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What To Do When Contractors Go Over Budget?

Hiring a contractor for a project can take out a lot of the stress of trying to do it yourself. However, what do you do when your contractor goes over the agreed-upon budget? Here are some tips on what to do:

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If your contractor has gone over budget, then follow these steps:

  1. Address the Issue
  2. Talk to who is in charge
  3. Let them explain
  4. Review the terms
  5. Explore options
  6. Get a second opinion
  7. Seek legal counsel

Home projects aren't inexpensive, so it can be frustrating when a contractor goes over budget. In this article, we will walk you through some tips on what to do if this occurs. In addition, we will answer other frequently asked questions about contractor budgeting, so let's get to it!

The engineering team discuss and calculate the engineering structure design of the building. Architects calculate the budget for housing construction. - What To Do When Contractors Go Over Budget

Contractor is over budget - What to do?

Unless money isn't an issue for you, a contractor going over budget is a cause for concern. No matter how big or small, home projects can be expensive enough as it is. So, if a contractor has gone over budget on your project, it usually isn't by a small margin.

It is easy to be left feeling frustrated, helpless, and even a little angry in this situation. After all, you trusted this person to complete the job, and they have let you down. Not to mention, now you're stuck with a higher bill than what you had anticipated.

Now that we've established how you might be feeling, it's time to move on to what you should do if your contractor has gone over budget.

Portrait of irritated young man architect emotionally talking on phone at indoor building construction site, having problems with contractor

Address the Issue

The first step is to address the issue in a calm and collected manner. There could be a reasonable explanation for why they went over budget. For example, they may have underestimated the cost of materials or the time it would take to complete the job.

Double-check the agreement and project quote before you approach your contractor. This way, you can be sure that they did go over the budget and that there isn't a misunderstanding.

If you are sure of the overage, then address the issue with an open mind and be prepared to listen to their explanation.

Talk to who is in charge

When you are prepared to address the issue, make sure you talk to who is in charge. This is usually the contractor themselves, but it could also be their boss or supervisor.

Blowing off the handle on an employee probably won't get you very far. It could make the situation worse. So, be calm and try to have a constructive conversation.

Let them explain

Once you have the lead contractor alone and you have had a chance to calm down, it's time to let them explain. This is their opportunity to explain why they went over budget and what can be done.

Listen to their explanation and see if it makes sense. If it does, great! It could have been something you missed or didn't think of. If their answer doesn't make sense, you gave them a chance to explain themselves.

Review the terms

If you are still not satisfied after hearing their explanation, it's time to review the terms of your contract. This will help refresh your memory on what was agreed upon and what wasn't.

This is also an excellent time to break down everything completed and how much it cost. If any work was performed that wasn't in the contract, make sure to point that out.

Understanding the costs will help you make a more informed decision on what to do next.

Explore options

Now, it's time to explore your options. Depending on how you feel, you may want to:

  • Let them finish the job but at a reduced rate
  • Have them finish the job and walk away.
  • Ask for a discount on an additional project.
  • Find someone else to finish the job.
  • Cancel the contract and get your money back.

These are just a few options to consider. The best option for you will depend on the severity of the overage, your contract, and your relationship with the contractor.

Hispanic Male Contractor Talking with Female Client Over Blueprint Plans In Front of Bathroom Drawing Gradating to Photo.

Get a second opinion

Before making a decision, you can tell the contractor you need time to think about it or that you want to get a second opinion. This will give you some time to cool down and make an informed decision.

It's also a good idea to get a second opinion from another contractor. They can take a look at the work that has been done and tell you if the overage is justified.

If you decide to get a second opinion, use someone you or your contractor don't know. This way, you can be sure that they are impartial.

Seek legal counsel

If you and the contractor can't agree, you may need legal counsel. This is usually a last resort, but it's an option if you feel like you have no other choice.

An attorney will be able to review your contract and advise you on what your options are. They can also represent you in court if it comes to that.

However, depending on the cost of the project and the amount of the overage, it may not be worth it to seek legal counsel. You will need to weigh the cost and decide if it's worth it.

How do you avoid a contractor going over budget?

While anything can happen and there are always risks, you can do a few things to avoid having your contractor go over budget.

Worker shows house design plans to a young couple at construction site

Choose the Right Contractor

The best way to avoid having your contractor go over budget is to choose the right one from the start. This means doing your research and taking your time.

Make sure you read reviews and talk to people who have used their services before. You should also get multiple quotes and compare them.

It's also good to meet with the contractor before hiring them. This will allow you to get to know them and see if they are someone you can work with. Plus, you can look at their previous work to see if it meets your standards.

Be Clear on What You Want

By being clear on what you want from the start, you can help avoid having your contractor go over budget. This means being specific about your needs and wants.

The more detailed you can be, the better. You should also give them a budget to work with so that they know what your expectations are.

If you're unclear on what you want, they may do more work than you wanted or needed. This can lead to them going over budget.

Keep an Eye on Their Progress

Another way to avoid having your contractor go over budget is to watch their progress. This means checking in with them regularly and ensuring they are on track.

Also, keep an eye on your budget as well. This way, you can catch any overages early on and address them before they become a problem.

Communicate With Them

If you're concerned about your contractor going over budget, then make sure to communicate with them. This means letting them know your concerns and asking them questions.

You should also keep the lines of communication open to address any issues that come up. Doing this can help avoid having your contractor go over budget.

Have Emergency Funds

It is good to have 10%-15% of your overall budget set aside for emergency funds. This way, if your contractor does go over budget, you will have the money to cover it.

You can also use this money to cover any unexpected costs that come up during the project. This can help reduce the chance of your contractor going over budget.

What's the difference between an estimate and a quote?

There are a few key differences between an estimate and a quote. An estimate is typically given before the work has started. This is an approximation of what the final cost will be. On the other hand, a quote is a set price that will not change.

When you get an estimate, the contractor will look at the scope of the work and give you a price based on that. This price is not set in stone and can change depending on the cost of labor, material, equipment, and other factors.

On the other hand, a quote is a set price that will not change. This means that the contractor will not charge you more than the quoted price no matter what happens.

It is essential to know the difference before you hire a contractor. This way, you can be sure that you are getting the price you want and that there will be no surprises down the line.

Closeup of a contractors clipboard as he writes up an estimate for a kitchen remodel. Shallow depth of field with focus on clipboard.

Final Thoughts

Doing your research and communicating with your contractor can help avoid having them go over budget. You should also clearly understand what you want and keep an eye on their progress.

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