Building a Home without a Budget

[Culture]

Do not read if you are unwilling to face my whining throughout a long post :

I will leave aside the messy details, but my wife refused to set a budget for our new retirement home, stating that she was willing to spend whatever it took to get what she wanted (in fairness, my wife has always been reasonable in the past when it came to purchases). Over my objections, this was what she told the builder. We are close to having the house done at this point (one month late with likely one month still to go), and have spent 143% of the original cost we were told for the house. We are at 200% of the cost of the used homes we were looking at to start with.

This is after removing the outdoor kitchen, natural stone flooring throughout (tile used instead) and vaulted ceilings with wood trusses which were in the original pricing. The house is substantially complete and I do not anticipate any significant additional cost, mainly because there are no more upgrades that my wife can make at this point without tearing something else out .

My advise to you? Never, ever, build a house without an iron clad (not one penny more) written maximum budget agreement between everyone involved; both spouses and the builder. Our builder has artfully ratcheted up the cost over and over again using one of two arguments:

1) This was not the in the contract. True on 100% of the occasions this has been raised, but he told us up front everything we would need to finish and move into the house was in the contract. Oh, you wanted the trees cleared from the site before we start constructing the house on top of the trees? That was not in the contract, I assumed you were going to clear the lot. Oh, you wanted the trees we just cleared hauled off the site instead of being left in a 30 foot high pile in you backyard? That was not in the price I gave you for clearing the trees, I did not realize you wanted them removed. Rinse and repeat 20-30 times. The contract should have included some statement similiar to "contract includes all labor and materials needed to construct a complete, functional house on the existing site."
2) "Do you really want to cheap out on ________ when everything else you have done is so nice?" This has worked very well with my wife, because as you make more and more upgrades, the argument makes more and more sense. Don't you want to gold plate that last door knob?

I would divide the cost overruns about equally between the two techniques. While the quality of the construction is reasonable, I would not recommend my builder to someone else.

Yes I am bitching, and I should be happy that I can afford a very nice, very beautiful new house in a very nice neighborhood. However, at this point I such negative associations with the new house I do not want to move into it. My wife and I are unable to even talk about the new house anymore as it starts an unpleasant argument every time. If I could get my money out of it, I would sell it. Unfortunately, it is only worth about 85% of what we have spent on it (too many non-recoverable upgrades) and I would have to divorce my wife . Marriage involves many compromises, some more painful than others. This one is as painful as all of the previous ones combined together.

If it make a difference to anyone (I do not think it does), my wife earned 50% of the dollars going into the house.

 

[LARS]

stating that she was willing to spend whatever it took to get what she wanted . Over my objections, this was what she told the builder.

Never, ever a good strategy: even if it is the case. No surprise that you greatly exceeded your budget. It would be a rare builder indeed who would not oblige your wife's desire to "spend whatever it takes".

 

[ERD50]

Well, you agreed (consented?) to this arrangement, with a pretty predictable outcome (IMO). My advice would be to suck it up, recognize that it is a sunk cost, and enjoy the new house with a wife who should be ecstatic over having her dream house! Be happy with her!

The alternative is to be mad about it, which doesn't change anything $-wise, and just causes more problems.

Yes, easier said then done, but really, isn't it the best alternative?

-ERD50

 

[Sarah in SC]

I am so sorry! I hope that your venting has helped you to feel better about the whole situation. Perhaps once you move in, your remembrances of the building issues will fade and you will be able to enjoy the nice house and that it makes your wife happy.

Building a house sucks, even one that is on-time and on-budget. It has been 12 years since I was the GC on our custom home build project, and I now can actually say it was a good experience, though for some time there, it felt bitter.

Best wishes and thanks for sharing your lessons learned.

 

[hakuna matata]

I have seen this many times in my career as an Architect. I always said if you want to test your marriage, build a house! Luckily I haven't done this, I came close, designed a house for a property but the numbers were so far out, we just both said 'nope'. But since I was an Architect I built a model and she could visually see what things would/could look like, which avoided building it in 3D and making changes.

Luckily right after that we bought the house we live in (which was similar in design to the one I did) and love it, so we avoided that particular skirmish.

Building a house with a GC is like raising kids, you have to have a strategy and BOTH send the same consistent message, never straying and stay focused. Where I see couples get in trouble is the gold plating strategy. On the contract side you just have to be clear either in the drawings or specs or contract language as to what is and is not included.

Sorry to hear the house has such a negative feeling for you, hopefully that will go away in time. My approach would be more like ERD50, suck it up and recognize it is a sunk cost and get beyond it. Good luck!

 

[MichaelB]

Don't be so hard on yourself. You can't put everything into a contract, and upgrades during the building are normal. The builder does this for a living, and you don't.

If this is DW's dream house help make it so. Remember, when Mama's happy everyone's happy.

 

[Bestwifeever]

Repeat after me: "If Mama ain't happy, ain't nobody happy." (ETA, okay, repeat after MichaelB -- great minds etc.)

Your house sounds beautiful and is exactly what you both wanted. It could have been a lot worse. Go forward and enjoy.

Perhaps the otiginal estimate was lowballed and the amount you actually spent is reasonable for what you got.

 

[Culture]

Well, you agreed (consented?) to this arrangement, with a pretty predictable outcome (IMO). My advice would be to suck it up, recognize that it is a sunk cost, and enjoy the new house with a wife who should be ecstatic over having her dream house! Be happy with her!

Actually, I refused to sign the contract due to the budget deficiencies. The contract is between my wife and the builder . However, it is fair to say I consented.

 

[bld999]

Lots of people spend more time and effort researching a new car than they do ensuring protections and clear agreements related to procuring building projects. Telling anyone you have an unlimited budget for a home is a mistake, this includes architects, if one is on board.

Architects however, can provide good guidance on contracts, detailed written scope of work, and the myriad expectations that are included in "dream homes." The AIA crafts and offers for sale very carefully drafted contract forms for construction such as this, and anyone planning on building should consider them. This is all in addition to the considerable skill architects bring to design. It's money well spent, architect's fees.

Sorry to hear of your travails, but maybe the two of you did get what you bargained for. It's a hard job, no doubt, and it blows up relationships frequently. Don't let it blow up yours.

 

[marko]

....Yes I am bitching, and I should be happy that I can afford a very nice, very beautiful new house in a very nice neighborhood..... Marriage involves many compromises, some more painful than others.

If you can afford this....be happy.

So many other ugly/sad scenarios in marriage/life that go beyond money.

So many people would pay to have this problem.

 

[Big_Hitter]

I feel your pain - however, that's how contractors make their money


unfortunately, they get you in a job and then nickel and dime you on the extras - been there done that through several remodels


that's why we've never had a house built, couldn't take the bickering and stress, plus I've never worked with a contractor that was as picky as I regarding little details

 

[Ronstar]

We've built 2 and bought another that was already built over the course of our marriage. Had the same problems as Culture on the 2 we built. I've learned to always, always go with the one that is already built.

 

[wingfooted]

Despite all the warnings and caveats - I am finding myself in a similar situation, building a 'very' custom house with no real idea how much the whole thing will cost. Fortunately we are in a position where we can afford even a high end result.

Has anyone engaged a general contractor based on 'project management' basis. All the bills go to the homeowner and the GC works on a percentage or flat rate ? What was your experience ?

 

[ERD50]

All things considered, being within 143% to 200% of original cost isn't bad at all! Celebrate that it wasn't worse!

Kind of reminds me of my bathroom remodels, cost wasn't the issue, but the amount of my own labor and trials and tribulations and a lot of messy, plain terrible work. Half way through, you just want to torch the place.

But a few luxurious showers later, it's all forgotten(*), and you just enjoy the new bathroom. Time heals, (or at least softens the pain of) most wounds.


(*) Not forgotten enough to ever, ever talk myself into another bathroom remodel though!

-ERD50

 

[bld999]

Despite all the warnings and caveats - I am finding myself in a similar situation, building a 'very' custom house with no real idea how much the whole thing will cost. Fortunately we are in a position where we can afford even a high end result.

Has anyone engaged a general contractor based on 'project management' basis. All the bills go to the homeowner and the GC works on a percentage or flat rate ? What was your experience ?

That method will work as well as any, but the piece that is critical once again is carefully describing what is to be built to begin with. Even the old lump sum bid works fine if everybody knows in detail what is to be built.

If the client discovers "must haves" as the building comes together, then yes change orders will ensue, just as they would in software or any other endeavor. Credit change orders happen, too.

If you don't know what you want, beginning construction and figuring it out during is very expensive and will be completely schizophrenic for everyone involved. This is especially true if it involves structure.
Bringing a builder on early in design is one way to get detailed pricing at progressive stages of design, and that way clients are able to see where the costs are and make adjustments.

The conventional tools of drawings and specifications are very helpful if done thoughtfully and made part of a contract. They become the instructions and a framework for all discussions during the process.

Choosing an experienced builder with a reputation for quality and honesty is essential, they are out there. Don't be afraid to ask after previous clients, get the stories. Architects usually have a short list they work with and know what sort of outcomes to expect on selection. That's a good way to avoid the change order-happy boneheads that unfortunately seem to get all the press these days.

The short answer is that no contract form will ensure nirvana, it's dependent on a bunch of pieces and actions. [I built custom homes and light commercial for 30 yrs, always with architects, as they tend to qualify the clients ]

 

[rodi]

I hear you on contractor woes. We went through two on our granny flat project... the first was billing so far ahead of work delivered (using his own spreadsheets) and we called him on it... That was that... he was gone. The 2nd actually refused to provide something in the contract - then slapped a mechanics lien on us for our refusal to pay for something they hadn't done.

We'll never hire another GC - we'll only do owner builder on anything going forward.

 

[Culture]

I am trying very hard to accept this and keep my wife happy. The problem is that every time I get to the point that I accept what is, is, we get a bill for another $5-10K. The constant change orders are what is really causing the problem. If I hade been told 145% up front, I likely would have got upset and then eventually accepted it because it is what my wife wanted. The constant pulling off of the band-aid is really causing me problems, to the point I am having problems sleeping.

 

[user5027]

The next shoe is after the certificate of occupancy is issued by the local municipality and the county real estate tax assessor comes around. At least that is what happens in Pennsylvania.

YMMV

 

[Midpack]

Sorry this happened to you. I'd be beside myself with a house at 143% much less 200% of original budget (so would DW fortunately), but we're all wired at least a little differently.

We did build a house, got everything we spec'd at exactly what we agreed to pay up front. However it was supposed to be done in 5/6 months, actually took a full 7 months. If we changed anything during construction, we would expect an upcharge. I have a BIL in high end residential construction, he's told us buyer changes are always very profitable for him.

Your experience just reinforces what we already knew.

Again, sorry. I hope you both enjoy the house 200% more than expected...

My advise to you? Never, ever, build a house without an iron clad (not one penny more) written maximum budget agreement between everyone involved; both spouses and the builder.

 

[Meadbh]

I am trying very hard to accept this and keep my wife happy. The problem is that every time I get to the point that I accept what is, is, we get a bill for another $5-10K. The constant change orders are what is really causing the problem. If I hade been told 145% up front, I likely would have got upset and then eventually accepted it because it is what my wife wanted. The constant pulling off of the band-aid is really causing me problems, to the point I am having problems sleeping.

Unfortunately multiple issues are contributing to this. First, as others have stated, "scope creep" and budget overruns are common enough on construction projects that they should be anticipated, even when the budget is clearly laid out beforehand.

Second, the decision to proceed without a budget was ill advised. I don't know how you and DW communicate and make financial decisions, but this was just asking for trouble.

I note that you refused to sign the contract. That suggests that you and DW have not been on the same page from the beginning. If DW signed the contract, is she paying the bills with her own money? Is she going to defer her retirement or go back to work to address these cost overruns?

I think it is time to sit down with DW, preferably with someone you both respect who can mediate the discussion. What you need now is an agreement to limit further financial damage. Maybe you can stop the financial bleeding without interfering with the structure. For example, you could defer drywalling and interior painting until finances allow. At a deeper level, you need to find a compromise that will save your relationship. Otherwise you may be heading for an expensive divorce.

 

[marko]

Keep it in perspective: She could've said she wanted a baby!!

 

[Culture]

I note that you refused to sign the contract. That suggests that you and DW have not been on the same page from the beginning. If DW signed the contract, is she paying the bills with her own money? Is she going to defer her retirement or go back to work to address these cost overruns?

Actually, I agree to work an extra year to pay for it. I retired about a month ago. That is part of the problem, as the extra year was not enough because the cost keeps going up, up and up. I feel like I quit about six month before I should have.

 

[Culture]

Keep it in perspective: She could've said she wanted a baby!!

That would be better, as I would like to have the second coming of Jesus Chris as a child! That is the only way it would happen on either side .

 

[foxfirev5]

Too late now to complain. Many contracts run over budget. However, there is nothing to replace planning. Each of our last couple homes where planned and redone before we broke ground. On the bright side our family business has made the bulk of our profits on change orders and on the fly adjustments.

Going back in time my mother and father built their first house for under $3k in 1950. My DM had to furnish a detailed list of materials to the bank which included everthing down to the individual nails. When the bank was still reluctant, her employer, a local stock broker stepped in and advised the bank to grant the loan. It was the last loan they ever had. How times have changed.

I might add that that my Grandfather built virtually all that house and one for his other daughter after he turned 65. Something I will aspire to at ER early next year.

 

[Meadbh]

Actually, I agree to work an extra year to pay for it. I retired about a month ago. That is part of the problem, as the extra year was not enough because the cost keeps going up, up and up. I feel like I quit about six month before I should have.

Probably not the best move, in retrospect. Could you unretire until the McMansion is complete and paid for?