08:50AM | 07/29/04
Member Since: 02/18/04
2 lifetime posts
My builder went to make the third of four draws yesterday and is already over the final amount! The problem here is that on everything that we knew about, we were only on course to be about $10,000 over. We always looked at our allowances when we had a choice to make (for things like flooring, doors, paint, lights, etc). But after requesting a detailed account of his cost, we found that we were $47,000 over on excavating and $38,000 over on lumber! We also look like we will be $6000 over on labor and about $5000 over on drywall (also over on a few other areas). Now I can kind of understand not knowing about the overages on labor and maybe the drywall, because they are not done yet. But the excavating and lumber have been known about for a while, with no mention. At this point, we are looking at being 44% over budget! At this point, I am very worried, because unless there is a mess up in the numbers, we just built a house for someone else. And frankly, I'm not sure if we could sell it for what we look like we will have in it. Any thoughts?


01:42PM | 07/29/04
Member Since: 07/01/03
549 lifetime posts
Your contract is an enforceable instrument that should be preventing over-draws or over budget unless you approve changes. You need to have your contract reviewed by your attorney quickly to find out what was agreed to and what protections you have against unauthorized changes or budgetary increases. The contractor has a responsibiltiy to provide a reasonable estimate of costs before construction begins. Typical over-runs are in the neighborhood of 12%. What happened that excavation (concrete?) would go almost 50K over budget. A contractor needs to fight and scrap for savings and provide you a full accounting of the reasons his bid is wrong, and obtain authorization for the change before he commits to it. If that was not done, this is just negligence.

You need an attorney to advise you on how to approach this contractor, and how to protect yourself against liens should you enforce the contract. Do not release payment until you have had an opportunity to consult your legal counsel. If I was a cynic, I'd say this guy is setting you up to skip town. $5000 is enough for 20,000 square feet of drywall materials. $47,000 sounds like 100% of an excavating subcontract. Assuming you had a written contract, the general contractor was liable to enforce the subcontractors to maintain their bids. Any payment exceeding the agreed amount without prior WRITTEN approval by you should be his cost. This project is in danger of not being completed.
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