What Are Change Orders, and How Do They Impact Your Custom Home?

What Is a Change Order?

A change order is a formal amendment to the original construction contract, documenting modifications to the scope of work, materials, design, or timeline after the project has begun. These adjustments often result in additional costs, delays, or both, making them a critical aspect of managing your custom home build.

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Why Do Change Orders Happen?

1. Design Adjustments:
   • The homeowner decides to change features like finishes, layouts, or materials.
   • Example: Switching from laminate countertops to granite after construction starts.
2. Unforeseen Conditions:
   • Issues discovered during construction, such as poor soil conditions or hidden structural problems in a remodel.
3. Errors or Omissions in the Plans:
   • Missing or unclear details in the original blueprints that require clarification or adjustment.
4. Regulatory Requirements:
   • New permitting or inspection requirements that weren’t anticipated.
5. Upgrades or Add-Ons:
   • Requests to include additional features, such as a deck or smart home systems, after the project is underway.

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How Change Orders Are Processed

1. Identification:
   • The issue or request is identified and brought to the builder’s attention.
2. Proposal:
   • The builder provides a written proposal detailing the scope, costs, and timeline implications of the change.
3. Approval:
   • The homeowner reviews and approves the change order in writing.
4. Implementation:
   • The agreed-upon changes are incorporated into the project.

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Costs Associated with Change Orders

1. Direct Costs:
   • Additional materials, labor, and equipment required to complete the change.
2. Indirect Costs:
   • Potential delays that affect the overall project timeline and increase labor or overhead expenses.
3. Administrative Fees:
   • Builders may charge fees to cover the administrative burden of processing and implementing changes.

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Tips for Managing Change Orders

1. Minimize Changes:
   • Finalize your design, materials, and budget before construction begins to reduce the need for changes.
2. Communicate Clearly:
   • Keep open lines of communication with your builder to ensure all decisions are documented and understood.
3. Include a Contingency Fund:
   • Allocate 5–10% of your total budget to cover unforeseen changes.
4. Understand the Terms:
   • Review your contract for the builder’s change order process, fees, and timelines.

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Pros and Cons of Change Orders

• Pros:
  1. Allows flexibility to adjust designs or address unforeseen issues.
  2. Opportunity to improve the home’s functionality or aesthetics.
• Cons:
  1. Can increase costs significantly.
  2. May delay project completion.

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Common Examples of Change Orders

1. Material Substitutions:
   • Switching flooring materials or upgrading fixtures.
2. Structural Modifications:
   • Adding windows or changing room layouts.
3. Additional Features:
   • Installing a covered patio or upgrading HVAC systems.

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FAQs About Change Orders

1. Do change orders always increase costs?
   • Not always. In some cases, removing features or choosing less expensive materials can reduce costs.
2. Can I request a change order at any time?
   • Yes, but frequent or late-stage changes may disrupt the project and incur higher fees.
3. What should I do if I disagree with a change order?
   • Discuss your concerns with the builder and review the original contract to resolve disputes.

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Related Topics

• Custom Home Contracts: Fixed Price vs. Cost-Plus
• Budgeting for a Custom Home Build
• Understanding Permits and Inspections