Why Does Your Home Builder Want You to Have a Contingency Sum?
As you talk to custom home builders about your project, you get a clearer idea of how much money you need to build your new home. Builders look at your plans and cost them up.
However, the quotes you get are just quotes at this stage. Some of the builders you talk to may recommend that you factor a contingency sum into your budget. What is this money for, and why should you add it to your possible costs?
What Is a Contingency Sum?
A contingency sum is an amount of money that you set aside before work starts on a building project. In an ideal world, you won't need to spend this money. It is there to cover unforeseen problems or changes to the build that increase your overall costs.
This sum can be a percentage of your quoted costs. Or it can simply be an amount of money that you keep outside of your basic budget in case you need it.
Why Add a Contingency Sum?
Experienced builders cost up projects carefully and accurately. They take into account the costs they know they will have right now, such as materials, equipment hire, labour and planning charges.
However, as any experienced builder will tell you, things don't always go to plan on a new home build. As the build progresses, your builder may run into issues that they couldn't foresee.
For example, if your builder starts to prepare your land and finds that it is contaminated with asbestos, then the ground will need to be cleaned up before work can start. This issue wasn't apparent until work started on the ground; however, putting things right increases your costs.
Or you may decide to make some changes of your own during the build. You might want to upgrade materials or fittings in the property. Again, this adds to your budget.
If you don't have a contingency sum, then you might struggle to pay for unexpected expenses or even simple design changes. You might need to stop work on the project or to change your plans to reduce costs in other ways.
A contingency sum simply gives you wriggle room. If you allocate this money before you start building, then you won't get any nasty budget surprises. If all goes to plan, you don't need to spend the money.
If you aren't sure how much money to set aside as a contingency sum, talk to your custom home builders. Their experience can help you decide on a sensible sum.