The Meaning of Change Orders in Home Remodeling

March 27, 2014 / by Gregg Cantor / In Home Remodeling

Change orders, agreement for changes, additional work authorization — whatever a home improvement contractor calls it, they are one of the biggest pain points for homeowners as they progress through their home remodeling project.

There are different types of change orders, some due to unforeseen circumstances and others due to owner requested changes or upgrades. Unforeseen circumstances can be something found hidden in a wall or underground, or an unexpected city requirement or fee. In any of these cases, it is our policy to work with clients, because nobody likes surprises that incur additional costs. When unexpected issues arise, it can mean reduced or no profit for us, and sometimes even splitting the cost with the client.

For owner-requested changes like adding more square footage or upgrading finishes, we always price them out before completing work and give our clients choices. The profit margin we use is consistent with our original contract.

Protect Yourself from Greedy Profit Margins

While they are a common component of any home improvement project, disreputable contractors will sometimes take advantage of homeowners with unmerited change orders. If you’re presented with change orders for work not requested, don’t just sign off. When I consult with homeowners, I advise them to push back if a contractor comes forward with change orders after the fact. Contract law states that it is illegal to complete additional work without a signed change order. That should be enough leverage to use against a contractor who treats you unfairly.

Here are some typical situations where change orders can legitimately apply:

  1. Documentation of a pre-existing field conditions

  2. Deviations from the plans or specifications due to code requirements or measurement discrepancies

  3. Material, fixture, or finish upgrades requested by owner

  4. Plan changes

  5. Additional work requested by owner

I suggest asking the firms you are considering up front how they handle change orders. This quote from a contractor in Maryland is exactly the mentality you should watch out for:

“Change orders are as much a part of our business as anything else we do. Mark-up needs to be much higher. Change orders can be a great way to increase profits!”

As an reputable San Diego design-build firm that is known for accurate up-front pricing, being greedy with profit margins on additional work is something we never do.

A healthy relationship with your home improvement contractor requires a little give and take. Check out our complete guide to choosing the right home remodeling contractor to learn more about starting off the client-contractor relationship on the right foot.

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