How to manage building cost overruns

Regardless of how good you may plan, there will always be unexpected home building costs.

Learning how to cope with unexpected twists and turns in home building cost is important in ensuring you stay within your budget.

So, what should you do if the unforeseen occurs?

1.) Assessment
You should take time to assess the situation. See what you can do about it. Think of the most appropriate thing to do in the given situation. If it is theft of materials, report the matter to the police. If it is rainfall, cover your materials (and if necessary, the whole site) with non-porous materials.

2.) Talk to your builder
You should talk to your builder regarding the given situation. If it is about cost escalation, find out what can be done to avoid the cost or reduce it. If you are dealing with a builder who refuses to do the right job, ask him what is wrong and if dialogues fails do not hesitate to hire a new builder.

3.) Insurance policies and bonds
You should never begin a home building project without covering all the construction risks. In addition to estimating home building costs, you should carefully assess your insurance requirements and obtain the best insurance policies.

An all-risk insurance policy is particular to a certain building project and protects the construction site, the materials and the equipment being used. This policy covers the materials while they are on transit or in a warehouse.

READ: How to estimate building costs

It is recommended that you get bonds to protect yourself against builders who do not follow through on their bids (bid bonds); bonds that protect you against builders who do not perform (performance bonds); and bonds that protect your construction materials and labour.

4.) Downgrade materials
You should consider downgrading on materials and use the savings to cover the unexpected cost. This may be a difficult choice to make but it may be the only way to finish your project on time and within budget.

5.) Draw on your slush fund
It is brilliant to add 10 per cent to 20 per cent on your budget as allowance to cover unexpected home building costs. You can draw on this fund when the need arises.

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