In last month’s blog post, I started a discussion about ways to figure out how much your home construction project will cost. Last month, I talked about getting bids. Now I want to talk about a better way: Determine your budget first, and plan accordingly.
You'd be surprised how hard that is for some people.
Think about it in other terms. What did you do when you first started looking for a new truck? (This is Texas. People drive trucks here.) Did you visit a bunch of dealerships and go to the truck shows looking for the biggest truck with all the latest bells whistles -- ooh, aah -- to figure out your wish list? Or did you sit down first and figure out how much you could afford or wanted to spend?
There are two ways a home construction project can go – it can be design-driven, or it can be budget-driven.
Design-driven means we plan the project and -- ooh, aah -- put in everything from the client's wish list without regard to the cost. In all my years of construction, I've had only one job that was truly design driven -- whatever she wanted, he wrote the checks for it.
In contrast, budget-driven means we set the budget based on what the client wants to spend and drive the design to that budget.
Every project -- no matter how large or small -- has a budget. Many potential clients fear sharing their budget with the builder. Usually, they fear the builder will spend their entire budget. They're right! I disarm this fear by telling them right up front -- tell me your budget, and I will do my best to spend all of it. After the shock wears off, I explain. It's my responsibility to give them the best value for their budget. To do this, we must walk through a process to determine the best value for their needs. I need all the information I can get in order to give a client a Value Accurate Price, and their budget is just one part of it.
Walking Through the Process
The best way I can explain this process is to walk you through the pre-construction process Dan and Karen Cripe went through to build their five-star home. We talk a lot about Dan and Karen's home because we like the smart way they went about it.
Dan and Karen set out early and took their time to plan their home. They had heard me speak at the Renewable Energy Roundup and came by my booth to chat. One thing Karen remembered was that I said I would look at a lot before they purchased it. They proceeded through their due diligence of checking up on me along with several other builders.
They studied, gathered information, and did their homework to learn more about energy efficiency building. When trying to find a lot, they couldn't get much help from Realtors, so they struck out on their own. (That's a whole other story. We should get Karen to tell the story sometime soon.) Once they found a lot they favored, they contacted me for a review. I was able to look it up on Google maps and recommended they make an offer. Once they purchased the lot, they proceeded to interview building designers and architects and review other builders. They chose professional building designer Debra Blessman with Select Home Design to design their home.
At the initial meeting, we discussed their budget. Dan and Karen had a firm number in mind. They also had a wish list of things they wanted in their home. We explained they would need to put their wish list in priority order. We would try to incorporate everything we could from their list, but they needed to be prepared to take items out if we needed to reduce cost. They agreed.
Debra went to work on design. I consulted with her along the way. After a couple of concept designs, one was agreed upon, and Debra produced enough material so that I could complete a detailed rough cost estimate. As we had suspected, it was over their budget. But since they had already prioritized their wish list, they knew what was most important to them.
To get costs down, the ceiling height was lowered in certain rooms, cabinets were taken out of the bedrooms and replaced with closets, a built-in desk and bookshelves were taken out of the office, and livable square footage was reduced a bit. Dan insisted that we keep the geothermal heating and cooling system because he was thinking of the long-term cost savings.
Once the plans went through another redraw with these changes, we were ready for the final detailed estimate. During this phase of the pre-construction process, the foundation and framing plans were engineered to determine the true cost of the foundation and the framing. In our budgets, we don't like to use allowances for things the clients will select, like lighting and plumbing fixtures, because it can often lead to budget creep. Instead, we took our time, and Karen and Dan made all their decisions about fixtures, finishes, cabinets, flooring, tile, and the like so we could determine the Value Accurate Price for their home construction.
At the end of this process, we arrived at a construction cost that Karen and Dan could work with. Because of all the careful planning and up-front material and fixture selections, we were able to build their home more quickly than we originally projected. We were also slightly under budget, so some unused funds went toward a deck Karen and Dan had expected to add later.
This process -- setting a construction budget and planning accordingly -- requires team effort, plus patience and willingness to grapple with the inevitable give-and-take. Our experience with it? For every client who has walked through the process with us, their homes have come in on budget. No surprises.
It’s not a race. It’s a process.
Come and see
Want to see the results of Dan and Karen's home? Come visit our Rock Star home on June 5 as part of the Cool House Tour. See you there.