1. Not setting a budget
You can't meet a goal you don't set.
What is the best way to make sure your home renovation or residential remodel does not go over budget? By setting a budget.
This might sound obvious, but you can't stay within a budget without actually setting a budget first. You may still go over, sure, but you will be far more likely to a) realize you are going over and take measures to prevent it and b) adjust your plan to fit your budget before construction begins.
You may say you have no idea what things cost. Before you start planing for a renovation or remodel project, that is true for many people. Will it be $15,000 or $60,000? Dunno. That's OK. That's normal. Doing a little research first will get you to a number.
- Find out what your home is worth, either by checking Zillow or by pulling comps - with a realtor or by yourself. Then take that number and apply whatever percentage is "typical" for the type of project you are looking at.
- Look at data from similar projects in your area. A great source is the Remodeling annual Cost Vs. Value report, which is broken down by region (US only).
- Ask your friends. This is the best source of unbiased local reviews. Even if you think you don't know anyone who has done a similar job, you may be surprised what people will volunteer if you mention you are thinking of doing some work on your home. Your child's teacher may know someone that turns out to be super useful - your mechanic may have a brother in the business. You don't know until you ask.
This will give you a BALLPARK figure. Because most renovation projects vary widely in scope, your specific project will be different. You might have more structural changes, or more expensive appliances, or the price of steel may have gone up since last year. Who knows.
The next step to getting a budget, of course, is getting actual bids from the pros. That leads us to the next budget-buster...
2. NOT UNDERSTANDING WHAT'S INCLUDED IN THE BID (and what's not)
Create a comprehensive scope to get apples-to-apples bids.
Most remodel projects involve hundreds of decisions. You may think you know what you want - say, a subway tile backsplash. But which tile? Bright white or a softer white? 3x6" or 3x8"? Beveled? What color grout? How will you address the edges? Will you use a border tile? Pencil? 2x6? Mitered corners? What about the outlet covers? White or cream? Standard or extra large? Maybe you don't want outlets on your backsplash at all, maybe they should go under the cabinets? Open shelves, OK. Countertop pop-up? What happens when you realize a nice even row of tiles won't fit because you wanted your cabinets hung 1" higher than the standard 18"?
When you're getting initial bids you won't know the answer to every question, and that's OK. Here's what's important:
- List every item you want to have done. Give the same list to all your bidders.
- Decide if you will be sourcing finish materials (things like light fixtures and appliances, not sheetrock and wire) or if you want someone else to pick everything or provide you with an 'allowance'. Then make sure every bidder does the same thing. No point in comparing one bid that includes tile and installation to one that only includes installation.
- Ask if permit fees and trash removal are included. Ask if appliance (re)installation is included. Ask if engineering fees are included. Are there any taxes to consider?
- Address how change orders will be handled. You should understand that there will be items you thought would be included that aren't, because they're not standard and cost more than the standard. Or, you may change your mind about an item. How will you and the contractor address these things? You don't want to suddenly be billed for a change you didn't approve.
- If something is important to you, call it out specifically, even if you think it's silly.
When you review the bids you shouldn't only be looking for the lowest bidder. Also consider punctuality, cleanliness, ease of communication, and attention to detail. These things can become very important down the line.
So, what's a great way to screw up your bids? By...
3. Keeping your budget a secret
How to get the showstopping elements you want, avoid reverse engineering, and still stay on budget.
Have you heard of 'reverse engineering'? That's when you design something without considering a budget (see reasons below) and then realizing there is no way in this lifetime you will be able to pay for it all, and having to make adjustments until you can afford it, usually destroying everything that made the design great in the first place.
This is not a position anyone likes to be in. It slows down the whole process, and everyone ends up disappointed with the result. During the bidding process is the best time to discuss your budget with your designer or contractor to get the most realistic idea of what you can have that you will love at your budget.
Why do homeowners not share their budget? They might not have set a budget (see #1). Or they might think that the bidding contractors are unscrupulous individuals who will simply make their bid match the highest number. Most people are secretly hoping that if they just don't share their max number, then contractors will come in with lower bids that still include everything they want.
That line of thinking seems reasonable, but it doesn't work.
For one, contractors and service professionals know that they are competing against other companies for your business. They are aiming to give you the lowest price that will still allow them to do the job to their standards and not go out of business.
Two, major parts of the design may change depending on the budget you set. It's not always as simple as changing from a $16/SF tile to a $3/SF tile. A higher budget might accommodate more floor plan changes or a new sink placement, or a wall mounted faucet. A good designer or contractor won't suggest things that they know to be outside your budget - partially because when the time for 'reverse engineering' comes, they will have loads more work to do.
Now, what if you are open to some over-the-top design elements but don't want to completely bust the budget? Tell your designer or contractor to suggest "reach" items. You can then decide which you must have and which you can live without.
A great way to approach this is by designating a few focal points, such as the kitchen island or master shower. You can spend money on these spots and keep other areas more basic. It also helps to prioritize all your needs and wants clearly, so it becomes obvious what to keep and what to cut.
4. Not reserving a contingency fund
Renovating? Surprises are practically guaranteed.
It's tempting to want to spend every penny you have on your glorious dream renovation. It can be very hard to decide where to cut your budget when everything seems necessary.
Being stuck without cash when you discover water damage, or outdated electrical wiring, or a hole in the roof and a family of squirrels using your attic like an Airbnb - is not fun. You don't want to have to make major decisions of where to save AFTER the wall has come down, the beam has gone up, and the non-returnable cabinets have been ordered.
Depending on the project and your comfort level, leave 10-20% of your budget for the unexpected. If you don't use it all, you will have money to reinvest in something else, or to decorate your new space. Hooray! Because open shelves demand beautiful dishes.
5. Ignoring site access
Consider what equipment will be needed to complete your project and how it will get to the project.
This won't be an issue for every job, but consider where a dumpster would be located on your site. Near the garage, or on the street? Do you have an HOA that may have rules regarding this? What equipment will be necessary and will it need to come in through a back gate? Will it be wide enough? Will your landscaping potentially be damaged?
Also consider where materials will be stored until needed (the 'staging area') and what path workers will use to bring supplies and equipment into your home. Will everything fit? What about stairs? Are doorways wide enough? Consider what furniture, artwork, or electronics may need to be relocated.
Consider how your life will be disrupted. If you need to move out of your home during the renovation, even for a short period of time, that can be a major expense. What about eating out, buying a portable microwave, or getting a family membership at the gym to have a place to shower? Think realistically about what it will be like to live at home during a renovation, and what your extra expenses may be.
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