Approximately 78% of home renovation projects go over budget, according to Clever Real Estate. Around two-thirds of homeowners end up taking on debt just to pay for those renovations. With the high cost of living, the last thing homeowners need is greater financial strain.
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Here’s why so many home projects exceed their budget and what you can do to avoid this issue.
Not Having a Realistic Budget
According to Angi, the average cost to renovate a home ranges from $19,481 to $88,369. Labor costs, the project itself, timelines, square footage and other factors can influence this.
But just because you have a baseline doesn’t mean you know what your specific project will cost. In some cases, homeowners don’t have a realistic budget in the first place.
“Many home projects or renovations go over budget because many homeowners don’t start with a realistic budget in mind,” said Joe Raboine, vice president of design at Oldcastle APG. “It’s important to have a firm understanding of your budget up front so you know what is feasible to tackle and communicate this to your contractor.”
If your contractors (assuming they’re reputable) understand your project and budget, they’re more likely to recommend materials and options that suit your needs.
Check Out: 6 Easy and Affordable Home Renovation Tips From Joanna Gaines
Not Knowing What’s Feasible
The idea of installing an entirely new plumbing system or knocking out a few walls to expand a room might sound appealing. But is it feasible?
“We often see home renovation projects go over budget due to homeowners not understanding what’s actually feasible before jumping to design and construction,” said Whitney Hill, licensed general contractor and co-founder of SnapADU.
Hill suggested doing a full feasibility analysis to minimize the risk of future issues. This means checking out zoning and city regulations, site and utility conditions, hazard zone implications, and so on. Doing this at the beginning can help prevent going over budget or spending more time — and likely money — on your project.
Not Doing the Research
If you choose a contractor who’s less reputable, you could face some major problems down the line.
“Too many people do not do the leg work of making sure their hired contractors have a good reputation in the community. You’d be surprised how many problems can be avoided by searching a contractor’s name,” said Travis Hargrave of Hargrave’s Plumbing in Lafayette, Louisiana.
For those considering a home renovation project, here are a few things Hargrave suggested doing first:
- Research your contractors
- Speak with local inspectors to find out who’s legit and who isn’t
- Get multiple quotes from recommended professionals (this can help prove validity)
- Verify with your local town hall that the contractor you’re considering has recently completed jobs in their jurisdiction.
And even if a low price is appealing, don’t immediately jump on it — especially if it seems too low.
“Choosing the lowest price can be a blessing and a curse,” Hargrave said. “Many times, I’ve been called to pick up the pieces after an unknown plumber has left a job hanging. If a price seems too low, I always tell people to be prepared and have a little extra just in case. Going back to the bank is not fun.”
Complicated Language or Poor Information
In some cases, homeowners go over budget not because of poor workmanship or planning but because of vague, complicated or missing information. Contractor bids can be confusingly worded. Sometimes, they’ll have confusing pricing structures, which can also be tricky to sort through.
One solution is to use artificial intelligence to run through contractor quotes, clarify language, identify price inconsistencies and find any risky omissions that could lead to debt.
A Compounding Effect
It’s often not only one thing that leads to home projects going over budget. There’s usually a compounding effect at work.
“The homeowner doesn’t know how extensive the project will be, what the existing conditions behind the walls are and scope creep,” said Carl Murawski, a certified electrician, construction coordinator and tradesman. “If there is mold, structural issues or rot, those things need to be addressed before anything else. So often there is a compounding effect.”
It helps to identify any costs upfront, but you don’t have to do this alone. Murawski suggested getting an exploratory visit from a trusted contractor or building inspector to see if your home’s basic systems — wiring, mechanicals, structure, etc. — can handle the project without major alterations.
You may want to leave a buffer in your budget — say, 15%. That way, if you do go over your initial estimate, you’re still financially prepared.
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This article originally appeared on GOBankingRates.com: The Renovation Trap: Why 78% of Home Projects Go Over Budget
