Should you tell your building budget to your builder, even before you’ve started working with them?
Do you fear losing your competitive advantage if you share what your building budget is?
Here’s what to know.
One of my podcast listeners asked this question:
“The builder I am looking to use has asked what my project budget is. I’m hesitant about telling him our budget at this stage as we are yet to even meet. Should I be telling him our budget??”
The short answer to this question is: YES.
Yes, you should be telling your budget to any builder or designer, as part of meeting them and introducing yourself to them and their business.
But I totally get the hesitancy and the concern. The common homeowner fear is this:
Well, if I just tell them my budget, then I’ll have just given away my competitive advantage. I’ll have just told them how much $$$ I have available to spend, and so they (the builder, the designer) will then go about making sure we spend ALL of that.
I’ll never really know if I could have got what I want for less, if I’d just kept my budget to myself from the start.
(And therein lies the biggest issue about how we go looking for designers and builders. But especially builders).
I’ll get back to that, but first, let me talk about why builders and designers need to know your building budget right from the start (even in their online enquiry forms).
#1 It enables them to see if you have realistic expectations about what your building budget and project costs
You’ve probably heard me say this before. In my experience, homeowners have dreams and ideas about what they want in their future renovation or new build. And then they have a budget that’s about 50% – 75% of where it needs to be to achieve those dreams and ideas.
For any professional – builders included – they need to understand your budget expectations (and your dreams and ideas), so they can see how mismatched they are.
If they are mismatched, the first step will be giving you some bad news that either your ideas or your budget need to change. And then they can help educate you what the alternatives are.
Many designers and builders also know that often, homeowners are fudging their budget figures in these enquiry forms and in early conversations (see back to my common fear about telling them your budget).
And so, knowing your budget doesn’t prevent them from having the conversation with you.
I’ve had many a conversation with a potential client who has said one figure on the first email, and then (when told it was insufficient), could increase it considerably.
However, having this info early means that builders and designers can give better quality feedback and advice about whether your budget and your ideas are aligned. Which saves you time as well.
(Establishing your budget early in your project can be challenging. In my Get Started Guide mini-course, I share some important things to understand about early budget discussions in a great bonus. Check it out here).
#2 It enables them to see if your project is a fit for the way they do business
To be frank, you can get a home built for $600 per sqm, and you can get a home built for $6,000 per sqm. And everywhere in between.
Of course, the type of home (its design, materials, size, etc) will drive the total cost. But don’t underestimate how much the business type also drives the project costs too.
Volume builders, who build the same home hundreds of times each year, have a very different business model to the family-owned custom builder building only 2 or 3 custom-designed homes per year.
There are also builders who have project preferences, insurance limitations, or team setups, or maximum capacity each year on projects … and so that will determine the minimum or maximum budgets they’ll work with.
And, some builders also have location preferences (as in, they only want to work in certain areas). However, for the right project, the right client and the right budget, they may consider working outside of those areas.
So, understanding your budget enables a builder, right from the start, to see how your project fits into their business model, and if it’s a fit for the type of projects they want to be doing (and where). Doing this early saves time and energy for everyone involved.
(If you’re wanting help with how to set your budget, and then stick to it as your project unfolds, this mini-course is brilliant).
#3 It helps the builder understand how ready you are to get going on your project
Good builders are busy, and that’s the case right now more than ever. For many, many years, we’ve known there is a skilled trades shortage in Australia, and in many other locations around the world.
Finding good builders can be hard.
And so, those busy good builders want to ensure that, when they start talking to you, that they know how ready you are to get going on your project.
It doesn’t mean they won’t talk to you – but it will just show them: are you wanting to do this project in 3 years? Or 1 year? And so will that work for them and you?
Again, this can save a lot of time in those early conversations.
And this is why …
Many homeowners are also contacting builders way too early in their project.
They’ll be just thinking about renovating or building, and have done very little of their own research. They’ll see a builder working locally and ask them to come around for a chat. Even though they may still be years away from getting serious. They pick the builder’s brain, get a bunch of ideas for free, and then sit on their project for another two years or more (because they’re not really ready to start).
When you’re asked to give your building budget indication and you provide one, it shows the builder how much work you’ve personally done to think about your project and get prepared.
Because, ideally to work out your building budget, you’ve done your homework on real estate values, chatted to your mortgage broker or bank, and assessed what local construction costs are like at the moment. To name that budget, you’ve done some work to figure out what your capacity is to pay for a project at all.
(Inside my ‘Choose Your Builder’ mini-course, I share the 5 C’s of choosing a builder. Plus there’s great checklists and questions to ask, so you can interview builders more confidently. Learn more here).
Sitting on both sides of the fence …
Having the unique position of being an architect, who also helps and teaches thousands of homeowners (and hears so many of your worries and concerns), AND then also works closely with builders inside my other business, Live Life Build … I find I get to sit on both sides (well, three sides if that’s possible LOL) of the fence.
And so, I know this budget conversation can be a hairy one for ALL involved. And as I said, I completely understand the hesitancy to disclose it early on.
So, these are my tips for you:
- figure out what your building budget is (with your own research and conversations with your bank or mortgage broker)
- determine if that budget will have to pay for EVERYTHING (professional fees, approvals, construction, contingency) or whether it’s purely for construction, and you’ll have other resources to pay for the fees etc along the way
- properly research the builders and designers you approach to see if their projects are similar to what you’re considering for your future home
- work out who you’ll be making enquiries with, and interact with them on social media or online when you see them sharing their current projects, to get a feel for what they’re like in their communication etc
- so that by the time you go to fill out their online enquiry form, or speak to them for the first time, you already have a feel if they’re going to be the right fit for you or not (and that ‘fit’ will be budget, project type, personality, etc)
- then tell them your building budget – or at the very least, give them a range (and tell them if it’s for everything, or just construction)
- and try not to fudge it or lie about it
Now, before I wrap up …
Remember I said earlier.. “And therein lies the biggest issue about how we go looking for designers and builders. But especially builders.”
What I see often is this:
Homeowners are looking for the cheapest builder to deliver their dream home. Not the right builder to deliver their dream home.
If you have a fear that any builder you share your building budget with is going to simply max out their pricing or quotes to the budget you’ve advised, then I suspect you’ve not done sufficient research on whether they’re the right builder for your project … in which case, go back to my tips in this email, plus the other resources I’ve suggested.
I get it: of course, when you want to build or renovate your home, you don’t want to pay more than you have to.
However, what you pay is not just about getting the finished home.
Building and renovating is not like buying something over the counter, where you hand cash over, and get something handed back.
When you’re building or renovating, you’re not just buying the finished home.
This is a process that can (depending on who you’re working with) take anywhere from one to three years to move through. So..
- You’re buying your project experience.
- You’re buying the quality of relationship you’ll have with your team
- You’re buying the amount of support and guidance and communication you’ll receive.
- You’re also buying the longevity of the follow up and builder support beyond your project completion.
- And you’re buying the confidence in the long-term quality and durability of that finished home too.
So, finding the right builder is a much better goal than finding the cheapest one.
Hopefully that helps you think about how to discuss your budget, and who to discuss it with, at the outset of your project journey.
This blog is about how to have the first conversation with a designer (and it also applies to a builder) >>> Read and watch here.
Not all designers are created equal, so learn how to choose the right designer for you >>> Episode #73
The Get Started Guide has a checklist for researching potential designers so you can sift and filter and figure out who you’ll contact >>> Learn more here
Choose Your Builder is brilliant to help you research, interview and select your builder confidently >>> Learn more here
Access my free “Your Project Plan” online workshop and awesome bonuses now >>> https://undercoverarchitect.com/projectplan
Access the support and guidance you need to be confident and empowered when renovating and building your family home inside my flagship online program >>> HOME Method