From building too big to forgetting small details, there’s no shortage of ways to blow through your budget when building a new house. Whether you’ve hired a builder or are acting as your own general contractor, be on the lookout for the following financial missteps when building your dream home.
1. Not reviewing the details (especially in contracts)
Before your builder breaks ground, have a lawyer review the contract. They’ll make sure the paperwork includes important details like costs, deliverables and what will happen if things go wrong. If your builder hasn’t supplied their own contract, have a lawyer draft one for the project.
2. Failing to negotiate with the builder
Even though builders have set costs for materials and labor, there’s still room to negotiate when purchasing a new construction home. While builders rarely negotiate on price, there is some wiggle room when it comes to the design center. In most cases, builders will offer incentives to use their preferred lender, like additional credits in the design center. While some homebuyers may have success in negotiating the base price of their home, you are far more likely to get a deal in the design center when adding upgrades to your home.
3. Building a home that’s too big
A large and spacious home might sound like a dream, but all that space comes with a cost. Even if you have enough money in the building budget, homeowners should also think about utilities and maintenance. Make smart use of indoor spaces by working with a talented architect or designer who can create a floorplan to help you get the most out of every square foot.
4. Signing off on too many change orders
Every contract for a new construction home should include stipulations regarding how changes will be handled. Before the new work can be completed, the homeowner must agree to a change order verbally or in writing, based on the contract. To keep your budget in check, track all change orders and review the budget regularly.
5. Acting as your own general contractor
Being your own general contractor might sound like an easy way to save money. However, unless you have residential construction expertise, it’s usually best to leave the work to a professional. That’s because owner-builders need to be comfortable with:
- Reviewing building plans and blueprints for potential problems
- Materials, including what to use for which projects and how much things will cost
- Obtaining the necessary building permits and building to code
- Hiring and scheduling subcontractors for framing, plumbing, electrical, HVAC and more
- Troubleshooting complex building problems when something goes wrong
Building a home is time-intensive and requires expertise in many different areas. To avoid blowing through your budget, homeowners need to understand every aspect of home construction if they want to act as the project’s general contractor.
6. Not protecting their biggest investment
Building a new home is likely one of the biggest investments you will ever make. Once the home is built, maintenance and repairs can also become expensive. Did you know that 68% of homes will experience an unexpected breakdown of a system or appliance every year? Fixing these items is costly, and can range from $1,703 for a new water heater to $5,418 for a new air conditioner. To avoid out-of-pocket costs, learn more about protecting your wallet (and your new home) with a Home Warranty.