Are you worried about blowing your budget with unexpected variations from your builder right in the middle of your renovation project?
We all love surprises – except when we’re renovating our home
You may have heard people discussing ‘variations’ when they talk about building and renovating. You may have also noticed that no one’s ever thrilled about them, to say the least.
The term ‘variation’ refers to changes to what has been agreed upon in a signed building contract. If something comes up that hasn’t been allowed for because the contract you signed wasn’t fixed-price, your builder will put his hand out for more money.
In this situation you will feel trapped. You will have little choice but to pay up or have the difficult conversation that you cannot afford it and potentially be left with an unfinished project. This is not a scenario you want to find yourself in as this is when relationships start breaking down and the job can go pear shaped.
Variations happen so much more often than you think, especially when renovating older homes which can often hide an unwanted treasure trove of issues. Before you know it, you’ve blown your budget, over capitalised and need to have what can be a very awkward conversation with your builder.
It doesn’t have to be this way!
There is a solution to avoiding variations and it’s all in the contract details. You need to ensure you have a fixed price contract and a guarantee from your builder that it will not change. The only way to get a fixed price guarantee though is to invest in a builder who will take the time before you sign the contract to do proper due diligence. This includes building scopes of work, finalising selections and reports needed so that it is all included in the total fixed price. This way you can be sure that nothing is missing and nothing will come up during the project.
According to the Australian Bureau of Statistics, in 2019 to 2020, 53.7% of South Australian residential dwellings increased in cost during construction.
Don’t become a statistic
Most people think variations are just part of building but in actual fact, it just highlights the fact that your builder has not done proper due diligence to quote your project properly. What else have they cut corners on?
Changing your mind
Sometimes a variation is unavoidable because it is not the fault of the builder. You may want to make a change to a selection item or get the builder to do more work while they are on site! We’ve come up with a few tips to help you ensure you can minimise the impact on your budget when you have a light bulb moment half way through the project.
Know what to look out for
It’s all too easy to be lured in by a great looking price, and rushing through the contract because you just can’t wait to get started. But that ‘bargain’ build may just end up costing you a lot more in the long run, and turn into one hell of a headache.
Don’t change the paint colour after the painter has started!
Changing the paint colour is a simple edit of your selection. After the painter has started though, it can be a costly exercise. Timing is everything – give your builder as much time as possible with changes to ensure you minimise the impact to your budget or schedule.
It’s critical to understand your building contract and watch out for areas where you can become unstuck with variations. Here’s a quick run through on common contract terms you’re likely to encounter, and what they actually mean:
Fixed price contract – a total price specific to a scope of work is nominated.
A provisional sum – an allowance included in a fixed price contract for an item of work that cannot be priced by the contractor at the time of entering the contract.
A PC (Prime Cost) item – an amount of money included in a contract sum to purchase a specified item such as tiles, taps, doors or bathroom fittings. An agreed estimated amount is included at contract signing but the specific products are not selected until a later stage.
Rise and fall – states an agreed method of adjusting the costs to allow for variations in labour and material costs during the construction period. Words like ‘estimate only’ or ‘this price may change’ must be used next to the prices.
A cost-plus contract – This is a specific type of contract where there is no total agreed price but the actual cost of the work is charged plus an agreed margin or percentage. These contracts rarely turn out well as your builder is incentivised to have the cost of the project increase. It’s not a good situation to be in as the homeowner. . .
It’s all in the details
Make sure you read your contract thoroughly before signing. What’s included and not included? It should be very clear! Look out for Provisional Sums and PC Items – these are always sure to lead to a variation.
Take your time ahead of signing to ensure your contract specifies brands, models, colours, power points, door handles, taps, and even coats of paint. Not having these items specified may mean your builder can install anything they want and then charge you a variation to change it after you realise you don’t like it. Having all these details documented pre contract will help be able to guarantee a fixed price before you sign the contract.
To help you save more money even before construction starts, download our free guide here and avoid a big mistake most people make when designing a custom home addition or renovation.