All of us have the dream of owning our own beautiful home. But when it comes to actually having the home built, we often try to manipulate our finacial reality to meet the dream, rather than adjusting the dream to what we can really afford. What you may not realise is that the company quoting to build your dream may be doing the same thing, resulting in a very expensive catastrophy for everyone.
All to often builders are competing to build your home on price alone. In fact many times the quote you receive to build your house will be less than the amount it will cost to actually build your house. How do they do this? Because they know the game better than you do, and know that along the way they will be able to make up their margins on variations.
What are variations? Well, I’m glad you asked.
A variation is anything - that’s right, anything that is different from the original specification.
For example, your contract and specification may not state anything about your door handles. This means that without you knowing it, your builder has factored into his cost (and therefore your price) the cheapest door handles he can get his hands on. When it comes time to putting in the doors, you find a fantastic set of door handles on the internet that you just have to have on every interior door in the house. Your builder tells you it’s fine, then charges you 3 times the purchase price of those (more expensive) door handes to install them. Oh, but he didnt deduct the cost of the door handles in the original specification did he?!
And why does he do this? Because in order to make a profit so he can stay in business, he has to! The problem is, you end up spending 25% to 30% more than you originally thought. That might be fine if you’ve got the cash to do that, but many people mortgaged themselves to the hilt to buy the house to begin with, and increasing the price by 30% puts them under substantial financial duress.
How to avoid this situation? Well, it’s actually suprisingly easy, and incredibly difficult at the same time. All you need to do is be wise about just how much you spend on building your home - don’t spend the absolute limit of what you can afford; and secondly make sure you put as much detail into the original specificaion as you can up front, so that you have a better idea of what your home is actually going to cost. Of course, it’s difficult because it’s human nature to want the bigger, better home, and keeping yourself under control is often more difficult to do than to write in a blog.
Just remember - sometimes cheapest costs you more!
