial Steps to Build Your Dream Home Within Budget (regardless of the current home build market).
Here’s exactly what you’ll learn during this FREE (virtual) training:
- The 3 biggest mistakes that get in the way of staying on budget when building.
- The 3 SIMPLE KEYS to help you build your dream home within budget (without sacrificing your must-haves so that you end up with a home you LOVE!).
- PLUS, I’ll share my step-by-step method that will help you build your dream home with more confidence, less stress, and a strategic plan to stick to your budget.
If you’re dreaming of building a home, but you worry about blowing the budget, you will NOT want to miss this training!