Part Two: Remodel War Stories: Are they Avoidable?
Posted by Bill Hansell on Wednesday, March 3rd, 2010 at 8:51pm.
Continued from Part One...
So if you have the trust thing down with an Architect and have started to weigh options, what should you expect in terms of construction budgets? The first thing is to know the difference between a "budget price" and a "bid". I'm constantly asking clients not to use the term "bid" unless they know that it is a fixed cost and the scope for that cost is well defined and agreed upon. Unless you have a completely finished set of plans and details, including every single light fixture, cabinet handle, tile spec, paint color, door hardware list, written QC specifications that outline reference standards of care, procedures, and general conditions, along with a planning and building permit, asbestos report, and maybe even have already done demo so that you can see all the existing conditions, you pretty much certainly don't have a "Bid" that reflects the final price of the job. You may have bids that cover a defined scope of work and allow for Change Orders as that scope is revised but don't fool yourself into thinking that is the price of the project.
What most people have well into the project is a "budget". If they are lucky, they have a budget with a "contingency" line item. If they are smart, they have a budget with a construction contingency and a design contingency. The reality is that most people do not want to pay for designing, detailing, permitting, and demolition before they price the construction. Without those things, though, you really can't nail down all the costs. Therefore, the substitute is to do budget pricing and include generous contingencies. I suggest different types of contingencies because some cost increases have to do with construction, e.g. the dry rot story above, while others have to do with design decisions. Many clients assume that the design will be set by the time construction starts but I have yet to see a project where there isn't some real improvement made during the course of building it. Sometimes it's a simple change and sometimes it's more complex. Despite our ability to build 3D models and do photorealistic renderings and walkthroughs, it often has to do with something that couldn't be seen until walls were framed and the space is physically accessible. Even the costs for minor revisions build up when you get enough of them.
You can get all the multiple GC and Sub pricing you want but successful budgeting is all about the contingencies. I suggest at least 20% of the budgets you receive but that is a bare minimum. There is just too much space in between the different specialty trades. Sometimes that's where the costs balloon. It's not the extra light you put in but the drywall demo, cleanup, new subpanel, replastering, and repainting that it took to get it there. The other trick is to re-price often during a project. Inevitably, the budget is a document in flux and you have to know where it is at any moment in order to not let it get out of hand. If you have appropriate contingencies, then it's not a problem but otherwise it's better to know sooner rather than later that there is a problem.
Most people don't believe it but at the beginning of a job the best barometer of cost is Area pricing, i.e. dollars per square foot. You can check your expectations against the past experience of your Architect or GC but in the San Francisco Bay Area the price for remodel projects starts to bottom out at $200 psf. Before the recession, I would have said $250 psf and certainly there are custom projects of a moderate but not decadent level that have gone to $500psf. Then, there are the customized bells and whistles projects that are $1000psf and up. These prices are for remodels that affect most of a house. Kitchens and baths are naturally more expensive per square foot than bedrooms. It does, though, tend to even out over a whole house given some infrastructure costs, HVAC or foundations for example, that apply everywhere. If it's a small project, it gets harder to assume the cost that way but most people have heard that a complete kitchen remodel can cost between $50K to $100K and up, and that powder rooms can be +$15K and master bathrooms +$35K. Then, there are projects that seem like just a kitchen remodel but have a million little extra add-ons around the house and garage, and maybe even a new roof and heating system. FYI, that is not a "kitchen" remodel...and the certain unnamed client I'm talking about knows who they are.
I could go into a whole other section about construction schedules but let me just say that it's a lot like pricing. You have to allow for a lot of contingencies. All it takes is for one person or part to be delayed and it throws everything else off. For projects susceptible to weather it's easy to see how you can only have so much certainty. Even for kitchen remodels, there is a sequence that has to be followed. For example, countertops can't be templated until the cabinets are in. Then, you have to wait for them to be fabricated and installed before the plumbing can be finished. In the same way that small projects can cost more proportionally than larger projects on a $/psf basis, so too they can take relatively longer. There is an efficiency that is gained on large projects and you often have to go through the same steps no matter what the size of the project: demo, framing, rough electrical, mechanical, and plumbing, drywall, cabinetry, finishes, final electrical, etc.
The design and construction process are complex and fraught with ways for a project to go badly. On the other hand, if you are well prepared with a professional you trust and allow for budgeting and scheduling contingencies, you can navigate your way through to a successful outcome. No matter what surprises have arisen during the process, my clients have always felt that customizing and updating their home to suit their needs and desires has been well worth it. It's always great to see how proud they are of their finished homes and the war stories, which hopefully I've made more tolerable, become badges of honor in the end. Pass the Xanax.
- For more info on building or remodeling a home in Marin or the San Francisco Bay Area, please contact Bill Hansell.
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