Three Simple Ways to Keep Construction Costs in Line

There are two types of people in this world: those who build homes within their budget, and those who let costs get out of control. Yet even the most fastidious bookkeeper faces a big challenge when it comes to curbing expenses. According to the National Association of Home Builders, cost overruns are typically 10 to 15 percent, and homes finished on time and on budget are in the minority. Recognizing this early is important, so that you can beat the odds and build a place more economically. If you employ three strategies, you can get the house you want at a price you can afford and increase your ability to really enjoy the building process.

Natural Selection

You've heard it before, but you should hear it again: Choose the right contractor and you'll satisfy many of your financial concerns. The most efficient way to do this is to solicit bids from a number of contractors and be firm about obtaining references from previous clients. Then take the time to check out them out. "Be nervy," says homeowner Patricia Lizzi, who built a home in Oak Ridge, New Jersey. "Knock on the doors previous clients." People are rarely shy. They'll tell you how they rate the builder's work in terms of quality and commitment.

Trust is an important element,too. Bill and Cindy Wheeler learned this firsthand when they discovered their builder had underestimated the amount of lumber for a small tower they'd requested on the house they were raising in Kent, Washington. "He could have billed me for it," Bill recalls, "but we got along well, so he offered to split the difference."

It can't hurt to choose a contractor who has built homes in your town. Typically, a local builder can arrange for inspections and permits quickly. "If one part of the job is delayed because you can't get the inspector, the subcontractors down the line have to wait," says New Jersey-based builder Dave Cannarozzi. In the end, your construction bill could increase faster than you can say 'time is money.'

Material World

Cost overruns are likely to occur when you select materials. Some things, like the fluctuating price of lumber, are beyond the control of you and your builder. But many items, such as floor coverings, siding, shingles, and cabinets, can be carefully budgeted for. If you want to pinch pennies, some homeowners say it's a good idea to set a limit on on how much you can spend and stick to it. Some choose to have the building contract include an allowance that estimates the cost of each item.

Rob Pinelli had budgeted a $3,000 allowance for a well when building a 2,200-square-foot house in North Carolina. However, when the driller had to go much deeper than anticipated, the cost shot up to $6,000. To make up the loss, Pinelli consulted with his builder to readjust allowances for other items. For instance, he saved $500 by purchasing stock lighting fixtures instead of the custom ones he originally wanted.

A builder can help you estimate allowances, but that doesn't mean you shouldn't do your own research. Mike and Elisa DeYoung knew they wanted custom windows for their home in Milton, New Jersey, but the price the builder quoted exceeded their limit. For that reason, they shopped long and hard on their own. In the end, they saved several hundred dollars per window.

Choosing materials carefully is only half the battle. You have to get them delivered promptly, too, particularly if you've placed special orders. "Don't delay any orders for materials," says Tom Landis, a builder in Black Diamond, Washington. Delivery can take longer than you think, which means your subcontractors could be kept on hold with the meter running. And make sure the builder installs items to themanufacturer's specifications. Failure to do so could void a warranty.

Don't Be Fickle

Once you've decided on your materials, stick with your choices. "The most common cause of a cost overrun is when a homeowner changes his mind," says Gopal Ahluwahlia, director of research at the National Association of Home Builders. Even what seems an innocuous modification, such as a new color for roof shingles, can tear holes in a tidy budget. The shingles may not be custom, but even popular colors can be hard to find on short notice, and the last thing you want to do is keep the roofers waiting. The same goes for structural changes. Don't request any in midstream of construction.