The Home Building and Remodeling Show

Budget Blowouts and Builder Blunders: What You Need to Know Before Building

• Chris Kerby • Season 2 • Episode 1

Share episode

Send us a text

You've dreamed about building your custom home for years, but are you prepared for what lies ahead? Before you break ground, learn why the National Association of Home Builders reports that most people exceed their budgets by 10-20% when building custom homes.

The budget represents just the first of ten critical mistakes homeowners make. Hidden costs lurk everywhere – from utility hookups and site preparation to surveys and landscaping requirements. One particularly confusing aspect is understanding the difference between "heated and cooled square footage" versus "under roof square footage." As our expert Adam explains, a home with 1,700 square feet of livable space might actually have 2,500-3,000 square feet under roof when porches, garages, and other non-heated areas are included. This misunderstanding alone can add $100,000 or more to what homeowners expect to pay.

Your choice of builder might be the most consequential decision you'll make. The builder-client relationship can transform your dream home into either your greatest asset or worst nightmare. While budget constraints and timelines matter, that gut feeling when interviewing potential builders shouldn't be ignored. And never select based solely on the lowest bid – there's usually something missing from that estimate.

Communication forms the foundation of any successful building project. Establishing clear expectations about meeting frequency, acceptable contact methods, and communication hours creates a framework for addressing inevitable challenges. When problems arise, measured responses prove far more effective than emotional reactions that can damage the builder-client relationship and lead to avoidance patterns that ultimately hurt your project.

Whether you're a first-time builder, a DIYer seeking tips, or a contractor looking to grow your knowledge base, this episode provides critical insights to help you navigate the complex journey of creating your dream home without it becoming a nightmare. Subscribe to our podcast and follow us on social media to continue learning how to build better.

Support the show

Speaker 1:

The Home Building and Remodeling Show. Let's go. Welcome everybody to the Home Building and Remodeling Show. My name is Chris Kirby and I'll be your host. I am the owner of three construction companies on the Alabama Gulf Coast. The show is about residential construction. We're going to cover topics of home building and remodeling. Are you thinking of doing a remodel or building a home? Are you a contractor looking to improve your knowledge base or grow your business? Have you ever done a remodel project or built a home? There were so many things you wish you knew or that you could have done differently during the process. Then this show is for you. We break down the process of building and remodeling and how to have the best results during your project. Whether you're a DIYer looking for tips, someone looking to hire a contractor to do a project, or a contractor looking to expand your knowledge base or your business, welcome aboard. Glad to have you. Stay tuned.

Speaker 1:

We kick off the show with my thoughts on home building and remodeling. I'll share best practices and talk about some of our experiences in business and out in the field. These shared thoughts and lessons learned are meant to help you on your very own journey. Let's go Thinking about building your dream home. Don't let it become a nightmare. Most people will make one of these costly mistakes and some of them will shock you. Stick around to avoid budget blowouts, bad builders and design disasters. Number one on the 10 biggest mistakes people make when building a custom home is the budget. People don't understand how much it costs to build a house. So the more you can educate yourself and your builder can educate you on the cost other than the construction cost of the home, the better you'll be throughout the process. So let's talk about some of the things that come up during a build that make your budget bust, and one of the things that commonly come up are the cost for utility hookups, such as sewer connections, water connections. Due to the fact that you're on public or private sewer, there could be costs for well, there could be costs for a septic tank. These are costs that are unassociated with the build that usually fall on the client themselves. So, for instance, the builder isn't going to be responsible for making sure that you have the water connection there. However, they can help you navigate the process with the municipality that you live in or the county that you live in to make sure that the connection is done. They're just not going to pay for it. It has to be put in your name. But those are some of the small things that can bust the budget right off the bat.

Speaker 1:

A couple of other things that we always see during the process of a home build is there's a lack of contingency in the budget for changes, and we want to make sure that you understand. You need to set aside some money, have some contingency money for the changes that you want to make to your home, and this is important because you get the plans designed. But the process of doing a home build takes a while and throughout the process you may have inspiration or you may see something else or ideas that you want for your home and you can make those changes. It's just when is the right time to bring it up, when is the right time to let your builder know, and because it is more costly to do changes at certain stages of the build than it is earlier in the game. So the sooner the better is my suggestion to you. So another cost I want to talk about that can bust your budget or make you go over budget from the client side is the site work. So this is something that your builder should talk to you about.

Speaker 1:

But a lot of times in the beginning stages, let's just say you have land that you need cleared or you have to bring in an extraordinary amount of dirt to get the site ready for construction. Those are costs, most time that are unassociated with the construction phase and the builder. You're going to have to get someone to do those for you. So, for instance, a tree clearing service, a land clearing service, a company that's going to come in and build that site up a little bit. Now the builder will be involved to make sure that the elevation and certain things are done correctly. A lot of times this isn't discussed up front, but it is something that you need to be aware of is making sure that the site preparation. You have set aside some money for the site preparation. Those are costs that are associated with the project but they're not necessarily construction costs that the builder is going to be responsible for. Another expense you need to be aware of that could bust your budget is a survey. So again, these are a lot of the pre-construction steps that are not a part of the build process or part of the construction process. The builder may not include this into the price. You have to make sure that you have a survey from a surveying company and that is a requirement, at least in our municipality to make sure that the site is accurate, that the house is staked out and that you are benchmarking where your house needs to go. That means the elevation and different things are correct and can be built up to where they need to be per code. This is something that a survey company will do and it's something that you need before you build your house.

Speaker 1:

Number two on our 10 big mistakes people make when building a custom home is choosing the wrong builder. And yes, I am a builder, but I'm going to talk about this. Sometimes the client and builder relationship aren't a match, and so you need to be aware of and understand who you're working with, and you need to really vet their background. Sometimes it can be as simple as timelines. Right, the builder's timelines and your timeline don't match. There's a trust factor and experience. There's also the type of home that you're wanting to build. If you have an ideal home and you know certain builders have built these homes, those are the builders that you need to talk to. Not that a new builder could not do the home, but it's just a history of success in building the style of home that you like.

Speaker 1:

So make sure that when you are getting ready to build your home, one thing I want to make sure of is that you never go with the cheapest bid. Not that the cheapest bid means there's going to be poor craftsmanship or the work isn't going to be up to snuff. However, it does mean that there may be something that the builder or remodeler but in this case the builder has forgotten to put into the bid, and usually there's a reason that they're the cheapest. Also, that doesn't mean necessarily that you're gonna go with the highest bid either. So make sure there's a balance.

Speaker 1:

This is continuing number two of our 10 big mistakes people make. When building a custom home, your builder is your biggest asset or your worst nightmare, and the relationship during a build is the most important thing, because the communication and that foundation from the beginning, picking the right builder is super important and most of the time, there is a gut feeling associated with picking that person. However, due to constraints in the budget, due to constraints in the timeline, it may not match up, not match up, and so you choose somebody based on those requirements instead of that gut feeling you have when you interviewed what you felt like was the right builder or a good builder for you and your project. I would say, if you can wait or if you can figure the budget piece out, go with the builder that you feel the best about. Number three on the 10 biggest mistakes people make when building a custom home is poor communication. So this is something that you're going to hear. It should be on all top 10 lists Communication over communicating.

Speaker 1:

I say over communicating like it's a bad thing, but it's a good thing. You want to make sure that your builder is communicating with you at a frequency that you've decided on from the beginning. Make sure that there are set meetings, there are set dates and there are set daily communication parameters. What I mean is in the contract there should lay out some sort of a communication timeline and a medium. Are you going to allow emails? Are you going to allow text? Is there a certain start and stop time of the day that they're going to do work? Is there a certain start and stop time to even communicate with the builder or the builder communicate with the client? And the reason I say this is because this is twofold.

Speaker 1:

Communication goes both ways. The builder should always be communicating the task list, the completion, the priorities, the delays, the budget, all of these things. They should be communicating to you, the client, that stuff on a daily basis. However, the timing of that communication could affect the entire build. If they're letting you know these things at after eight o'clock, let's just say on a weeknight, probably not the best idea. So I know it sounds tedious to really have to talk about these things, but it is very important to set parameters and also you have to honor those same parameters.

Speaker 1:

During the process of a home build, the communication is key. However, during the process of a home build, the communication is key. However, again, letting something settle before you communicate with the builder could help you as the home buyer, home builder, client, to make sure that you understand that things happen during a build. And if you communicate while emotional or while you're upset, then something could trigger the builder and it could turn into an argument. So let's just say you do get a bad news or a bit of bad communication or delay or something happens in the project from your builder at 730 at night. Okay, they didn't text you after eight, they didn't call you after eight. That was the parameter you set. How are you going to respond? Are you going to come back even though it's late? You're upset about the delay. Are you going to respond to the builder in a negative manner after, outside of the parameters that you set? Super early in the morning, super late at night those things can start to erode the relationship during the process of a build and if you overstep those boundaries too many times, the builder will feel burnt out. They also will feel like they can't deliver bad news to you without a repercussion of you being overly emotional or it makes them want to avoid communication, and so they try. You'll start seeing limited communication from the builder and that's not what you want. So again, number three on the top 10 mistakes people make when building a custom home is poor communication.

Speaker 1:

And now we move into Shop Talk. It's the portion of the show where I bring in a co-host and we cover trending topics in home building and remodeling, where I bring in a co-host and we cover trending topics in home building and remodeling. Hope you enjoy. Let's go All right.

Speaker 1:

Welcome back for season two of the Home Building and Remodeling Show. I'm back here with my co-host, adam, and we're going to jump right. In Season two we've changed a lot of things. We're going to open it up and have a little more fun with the podcast. We're going to be bringing you different tips and tricks. We're going to open it up and have a little more fun with the podcast. We're going to be bringing you different tips and tricks. We're going to talk about mistakes.

Speaker 1:

People make, stuff to avoid when doing construction. We're going to bring you the real stories from not only our employees and workers and team here, but some of the clients that we work with, some of the vendors, some of the hardships that we go through, and we're going to kick off the season with the 10 common mistakes people make when building a custom home. The first thing on the list is people don't realize how much it costs to build a home. So on average and I got this information from the National Association of Home Builders people are going 10 to 20 percent over on their budget and it's so frustrating because we've been kind of dealing with this when people are expecting to get a production budget with a custom home Right and one of the things that's hard because Adam here does all of our estimating and bidding. Some people call it a bid, some people call it a quote estimate. Whatever you want to call it, it has different terms. But what's been hard for you, as it relates to the budget, and for the clients.

Speaker 2:

Lately I've been picking up on the under roof and the heat and cool square foot.

Speaker 1:

So what do you mean? So he said the under roof and the heat and cool square foot. So what do you mean? So he said the under roof and the heated and cooled. What do you mean by square footage under roof and the heated and cooled square feet?

Speaker 2:

So the heat and cooled square foot is all the space that you have. Your AC and your heater works. So your livable space. Livable space and your heater works, so your livable space.

Speaker 1:

the rest of it is um like your garage porches and all that fun stuff. So and what we've learned is we had a client that we're we're working on the budget right now for trying to reduce the cost and they come in with and a lot of clients won't tell us what their budget is. So let me tell you if you're, if you're somebody who's generally interested in building a custom home, and you're listening to this, Be open with your budget.

Speaker 1:

Yep, let them know, because we're going to give you the works or, you know, we won't know where to even start with your budget. This is a custom home, not a production home, so it's hard to just box you in to a number. So it is it's super important that if you know what your numbers are and I know what it is clients will feel like if they tell you hey, my budget is $450,000, you're going to come in at $449,000. And that's just not true, especially us. We're not going to come in at $449,000. Right, and that's just not true, especially us. We're not going to do that.

Speaker 2:

But this client had given us a budget and you were fighting it hard after the drawings were done. Well, in our meeting we discussed square footage.

Speaker 1:

Yeah.

Speaker 2:

They told us the square footage, you know, gave us their budget and we were like yeah, we can make that happen.

Speaker 1:

Yeah.

Speaker 2:

But then when we get the plans, the heat and cool square footage matched what they were talking about, and then there was additional 15 or 1700 square foot.

Speaker 1:

And that's something that I've always struggled with, Even when I was estimating. People don't understand that a square foot price, right, it's typically based off of that heated and cooled. So, hey, I'm getting a 1700 square foot house. It's $200 square foot. You know, that's 340,000. Okay, sounds good. Then you got the plans and there's another thousand square foot under roof porches, a screen porch, the extra garage space. All of that isn't heated and cooled but it costs money.

Speaker 1:

And in your case it was the same thing. We had our, our person, Rob, draw the plans for the client, our person, Rob, draw the plans for the client. And when they got sent to us, you know their square footage had dang near doubled because they had porches and different things. So the struggle was we told them hey, you know this, this square foot for your budget is no problem. Now, all of a sudden, yeah was dang near $100,000 over, and it was because of the porches and different stuff. And so what we're trying to figure out and what we're trying to balance is how to make sure the client knows that all of this stuff costs money. So you can't say 1,700 square foot heated and cooled and then add all the space, Right, Because that basically makes us have to, you know, pay for that portion of the build.

Speaker 1:

Yeah, absolutely. And it does become frustrating from their perspective because they're like well, I was told I could get this square footage and it's no problem. It goes back to just knowing what things cost and even from our side, if we know your budget, we could have probably talked a little bit more about hey, heated and cooled square footage is and we'll just kind of generally talk about it For us, you know, $185 and up for heated and cooled square footage, and then the other unheated spaces. They do cost a little bit different. Right, it's less to build a carport than it is a heated and cooled space or a bathroom or kitchen, but we still have to average that in to the total cost of the budget.

Speaker 1:

So when you're looking at the plans or home plans online and you see, typically they give you a breakdown, right, you've got your main home heated and cooled or living space. They may say heated and cooled space or they may say living space on the plans, and then that's going to be, let's just say, 1500 square feet, and then your under roof number may be 2500 square feet, because you've got 200 square foot of porches, a sunroom or a carport or a garage. You can't lock into that heated and cooled or living space number as the square foot of your home. The footprint or the under roof is the number. What else do you notice in the budget, because you've been doing this for a long time, especially on the remodeling side and more new to the new home side. But what are some other things that you notice in the budget that people don't understand? That we've been trying to better educate people in general?

Speaker 2:

The landscaping.

Speaker 1:

Oh yeah, so we started-.

Speaker 2:

Because they don't understand that it's code for you to Do certain things.

Speaker 1:

Yeah, yeah. And what do you mean? What do you mean by code when you say that for people who don't understand that part.

Speaker 2:

Any the dirt that you disturb, you have to cover it with sod.

Speaker 1:

Yeah, you got to basically put it back.

Speaker 1:

Yeah, you got to put some sort of a permanent setting back and those are one of those things we've actually. Ultimately, we took it off of an allowance. So we used to give them a landscaping allowance and we went on ahead and moved that landscaping portion off and then now we just do the final grade and sod and then anything beyond that. We're going to connect them with a landscaper. I'll go ahead and tell you a story. We were going to connect them with a landscaper. I'll go ahead and tell you a story.

Speaker 1:

We had a guy in Gulf Shores that built a house that was a thousand square foot and ended up with $44,000 worth of landscaping, and our budget for his landscaping was I can't remember if it was $2,500 or $5,000 because it was just for the side and maybe some straw or maybe some mulch and I don't know what. All he got, but $44,000, you know, bringing in trees, and so that was a big lesson for us to learn. We really can't control that much variety in a house. So we took it off the allowances. Allowances are a big one. We do fixed fee contracts for the construction portion and then we give them allowances. So that's the credits and debits, and can you explain a little bit how that works for our budget.

Speaker 2:

So we have a good, better, best portion for our allowance items. When we do our interviews we kind of get a feel for where they want to be with their decorative stuff. So usually everybody kind of falls in the good or better yeah they want to be Yep.

Speaker 2:

And then so we give allowance money for that. So let's say you give $500 for a sink, they get a $300 sink and at the end of the build we'll credit them back the $200, or we'll take that $200 and flip it to another allowance they may be going over on.

Speaker 1:

And with that you got to be a little bit careful. Make sure you document, because we'll get to the end of the build and they'll be like, hey, I had $200 left over on my exterior door or my front door and uh, where did that go? So if you're not tracking those, those numbers, very good. And what we do now is we document it on a change order. So if they've got a credit and instead of us writing them a check for that credit, they want to move it, we do a change order to say, hey, I'm moving the $200 credit I had from my front door to my tile or cabinets or whatever it is, and so that way we know where that money went. That's kind of one of the hardest things on a fixed fee contract is giving them a set price for those allowances, and that's just because things go up and down.

Speaker 2:

Yeah, some people like nicer things than others, and the one that I'm dealing with right now is pretty cool, because she told me to put everything in there, but she's like, more than likely, after I go through it all, I'm going to have you pull it all off and I'll just purchase it myself, which is okay with us.

Speaker 1:

Yeah, yeah it. Basically you know that's smart, you know, because what that does is say, okay, because this is something that aggravates me and this is why we do an all-in bid or an all-in estimate. When I say all-in, I mean we give them our labor costs and we give them the allowances, like for a bathroom. We give them our labor costs and we give them the allowances, like for a bathroom. We're going all in the plumbing fixtures and stuff like that. And the reason we do that is so they know the actual cost where other contractors will go in and they will give them a labor only cost to make them responsible for the for the rest of the materials. The problem is is that that labor costs maybe $1,500 for a shower, but the client's like man, they're $1,500 for that shower and you are $10,000 for the same shower.

Speaker 1:

Well, that's because we're including all the modern materials and the allowance items, plus the plumber's costs, plus the electrician's cost if there's movement for the lights and different things. Thanks for joining us today. As always, we are grateful for our listeners and your continued support. Please subscribe to our YouTube channel, follow us on social media via Facebook, instagram and TikTok. Get more info at our website wwwthehomebuildingshowcom and, as always, remember who we are the Home Building and Remodeling Show, outro Music.

People on this episode

Head Shot

Chris Kerby

Host