Thursday March 16, 2017
Building is Not a Game of Poker - Why you Should Share Your REAL Budget
Should you tell us your real budget? If you want a successful project, the answer is yes.
We occasionally meet homeowners who don’t want to reveal their true budget numbers. This lack of disclosure is not in their best interests, and almost always sets the stage for miscommunication and misallocated resources. This reluctance is understandable, of course. Much of the available advice about hiring general contractors treats the process as a zero- sum poker game, with the contractor as the opponent. This mentality leads people to hold their cards close.
But the adversarial approach is the least effective one when planning a custom home. You only get one bite at the apple, and if you end up scrimping or splurging in the wrong places, you’ll regret it for a long time. Success demands that you choose a builder in whom you have enough trust to discuss how much you are prepared to invest. You can give a range rather than a hard number, but it needs to be realistic.
A reality-based budget is a crucial tool in the construction planning process. Most people have preconceived notions of the average cost per square foot to build a custom home they have seen here and there. But these assumptions seldom support the designs and products they’re envisioning, and the result tends to be frustration. Putting your budget cards on the table is the only way the builder can paint an accurate picture of what is possible.
There are many ways to shed significant dollars out of a construction proposal. We can recommend high performance materials that are significantly cheaper than the “top-of-the-line” selection, but still look great. We did just that at a recent meeting with a prospect looking to build a new custom home in Rehoboth Beach Yacht & Country Club. At the same meeting, however, we recommended that they increase their budget for HVAC systems to accommodate an advanced, variable-speed unit that will save them thousands of dollars in the future. This is just one example of where a quality builder can help you make smarter decisions if he knows the real budget.
The best approach is to bring us your design—whether it’s a full set of plans or just a rough concept—along with your product wishes - for a planning session. We will weigh these against what you want to spend. If there’s a gap, having complete information opens the door to finding creative solutions.
These solutions usually involve a bit of value engineering, which is a systematic approach to making intelligent tradeoffs that satisfy the homeowners’ priorities.
Value engineering may include altering the layout, such as reducing square footage in a way that doesn’t take space from the rooms you consider most important. If you’re applying for a construction loan, a knowledgeable builder will also make sure to reduce costs in ways that don’t lower the home’s appraised value. For instance, the market will likely value the home the same regardless of its roof covering, so choosing standard shingles instead of that shiny metal roof could slash the roofing cost by 75 percent without affecting the loan amount.
The value engineering process can also include specifying less-costly products that, while not ideal, are easily upgraded later. For example, you can replace that $50 light fixture with the $1,000 chandelier you want when you have the cash. You can design in an elevator shaft, but not install the elevator until you need it. Or you could opt for inexpensive carpet today and install hardwood floors in a couple of years. The builder will also ensure that you make the best choices today on items that aren’t easily upgraded, like cabinets and countertops.
This tradeoff process can go on until you have a set of plans and specifications that give you as much as possible of what you want without creating financial hardship.
The builder can’t do this creative work without an accurate budget. In other words, an honest discussion about money is a prerequisite to getting a result that will satisfy. But it all comes down to choosing a pro that you trust to be your partner.
A Design/Build company like Turnstone is the best source to balance the tradeoffs to get your budget and design just right.
[This blog is inspired by an article by Castle Homes of Brentwood, TN]