Remodeling’s “Hidden” Costs – Change Orders

Many builders and remodelers charge a fee for change orders.  This fee can be a flat price or a percentage.  Regardless of whether you are adding to a project or deducting from a project, this fee will probably hold.  Be sure to ask your contractor about this fee and scan your paperwork for it prior to signing anything; they need to be upfront about it in order to charge for it.

Once a project is sold, the office will start to process the finalized paperwork.  This process includes the obvious of ordering materials and scheduling trades.  The not-so-obvious part is the distribution of information.  Your salesperson/designer is your contact, but that person disseminates information to a team of people who distributes that information to their team of people.

Here’s an example to illustrate this:  The salesperson gives a copy of the contract and all supporting documentation to the comptroller (to enter all information into the company’s system), to the accountant (to figure out payment schedules to the various vendors), to the scheduling department, to the supervisor and to the material handler.  The comptroller pulls permits and other licenses, bonds, etc.; the scheduling department organizes all the various trades according to availability of labor and the availability of product; the supervisor looks over the plans and creates a work order for each trade and the material handler calls all the vendors necessary to get the products in-house when needed.

When a change order comes from a client, everyone needs to be alerted to the change.  Even something as small as changing the finish on a faucet can cause turmoil.  Time, effort and due diligence is required of all staff members and the risk of an error is raised substantially.

These are all factors that are considered when a contractor accepts a client’s change order.  Without involving a fee for this disruption in the process, a contractor could easily go broke.  And, of course, this is just for the service end of a change order.  By removing product from a project, you can also expect a restocking fee (25% is standard) for the unexpected shipping, handling and additional paperwork on the part of the warehouse.  Beware, custom and special ordered product is usually non-refundable.

Of course, things happen on job sites.  A wall is opened and surprise!  These kind of things are par for the course and you should not be charged an additional premium for a change order.

It can be said that change order fees discourage clients from changing their minds.  From a contractor’s stand point, that’s not a bad thing.   If you desire the smoothest project for the least amount of money, stay committed to the agreed to project.

January 2011 – Stephanie Bullwinkel, CBD

Imperial Kitchens and Baths, Inc.
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