CONTINGENCY FUND
Insider secret tip: your contractor does not have x-ray vision or mind-reading capabilities. Although, if you meet one who does possess these skills, we’d love to hire him/her!!
Why do we recommend a contingency fund for each renovation or build? Two main reasons. Mostly, it’s because a contractor never knows what is behind a wall (or in a wall), until demo begins. Can we simply look at 1980’s drywall and know for sure if it has asbestos or not? No sir. Did we know that ant colony had eaten away the structure below your window? No Ma’am. Did we realize that the non-load-bearing wall was full of HVAC that would need to be relocated in order to have an open concept? Alas, not until at least part of the drywall was removed.
So we’ll just be blunt. We can only quote on what we can see and reasonably anticipate is going to be involved in the project. Sometimes a permit office will ask for a test or document that is rarely used; for example, an engineer’s report on a 100 year flood event (2013 in Calgary). Sometimes finishing a basement may uncover the fact that the wiring of the entire house will need to be updated due to a fire hazard. Literally, sometimes fixing one thing, causes a problem somewhere else.
We provide a quote for each project with everything we think will be involved. Then we suggest a contingency fund. A general rule of thumb these days is to have 10% to 20% of the quoted price available somewhere, just in case. The money can be held in a stock or a fund, but it may need to be accessed in a week or less if a problem is revealed during the renovation. The money might just be a line of credit that a homeowner keeps for unexpected “rainy days.”
The truth? Almost every renovation has a surprise. Something happens, a product needs to be changed, a tradesperson quits and needs replacing, …. We always try to keep to the budget, but that isn’t always possible.
And now, the other main reason that we suggest a contingency fund. Occasionally, a homeowner starts off with a very reasonable plan and budget. But then (drum roll please), they like the quartz countertop better than the granite. Or, since the house is a mess anyways, let’s redo the bathroom at the same time that you’re working on the kitchen. Or, let’s get new flooring for the bedrooms in addition to the living room and kitchen. It is worth mentioning that stair railings escalate from a reasonable price to outrageous $$$ very quickly.
It’s your house, and your choice. We can still provide quotes for changes when the job is in progress. But no, we cannot exchange a $2 tile, for a $10 tile, and expect the same pricing for the job.
What we can do is make every attempt to communicate the risks, costs, extra costs and extra time required for any changes in the scope of your plan. The larger the project, the more important it is to keep track of any changes. Why? Because $500 here, and $1000 there can add up very quickly.
A contingency fund should always be used for safety (asbestos) and structure first. Then, if there is still access to extra funds, a homeowner can upgrade or add to their project. In contrast, some projects can be broken down into phases: kitchen in year 1, bathrooms in year 2, flooring in year 3. Everyone has a budget. We don’t ask about client’s finances; but we do provide written quotes and contracts in our attempt to be as clear as possible about the anticipated costs on each project. And then we work together with each client to figure out solutions for each “surprise” or requested upgrade.
Bottom line: don’t “spend” your entire reno budget on the quote. And if you don’t need it? Well, your next grand vacation is already paid for!
