Change Orders: What Contractors Won’t Tell You About Remodels

So, you’re right in the middle of your home remodeling project. Everything is going as you expected, and that’s when your contractor hands you a change order contract. “What is this? Why am I being charge an additional $9,000?” You interviewed many different contractors and chose the one that you thought wouldn’t try to rip you off. Everything was perfectly fine, until, you got that call from your contractor. You know the one, where they say, “don’t worry but, I have a small issue we need to discuss.” That’s where probably for the first time, you hear the dreaded term know as a…“Change Order”.
You got a very detailed breakdown of pricing before you even began, so how could it happen? Most homeowners that remodel their home asks themselves this question all the time. So, is it the contractor’s fault? Is it your fault? Is it your house? Before you jump to conclusions, let’s start from the beginning and let us walk you through the entire topic of change orders.

What’s a Change Order?

A change order is a modification of the original contract agreement that was signed between you and a contractor. A change order can include changes in the project scope of work, timeline, and of course, total price. Sounds simple enough? A quick google search will tell you the definition.

In the home remodeling industry, we have two main types of change orders:

  1. Voluntary Change Order: Is when changes to the project are made by choice and are not essential to continuing the original scope of work.
    • For example, after demolishing the wall in your kitchen, you realize you have much more space than you anticipated. You decide it’s the perfect time to add that kitchen island you’ve always wanted. That’s a voluntary change order.

  2. Involuntary Change Order: Is when changes are required for the project to proceed as normal.
    • For example, your kitchen remodeling plan includes upgrading all outlets and lighting to comply with current building codes. However, your electrical panel box is not big enough to accommodate all the additional circuits, so now you have to upgrade your panel box in order to continue with the kitchen remodeling project. That’s an involuntary change order.

Why Do Change Orders Happen?

There are three main reasons why change orders happen:

Unprofessionalism: Hiring a general contractor is one thing; hiring a professional general contractor is another. When you trust a contractor to work on your home, you need to make sure they know what they are doing. The last thing you want is someone using your house to practice their building skills. 

Miscommunication: This happens all the time, not only in construction but in almost every type of relationship. You might say one thing, but the contractor doesn’t hear you correctly, or you specifically remember asking the contractor for something and he agreed, but he doesn’t remember. And voila, you have a change order. Sounds frustrating, right? Well, it is. But guess what? You can easily avoid it. More on that later.

The Unseen: You know how they say, “If walls could talk…” If they could, they would tell us what’s behind them. Anything from electrical to framing can be behind those walls, and sometimes it is not pretty. Unfortunately, we don’t have X-ray vision yet. So until we do, this type of change order will happen over and over again.

So now that we know all the reasons why change orders happen, let’s get to the real reason why you’re here:

How Do I Avoid Change Orders?

Want to avoid change orders completely? Well, don’t hire a general contractor. Lol, just kidding. The best way to avoid change orders is great project management. Now you’re probably saying, “but, I’m not a project manager!” Good point. A great project manager knows that managing a project is constant work. It’s about avoiding pitfalls and understanding the road map for every stage of the renovation. Here’s what good project management entails:

Nothing is verbal: Back in the day, people used to spit handshakes to come to any sort of agreement. Thankfully, we’ve outgrown that, and today we use contracts. All you need is to sign, but wait, what if some of the things you’ve discussed are not in the contract? Simple. Don’t sign. If it’s not in the contract, technically it doesn’t exist, and if it doesn’t exist when it needs to, that means that later on it will come in the form of a change order. Always, always, always make sure that everything you’ve discussed with your general contractor is in the contract. Every little detail. You want measurements, materials, quantities, and everything in between. It doesn’t matter how much trust you have in your general contractor; you never know where things will go, and you must protect yourself. Is something missing in the contract? Ask your contractor to add it.

Pre-inspections: Did you buy your home without checking that it’s safe to live in and that it doesn’t have any major issues? NO. So why wouldn’t you do it before working on it? A professional general contractor would want to check your home’s infrastructure before starting the project (plumbing, electrical, framing, and foundation). By doing so, it will give you both a better indication of how long, complex, and pricey the project is. We don’t have to play any guessing games; sometimes the answers you’re looking for are right under your nose. All you need to do is inspect.

Communication pre-construction: Ask your general contractor these questions: “Have you ever had a change order before?” “How do you handle change orders?” “If we have a change order during the process, what’s the profit margin you’ll be charging on it?” All these questions will help you choose the right contractor, but they will also show the contractor that you care and can’t be played with.

Contingency: Starting a remodeling project without a contingency budget for unexpected costs is like showing up to dinner with friends without your wallet. You must understand one thing: construction is dynamic. So many things can happen during a remodeling project; you must be prepared. When saving for your remodeling project, we recommend saving an extra 10-15% for a contingency budget.

Negotiating With a General Contractor

Your goal is NOT to hire a different professional to work in your house. The last thing you need is two people blaming each other for not working correctly if things go south. Your goal is to find a way to work with your general contractor, especially if he is licensed. Every contractor has to provide you with a warranty for their work. If you have two different contractors working on your project, they will try to blame each other for their mistakes instead of taking responsibility.
How do you negotiate a construction change order? 

Negotiation can be long and frustrating, or it can be nice and simple; it depends on how you make it. Before you start a negotiation, you must come prepared with your terms. If you just ask for a discount, you might get it, but maybe you could’ve gotten more. So, how do you negotiate with your contractor? I’m going to share a very short and simple method with you that works almost every time.

Once you have your terms ready, present them to your contractor while being grateful for the change order and say: “Thank you for bringing it to my attention, but unfortunately I can’t make it work. What can I do from my side to get to my terms?” This alone will show the contractor how much you care, and it will also make the contractor think and come up with different alternatives. You’ll have different options on the table, so you can decide what’s the best move for your renovation. You’ll be surprised by what your contractor can come up with when they like you.

Change order negotiation

Creative Solution for a Budget Constraint

I’ll give you an example. Back in 2018, I had a client named Susan. Susan had an ADU garage conversion project done by us. During the project, we found out that the main water line from the street to the house had a crack in it, and the water pressure to the ADU was very low. To fix the pressure on the ADU, we had to replace the main water line. We wrote a change order for a total of $3,000 to replace the main water line and gave it to Susan. When Susan saw the change order, she said: “Thank you for letting me know about the main water line. I really appreciate it and the hard work you’ve been putting into my project. I really want to have the main water line replaced and I want you to do it. However, I’ve budgeted only $1,800 for any type of extra work needed. What can I do from my end to make it work for $1,800?” At that point, we had to come up with a different solution. We offered her to get the trench digging for the main water line replacement done by herself, and then we could reduce the price to $1,800. She was very happy with this solution. She had her two sons dig the trench in four hours, and just like that, she saved $1,200.

Can You Reject a Change Order?

The short answer is yes, but the question is if it’s worth it. Once you reject a change order, you’ll have to pause the project until you come to an agreement. And guess what? This pause is wasted time, and we all know that time is money. Always take time into consideration before rejecting any type of change order.

What are Common Reasons for Change Orders?

We are going to list the most common change orders in the home remodeling industry. As long as you cover all of them pre-construction, you should be just fine.

  1. Foundation: Cracks in foundation, cracks in raised foundation, shifted foundation, sinking foundation, earthquake damage, foundation spalling, water intrusion to the foundation, etc.
  2. Framing: Wall cracks, doors and windows misalignment, roof sagging, wall bowing, gaps and spaces in framing, water damage to framing, structural movement, sagging floors, etc.
  3. Plumbing: Leaky pipes, clogged drains, cracks in pipes or drains, old pipes, etc.
  4. Electrical: Old wires, old electrical panel box, ungrounded wires/panel box, overloaded circuits, not enough circuits, etc.
  5. Toxic materials: Mold, asbestos, lead, etc.

Change orders are inevitable; they happen all the time, and as a homeowner, you have to accept it. That being said, there are many ways to prevent them, as we mentioned above. Your part doesn’t end with hiring the right general contractor for your project and trusting him no matter what. You must manage the project and make sure it goes down the right path. If you want a hands-free project, all you need to do is call us.

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