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    10-15. Eliminate change orders. - Electronic Edition

    10-15. Eliminate change orders. - Electronic Edition
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     Owner-builder Curtis B. of Valparaiso, IN told me: “I’m in commercial construction, and will break ground end of this season on my own home after 8-10 mos. of planning. We want to make sure there’s no change orders.” Curtis and his wife Cheryl are wisely investing most of a year planning because his construction background has taught him the economics of change orders.

     According to Custom Builder Magazine, the average custom home goes over budget by 12-19%. I love that statistic. Typical builderspeak. An average is a single number, not a range. But if you state it as a range, people can hope for the lower end, which may have been the lowest case measured. My guess is that actual direct costs went over budget by 19% and with added builder overheads, and interest costs for delay, easily 25% over.

     Construction writer Ron Horne says that the average custom home goes over by 20%. These are contractor-built homes, and with the average new custom home now over $850,000 a 20% increase could ruin your whole day. Why does it happen? Change orders. You agree to a budget number, you see what you get, and you change your mind. Then you undergo the cost of taking out and redoing something, far more than doing it right the first time.

     The antidote is planning. If you do your shopping and cross the T’s and dot the I’s, you’ll get what you want the first time. The average owner-builder reported to me a cost overrun of 5% due to changes. Much better than contractor-built, and another reason owner-builders save money. But even the 5% can be eliminated by good planning.

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