1 00:00:18,190 --> 00:00:22,830 Hello everyone, This is Brian and Steven back with Building 2 00:00:22,830 --> 00:00:26,430 with Brevin. We are back for Week #12 and 3 00:00:26,430 --> 00:00:31,470 consequently Episode #12 and we're once again happy to be 4 00:00:31,470 --> 00:00:35,070 back on the podcast and provide you guys some more value. 5 00:00:35,070 --> 00:00:39,230 So this week we've got a a fun topic that I think everybody's 6 00:00:39,230 --> 00:00:42,590 really going to find a lot of value in because every single 7 00:00:42,590 --> 00:00:46,590 bill that I think I've been a part of has run into this 8 00:00:46,590 --> 00:00:49,910 particular instance. So it's going to be a good one 9 00:00:49,990 --> 00:00:51,870 and we're excited to share that with you guys. 10 00:00:52,350 --> 00:00:56,990 But with before we jump into that, Brian, how's everything 11 00:00:56,990 --> 00:01:00,710 going? Good. 12 00:01:01,590 --> 00:01:06,120 I think we. We need to share with our 13 00:01:06,120 --> 00:01:09,120 listeners. We've struggled on the timing of 14 00:01:09,240 --> 00:01:11,720 getting this podcast done because you're you're in the 15 00:01:11,720 --> 00:01:14,360 middle of a personal move yourself. 16 00:01:14,360 --> 00:01:20,280 And I would say that what we're the topic we're going to talk 17 00:01:20,280 --> 00:01:24,200 about which we'll share in in just about 10 seconds actually 18 00:01:24,280 --> 00:01:26,270 is. Stevens kind of going through 19 00:01:26,270 --> 00:01:28,710 that on his on his personal house in a different sense 20 00:01:28,710 --> 00:01:32,590 because he's that the house is complete and it's not a it's not 21 00:01:32,590 --> 00:01:34,590 a brand new build. It's a it's a resale. 22 00:01:34,590 --> 00:01:38,630 But he's he's making some changes so how's the how's the 23 00:01:38,630 --> 00:01:41,190 move going? That's never, no matter how nice 24 00:01:41,190 --> 00:01:45,710 or new or old or whatever you're doing, it doesn't matter. 25 00:01:45,710 --> 00:01:48,630 Moving is stressful. And I guess nobody ever says 26 00:01:48,630 --> 00:01:50,710 moving into a new house is pleasant. 27 00:01:51,290 --> 00:01:54,170 Yeah, well, you know what? I always try to go into it with 28 00:01:54,170 --> 00:01:58,250 the best attitude, but man, it Peach it down throughout the 29 00:01:58,250 --> 00:02:01,330 process. So, you know, it's it's mostly 30 00:02:01,330 --> 00:02:04,930 just the financing aspect of it and you know, signing all the 31 00:02:04,930 --> 00:02:07,610 documents and getting all the documents to the lender. 32 00:02:07,610 --> 00:02:10,610 And so that's one thing. And then of course the actual 33 00:02:10,610 --> 00:02:14,170 moving is the second piece that, yeah, I mean it's just more 34 00:02:14,170 --> 00:02:16,890 stuff than you ever thought you had, comes out of your current 35 00:02:16,890 --> 00:02:20,750 house and your new house. So anyways, but no, it's an 36 00:02:20,750 --> 00:02:24,190 exciting transition and we're excited for the new house and 37 00:02:24,710 --> 00:02:27,750 and definitely excited for the baby that we've got on the way. 38 00:02:27,750 --> 00:02:31,230 So yeah, it's going to be, it's going to be a good space that 39 00:02:31,230 --> 00:02:33,590 we're going to make our own and we're excited for that. 40 00:02:33,590 --> 00:02:37,630 So and the reason if anybody's asking or wondering that we 41 00:02:37,630 --> 00:02:41,510 didn't build a Brebin home is well, we really couldn't find 42 00:02:41,510 --> 00:02:44,950 land in the area we wanted to be that made sense to build a 43 00:02:44,950 --> 00:02:49,020 Brebin home on. So went back to that, that very 44 00:02:49,180 --> 00:02:53,060 important first topic of finding the right lot and we couldn't do 45 00:02:53,060 --> 00:02:54,980 that. So anyways, we're happy with the 46 00:02:54,980 --> 00:02:58,420 home that we picked, but Brevin home would be in hopefully 47 00:02:58,420 --> 00:03:01,740 yours, Brian and my future at some point. 48 00:03:01,900 --> 00:03:04,140 So anyways. Yep, absolutely. 49 00:03:04,340 --> 00:03:07,860 Good, Good point. And I think we might need to. 50 00:03:08,420 --> 00:03:10,900 We'll keep building this business and helping homeowners 51 00:03:10,900 --> 00:03:12,530 that. That are looking to get into 52 00:03:12,530 --> 00:03:14,370 their dream home because that's that's our passion. 53 00:03:14,370 --> 00:03:16,290 That's what we love to do. But we might need to start 54 00:03:16,290 --> 00:03:21,770 another business. So creating corrugated boxes 55 00:03:21,770 --> 00:03:25,090 because I'm sure you're buying boxes at Home Depot and they're 56 00:03:25,090 --> 00:03:27,930 insanely expensive. So Oh yeah, there's good money 57 00:03:27,930 --> 00:03:30,130 there. Yeah, what you're getting, it 58 00:03:30,130 --> 00:03:32,370 seems like, yeah, it seems like it's just crazy. 59 00:03:32,450 --> 00:03:36,250 But anyways, I know people didn't tune into this episode to 60 00:03:36,250 --> 00:03:39,970 listen about my move. So it's I think we're, we're 61 00:03:39,970 --> 00:03:44,340 ready to jump in. Yeah, this week, like I said, is 62 00:03:44,340 --> 00:03:49,500 is a topic that I believe every person that builds a custom home 63 00:03:49,580 --> 00:03:53,180 runs into, whether they they think they're going to or not. 64 00:03:53,220 --> 00:03:58,940 And that topic is change orders. Now Brian, you know, I think 65 00:03:59,260 --> 00:04:01,340 just jumping right into this, but we're going to have some 66 00:04:01,340 --> 00:04:03,420 questions. And I mean, can you just kind of 67 00:04:03,420 --> 00:04:11,220 tell us what a change order is? I think a good place to start is 68 00:04:11,220 --> 00:04:19,180 to talk about some some things we've discussed in some previous 69 00:04:19,180 --> 00:04:26,140 podcast, but also the the steps that are taken to get to a point 70 00:04:26,140 --> 00:04:30,420 of where construction has begun. So after you have worked with an 71 00:04:30,420 --> 00:04:36,860 architect after the final complete, 100% complete plan set 72 00:04:36,900 --> 00:04:40,570 has been agreed upon. Mainly with you but also with 73 00:04:40,570 --> 00:04:42,170 the builder. So the builder knows what 74 00:04:42,170 --> 00:04:45,930 they're signing up for in terms of hey, I now have to take 75 00:04:45,930 --> 00:04:50,410 what's on this piece of paper and and turn it into a a real 3D 76 00:04:50,410 --> 00:04:53,650 structure that is everything you expect and hopefully more 77 00:04:55,090 --> 00:04:59,890 there's that's what we would call a a complete executed 78 00:04:59,890 --> 00:05:02,530 signed off plan set. What we do with our homeowners 79 00:05:02,530 --> 00:05:06,610 is, is we ask them to to sign every page of that plan set. 80 00:05:07,100 --> 00:05:09,580 So that we know, hey this is what's final, this is what we 81 00:05:09,580 --> 00:05:13,660 are going to move forward with because after that's done in 82 00:05:13,660 --> 00:05:17,420 what we call the, the concept agreement or fairly early on 83 00:05:17,420 --> 00:05:20,180 after we are done with the architect, there's a lot of work 84 00:05:20,180 --> 00:05:24,260 that has to be done right, the engineering, the energy analysis 85 00:05:24,660 --> 00:05:29,380 you move in this selection. So we talked about what that 86 00:05:29,380 --> 00:05:32,500 looks like in the preliminary building agreement and some of 87 00:05:32,500 --> 00:05:35,140 the some of the work that's done as soon as the. 88 00:05:35,810 --> 00:05:39,410 The floor plan has been excuse me, not just the floor plan, the 89 00:05:39,410 --> 00:05:41,490 whole plan set has been complete. 90 00:05:42,530 --> 00:05:46,490 So as Steven said this happens on every single build we've ever 91 00:05:46,490 --> 00:05:49,650 built and it happens even in production homes right. 92 00:05:49,650 --> 00:05:52,690 Things come up so let's Fast forward we're starting to build 93 00:05:52,690 --> 00:06:00,090 the house and something was something was maybe overlooked 94 00:06:00,090 --> 00:06:03,090 on on the homeowners and they're oh shoot we didn't add this to 95 00:06:03,090 --> 00:06:06,420 the plans or. We really like this and we 96 00:06:06,420 --> 00:06:09,460 didn't even know to to think about this when we were working 97 00:06:09,460 --> 00:06:12,220 with the architect, right. I mean there's there's clearly a 98 00:06:12,500 --> 00:06:15,780 good period of time between when you finalize the plans with the 99 00:06:15,780 --> 00:06:19,540 architect and when the house comes to life, certainly in 100 00:06:19,540 --> 00:06:21,740 different phases of the build, right. 101 00:06:21,740 --> 00:06:25,660 I mean the foundation is one thing, but you're 681214 months 102 00:06:25,660 --> 00:06:29,860 down the road at some other point in the build and so you 103 00:06:29,860 --> 00:06:33,180 say hey, I I for example, I forgot to add the. 104 00:06:34,150 --> 00:06:39,790 I have a Tesla and I forgot to add a 220 Volt car car charger 105 00:06:39,790 --> 00:06:42,670 in the in the garage, right. Okay. 106 00:06:42,670 --> 00:06:46,510 Well, we can certainly go back and add that, but that's really 107 00:06:46,510 --> 00:06:50,510 where a change order comes in. So a change order is when there 108 00:06:50,510 --> 00:06:55,670 is something that you would like to add to the house that is not 109 00:06:55,710 --> 00:06:59,510 on the original executed plan set. 110 00:07:01,360 --> 00:07:04,880 Yeah, I think that sentence right there at the end kind of 111 00:07:04,880 --> 00:07:07,840 summed that up really well. And I like how you took it back 112 00:07:07,840 --> 00:07:10,280 to the beginning to say, okay, here's what you're starting 113 00:07:10,280 --> 00:07:13,640 with. Anything that deviates, changes, 114 00:07:13,920 --> 00:07:18,080 adds to or subtracts from that plan is going to initiate a 115 00:07:18,080 --> 00:07:21,640 change order. And so for that reason, yeah, 116 00:07:21,640 --> 00:07:25,480 change orders are an important topic because when you build 117 00:07:25,480 --> 00:07:29,300 custom homes, it's it's never been done before. 118 00:07:29,340 --> 00:07:32,900 You know, that particular home on that particular lot, there's 119 00:07:32,900 --> 00:07:35,300 things that are going to come up that could have never been 120 00:07:35,300 --> 00:07:37,900 planned or the homeowner could have never envisioned in their 121 00:07:37,900 --> 00:07:41,620 head. And for that reason, you know, 122 00:07:41,620 --> 00:07:45,620 they really want to see the home come up and as they see it come 123 00:07:45,620 --> 00:07:48,620 up in front of their eyes, they're going to want to 124 00:07:49,020 --> 00:07:52,020 potentially change something. So as that happens, like you 125 00:07:52,020 --> 00:07:56,810 said, that initiates change order, you know, and I think 126 00:07:56,810 --> 00:07:58,650 that leads us into our next question, Brian. 127 00:07:58,650 --> 00:08:01,690 When should we expect to run across a change order? 128 00:08:02,810 --> 00:08:06,330 You know, with homeowners or if you're a homeowner, what exactly 129 00:08:06,330 --> 00:08:07,930 is going to initiate a change order? 130 00:08:11,570 --> 00:08:16,890 This is to be fair, I think it's going to vary from builder to 131 00:08:16,890 --> 00:08:23,530 builder and to the extent of what the the change is, right 132 00:08:23,530 --> 00:08:27,400 so. There's a there's a million 133 00:08:27,400 --> 00:08:31,520 different reasons or or changes that could happen on any build, 134 00:08:31,720 --> 00:08:34,760 right. So I use the example of the of 135 00:08:34,760 --> 00:08:37,600 the car charger right that that would be something that would 136 00:08:37,600 --> 00:08:41,480 require the change order because it's going to change the 137 00:08:41,480 --> 00:08:45,000 electrical plan and the materials and the labor that's 138 00:08:45,000 --> 00:08:48,400 needed to to do that. So we'll jump into some more 139 00:08:48,400 --> 00:08:52,440 details on that here in a second, but you. 140 00:08:53,330 --> 00:08:58,690 Again depending on the builder there's other things like you 141 00:08:58,730 --> 00:09:03,370 you would not need a change order for things like hey can we 142 00:09:03,370 --> 00:09:06,970 move your walk in the house at the at the completion of the 143 00:09:06,970 --> 00:09:11,450 mechanicals phase which is after the plumbing, electricity and 144 00:09:11,450 --> 00:09:15,810 HVAC has been installed in the home but before insulation and 145 00:09:15,810 --> 00:09:22,620 you say hey can we this switch is. 6 inches too far this way 146 00:09:22,620 --> 00:09:24,340 and I would prefer to have it here. 147 00:09:24,340 --> 00:09:26,860 Can we move it on this up the other side of the stud Bay? 148 00:09:26,860 --> 00:09:29,260 That would be something that we as Brevin Holmes would not 149 00:09:29,260 --> 00:09:30,980 charge a change order for, right? 150 00:09:30,980 --> 00:09:35,660 So there's there's little, very little details like that that, 151 00:09:35,740 --> 00:09:37,860 hey, yes. Is that how it is on the plan? 152 00:09:37,860 --> 00:09:39,500 No. You want to move it over because 153 00:09:39,500 --> 00:09:43,140 of XY&Z reasons down the road that would not require a change 154 00:09:43,140 --> 00:09:45,550 order, but. I would say things where you 155 00:09:45,550 --> 00:09:48,510 have to, we have to go back and work with the trades where 156 00:09:48,510 --> 00:09:52,710 there's going to be additional labor and or materials and we 157 00:09:52,710 --> 00:09:59,550 have already done work to to build the house as it is on the 158 00:09:59,550 --> 00:10:02,790 original plans and we have to go back and do redundant work. 159 00:10:03,510 --> 00:10:06,550 We just most builders including ourselves, we just have to be 160 00:10:06,550 --> 00:10:08,950 compensated for that because it is redundant work. 161 00:10:11,000 --> 00:10:12,120 Yeah. And I like what you said there 162 00:10:12,120 --> 00:10:17,400 that you know it's really comes down to a materials in labor 163 00:10:17,840 --> 00:10:20,120 type of thing. You know, it's it's an equation 164 00:10:20,120 --> 00:10:25,600 there that as those change, of course the subcontractors that 165 00:10:25,600 --> 00:10:28,720 we use, their price is going to change and then that changes our 166 00:10:28,720 --> 00:10:31,160 price and then that changes the price for the homeowner 167 00:10:31,160 --> 00:10:33,970 ultimately. So like you said, I mean it's 168 00:10:33,970 --> 00:10:38,530 one thing to move an outlet from a stud Bay to the one right next 169 00:10:38,530 --> 00:10:41,130 to it, you know, that's a fairly simple change. 170 00:10:42,290 --> 00:10:46,570 But as those start to add up and as things move further or you 171 00:10:46,570 --> 00:10:49,370 know, something changes to a different sized outlet or so, 172 00:10:49,810 --> 00:10:53,410 whatever it is, those are the kind of things that require 173 00:10:53,410 --> 00:10:56,370 additional materials or additional labor or both and 174 00:10:56,370 --> 00:10:58,850 those would initiate those change orders. 175 00:10:59,950 --> 00:11:02,430 And like you said, I mean every builder is going to handle these 176 00:11:02,430 --> 00:11:05,990 a little bit differently. Some builders are fairly lax or 177 00:11:05,990 --> 00:11:09,110 lenient on their change orders and whether that's right or 178 00:11:09,110 --> 00:11:12,110 wrong, that's something to consider. 179 00:11:12,510 --> 00:11:16,750 Other builders are very regimented and strict on change 180 00:11:16,750 --> 00:11:19,430 orders. So anything that deviates from 181 00:11:19,430 --> 00:11:23,790 the plan is typically going to initiate a change order, even if 182 00:11:23,790 --> 00:11:27,190 it's a change in location or a change in something else, you 183 00:11:27,190 --> 00:11:30,420 know, those kind of things. But I think another thing to 184 00:11:30,420 --> 00:11:33,660 note too, and we've seen this with some of our subcontractors 185 00:11:33,660 --> 00:11:38,380 is that, you know, a lot of times they'll give you a credit, 186 00:11:38,380 --> 00:11:41,860 say you don't want an outlet in one place and I don't want it. 187 00:11:41,860 --> 00:11:44,460 This all be about electrical. It could be about anything. 188 00:11:44,860 --> 00:11:47,140 But you don't use an outlet in one place. 189 00:11:47,140 --> 00:11:49,940 OK, you know what, you guys get the credit back for that because 190 00:11:49,940 --> 00:11:52,180 you didn't need it there. Do you want to use it somewhere 191 00:11:52,180 --> 00:11:53,340 else in the house? Right. 192 00:11:53,340 --> 00:11:56,740 And typically that's something that homeowners will, will take. 193 00:11:57,140 --> 00:11:59,260 Okay, yeah, we didn't want it here, but let's put it over at 194 00:11:59,260 --> 00:12:03,220 this desk that we added. You know, so little things like 195 00:12:03,220 --> 00:12:06,340 that that there's a lot of nuances or caveats here. 196 00:12:06,340 --> 00:12:11,140 But yeah, I think that that's kind of the gist of it is 197 00:12:11,140 --> 00:12:19,260 materials and labor changes. So yeah, looking at the next 198 00:12:19,260 --> 00:12:21,940 question here, why is the change order needed? 199 00:12:22,100 --> 00:12:24,460 And I think we've maybe already touched on this a little bit, 200 00:12:24,460 --> 00:12:26,740 but I think we can go into it in more detail. 201 00:12:28,700 --> 00:12:35,940 Yeah, I think there's, there's two main reasons and and one we 202 00:12:35,940 --> 00:12:40,300 haven't touched on is just pure organization, right. 203 00:12:40,300 --> 00:12:46,420 We have to work off of a complete plan set with or 204 00:12:46,420 --> 00:12:51,300 without change orders so that we build the house that you expect 205 00:12:51,460 --> 00:12:55,820 and and organization is a critical piece of any build. 206 00:12:56,490 --> 00:13:00,250 Whether it's a production home or a custom home doesn't matter. 207 00:13:00,250 --> 00:13:03,490 You have to be organized that the builder has to be organized. 208 00:13:03,490 --> 00:13:07,850 Excuse me. Make that clear and and there's 209 00:13:07,970 --> 00:13:12,250 a lot of different ways you can people stay organized but I 210 00:13:12,250 --> 00:13:15,690 think that's one thing right if if changes are being talked 211 00:13:15,690 --> 00:13:22,090 about and not organized in a in a good way things will get 212 00:13:22,090 --> 00:13:25,810 missed right and and we'll be the first to admit we've we've. 213 00:13:26,360 --> 00:13:30,840 Made some mistakes and had some some errors because because of 214 00:13:30,840 --> 00:13:33,960 different ways of communicating and hey was that was that 215 00:13:33,960 --> 00:13:37,400 written and and and signed off but by both parties, the 216 00:13:37,400 --> 00:13:42,600 homeowner and us on a formal change order form it just I 217 00:13:42,600 --> 00:13:48,400 don't think we can just look past the organizational piece 218 00:13:48,400 --> 00:13:51,120 right to say hey here's the complete plan set and then here 219 00:13:51,120 --> 00:13:53,920 are the change orders which we would put on top of the. 220 00:13:54,880 --> 00:13:57,760 The final plan set is what we call redlining it saying okay, 221 00:13:57,760 --> 00:14:00,760 well, here's the plan set with the red lines that we all have 222 00:14:00,760 --> 00:14:02,640 agreed to. So that's number one is 223 00:14:02,640 --> 00:14:06,680 organization #2 is the financial aspect, which we've already 224 00:14:06,840 --> 00:14:11,480 addressed a little bit here and that that can look any number of 225 00:14:11,480 --> 00:14:13,600 ways, right. I mean there could be a change 226 00:14:13,600 --> 00:14:21,040 order that it is, is, is minimal in, in cost or it could be 227 00:14:21,120 --> 00:14:22,840 rather significant, right. And that's. 228 00:14:23,280 --> 00:14:27,320 Obviously very dependent on what the change request is. 229 00:14:29,640 --> 00:14:34,280 Yeah, both really good points there and I'm glad you brought 230 00:14:34,280 --> 00:14:36,920 both of those up. And really another piece to 231 00:14:36,920 --> 00:14:42,760 think through on the financial aspect of it is on the change 232 00:14:42,760 --> 00:14:47,460 orders. As far as financing goes, a lot 233 00:14:47,460 --> 00:14:50,980 of times these homeowners that we're building for come with a 234 00:14:50,980 --> 00:14:54,180 set number in their head of this is how much I want this build to 235 00:14:54,180 --> 00:14:58,340 cost or this is my budget. Now once change orders start 236 00:14:58,340 --> 00:15:01,780 coming into the picture, change orders could be small or they 237 00:15:01,780 --> 00:15:04,900 could be large and there could be a lot of them or there could 238 00:15:04,900 --> 00:15:09,860 be a little of them, but they're all going to fluctuate the 239 00:15:09,860 --> 00:15:12,380 budget. And so whether that budget goes 240 00:15:12,420 --> 00:15:17,330 up most times or possibly comes down, not very likely. 241 00:15:18,410 --> 00:15:20,290 You know, where is that extra money coming from. 242 00:15:20,410 --> 00:15:22,770 And that's something that really, really needs to be 243 00:15:23,450 --> 00:15:26,850 tracked very well. So that homeowners are aware of 244 00:15:26,930 --> 00:15:31,210 how much they have added to their budget and know Okay, is 245 00:15:31,210 --> 00:15:33,530 that coming from the bank loan, is that coming from their 246 00:15:33,530 --> 00:15:37,800 personal money, is that coming from somewhere else, You know 247 00:15:37,800 --> 00:15:40,680 and that's something that is really, really important to keep 248 00:15:40,680 --> 00:15:42,960 track of so that you don't get to the end of the build and 249 00:15:42,960 --> 00:15:45,360 you've already initiated change orders throughout the build, 250 00:15:45,960 --> 00:15:47,920 oops. And then you run out of money by 251 00:15:47,920 --> 00:15:51,960 the time that the home is done. So very important to track that 252 00:15:51,960 --> 00:15:55,040 and and make sure that it's it's all good. 253 00:15:58,320 --> 00:16:04,880 Steve and I said there were only two two main. 254 00:16:05,870 --> 00:16:09,070 Points why a change order is needed and I probably forgot the 255 00:16:09,070 --> 00:16:12,470 most important one. Or or you call it a Third Point 256 00:16:12,510 --> 00:16:18,070 and that is with a builder like ourselves where our guarantee is 257 00:16:18,150 --> 00:16:22,710 on time and on budget, a change order can affect the schedule as 258 00:16:22,710 --> 00:16:28,070 well. So if we are guaranteeing a on 259 00:16:28,070 --> 00:16:31,790 time move in and handing the keys over and then a. 260 00:16:32,550 --> 00:16:36,830 A change is requested that all parties agree to move forward 261 00:16:36,830 --> 00:16:39,310 with after the financial side's been reviewed. 262 00:16:40,230 --> 00:16:44,710 It's we also have to look at how that affects the schedule. 263 00:16:44,710 --> 00:16:46,430 Sometimes it may not affect it at all. 264 00:16:46,430 --> 00:16:50,430 At other times we've had change orders that can that can delay 265 00:16:50,430 --> 00:16:54,390 the bill by a month or more. And so obviously that's out of 266 00:16:54,390 --> 00:17:00,870 our control when we have agreed to a move in or a on time. 267 00:17:01,990 --> 00:17:04,550 Completion on the original plan set. 268 00:17:04,550 --> 00:17:09,390 So another part of our change orders is well, hey, if we 269 00:17:09,390 --> 00:17:12,109 execute this, this is how much it's going to cost and this is 270 00:17:12,109 --> 00:17:17,270 the delay that is going to be realized in construction. 271 00:17:17,270 --> 00:17:22,470 So this change orders $10,000 for everything and. 272 00:17:23,700 --> 00:17:28,180 The on time guarantee is now pushed back for weeks, for 273 00:17:28,180 --> 00:17:30,220 example, right? And we will have this home 274 00:17:30,220 --> 00:17:34,060 complete with this additional change that we all agreed to a 275 00:17:34,060 --> 00:17:36,100 month later than originally agreed to. 276 00:17:37,700 --> 00:17:42,860 That's a fantastic point and I think it's one that is important 277 00:17:42,860 --> 00:17:47,020 to note because sometimes like I said, change orders can be huge 278 00:17:47,020 --> 00:17:51,980 and in in huge, I mean changing the structure of the floor plan 279 00:17:51,980 --> 00:17:55,420 of the home, you know. So when that happens, there are 280 00:17:55,420 --> 00:17:59,220 a lot of parties involved where we have to go back to sometimes 281 00:17:59,220 --> 00:18:01,260 all the way back to the engineer, start from the 282 00:18:01,260 --> 00:18:03,700 beginning, you know talk to the engineer, how is this going to 283 00:18:03,700 --> 00:18:08,900 change the structural components of the home bracing layout, all 284 00:18:08,900 --> 00:18:12,300 that good stuff and then go back to the the lumber company for 285 00:18:12,300 --> 00:18:15,860 example, go price that out. So I mean, I hope the listeners 286 00:18:15,860 --> 00:18:19,220 can see that some of these change orders change every 287 00:18:19,220 --> 00:18:21,820 single thing. If it if it starts at the frame 288 00:18:21,820 --> 00:18:25,380 or even foundation stage, they want to add a wing to the home 289 00:18:25,380 --> 00:18:30,540 or do something, you know, there's a lot of other dominoes 290 00:18:30,540 --> 00:18:33,380 that fall behind that. And that's something that us as 291 00:18:33,380 --> 00:18:36,580 a builder, we have to think through all that and every last 292 00:18:36,580 --> 00:18:39,060 thing that's going to change based on one little change 293 00:18:39,060 --> 00:18:41,900 order, no matter how big or small it is. 294 00:18:43,780 --> 00:18:47,740 And I think we joke or I joke a lot of times with clients, they 295 00:18:47,740 --> 00:18:50,020 say, oh, can we do that? Is it too late to do that at 296 00:18:50,020 --> 00:18:52,540 this point? Can we change this and always 297 00:18:52,540 --> 00:18:55,380 tell them we can make your one story, A2 story. 298 00:18:55,460 --> 00:18:57,900 That's not the problem. The problem is usually it comes 299 00:18:57,900 --> 00:18:59,980 down to a budget or a timeline perspective. 300 00:19:00,060 --> 00:19:02,420 You know, we can tear down your one story and make it a 301 00:19:02,420 --> 00:19:05,580 two-story. But is that reasonable or is 302 00:19:05,620 --> 00:19:07,060 does that make sense? No. 303 00:19:07,580 --> 00:19:10,900 You know, so unfortunately change orders sometimes fall 304 00:19:10,900 --> 00:19:15,120 into that bucket. Not to be crass about her, I 305 00:19:15,120 --> 00:19:16,160 don't, I don't know the right word. 306 00:19:16,160 --> 00:19:20,640 But, you know, not to poke fun at the situation, but there's a 307 00:19:20,640 --> 00:19:24,560 certain time where it becomes a lot harder to make change orders 308 00:19:24,560 --> 00:19:27,000 on things that that ship has already sailed. 309 00:19:27,120 --> 00:19:29,840 You know, we get we get drywall up, okay. 310 00:19:29,920 --> 00:19:34,000 You know, it is really hard to make a change on the structural 311 00:19:34,000 --> 00:19:35,560 components of the home at that point. 312 00:19:35,560 --> 00:19:39,960 Or the mechanicals, plumbing, drywall, you know, HVAC, 313 00:19:39,960 --> 00:19:43,070 electrical, all that stuff becomes a lot more difficult to 314 00:19:43,070 --> 00:19:44,990 change. So that's why we kind of joke 315 00:19:44,990 --> 00:19:46,750 about that at any point in the build. 316 00:19:46,750 --> 00:19:49,510 Yeah, we can tear down a wall, we can do other things, but it's 317 00:19:49,510 --> 00:19:53,670 gonna require a lot more work. So kind of a little side note 318 00:19:53,670 --> 00:19:55,470 there, but just something to talk through. 319 00:19:56,950 --> 00:20:00,910 Yep, that's a good point. So we've covered a lot. 320 00:20:02,030 --> 00:20:05,700 Let's walk through a. Let's walk through a full 321 00:20:05,700 --> 00:20:08,500 example of a change order, if that's fair with fair to you, 322 00:20:08,500 --> 00:20:10,540 Steven. So I mean how does this change 323 00:20:10,540 --> 00:20:15,140 order work And we know that of course we've already said it 324 00:20:15,140 --> 00:20:19,540 depends on on your builder and how they they organize and 325 00:20:19,540 --> 00:20:23,140 manage change orders. And there's really change orders 326 00:20:23,140 --> 00:20:26,380 look a little different when you get back to the type of contract 327 00:20:26,380 --> 00:20:28,100 that you signed, right. They look a little different on 328 00:20:28,100 --> 00:20:33,180 fixed price versus cost plus agreements, but let's as quickly 329 00:20:33,180 --> 00:20:36,820 as we can walk through an example of of how a change order 330 00:20:36,820 --> 00:20:41,540 works in, in both those in both those situations with cost plus 331 00:20:41,540 --> 00:20:43,860 and fixed price. Yeah, I think that's an 332 00:20:43,860 --> 00:20:45,900 excellent idea. Just to give the listeners an 333 00:20:45,900 --> 00:20:48,540 idea of how the whole process would would play out. 334 00:20:48,540 --> 00:20:51,900 So OK, going all the way back to the very beginning, but keeping 335 00:20:51,900 --> 00:20:57,740 this brief, you have your fully designed plan set, so all your 336 00:20:57,740 --> 00:21:00,740 engineering is done, all that stuff that you need to get to 337 00:21:00,740 --> 00:21:05,380 the starting line of your build. Home starts being built and you 338 00:21:05,380 --> 00:21:09,220 get to, let's say you get to frame stage, right. 339 00:21:09,220 --> 00:21:11,260 We'll just use this as an example and walk through it. 340 00:21:11,380 --> 00:21:15,140 You want to move a wall or let's say you're going to close in a 341 00:21:15,420 --> 00:21:20,180 dining room and make it a study. So that's going to require a lot 342 00:21:20,180 --> 00:21:23,020 of things that will change. Of course you've got to add 343 00:21:23,020 --> 00:21:25,860 framing to close in the walls that were going to be opened. 344 00:21:26,420 --> 00:21:29,380 You've got to possibly change some electrical because those 345 00:21:29,380 --> 00:21:32,340 were probably going to run through those openings or walls 346 00:21:32,340 --> 00:21:35,460 or now new walls. Are there any doors that are 347 00:21:35,460 --> 00:21:37,380 going to be required, things like that. 348 00:21:37,380 --> 00:21:40,500 So that's our thought process as we've look at those plans and 349 00:21:40,500 --> 00:21:44,220 what is going to change now, what trades are going to be 350 00:21:44,220 --> 00:21:46,540 affected. So we go through that exercise 351 00:21:46,540 --> 00:21:49,100 in our head and we think through every single trade that that 352 00:21:49,100 --> 00:21:51,860 could possibly affect. Is that going to be a cost 353 00:21:51,860 --> 00:21:55,540 increase or cost decrease, right, Is it maybe? 354 00:21:56,290 --> 00:21:58,330 Less flooring or something like that, right? 355 00:21:58,330 --> 00:22:00,890 You're going to do carpet in the office instead of hardwood 356 00:22:00,890 --> 00:22:01,890 floors. OK. 357 00:22:01,890 --> 00:22:03,930 Well, you might get a credit back for that, right, because 358 00:22:03,930 --> 00:22:07,850 carpet is cheaper than hardwood floors, things like that. 359 00:22:07,850 --> 00:22:11,210 So as we're thinking through those pricing exercises, OK, and 360 00:22:11,210 --> 00:22:13,090 what stage of the home are we in right now? 361 00:22:13,130 --> 00:22:16,210 Do we just start frame? Did we catch it at a good time 362 00:22:16,250 --> 00:22:19,170 that we can still add those walls and go through the the 363 00:22:19,170 --> 00:22:22,930 exercise in proper order? That definitely helps, right? 364 00:22:22,930 --> 00:22:25,130 So that'll help speed the process up. 365 00:22:25,660 --> 00:22:28,740 Did we catch it at the end when we're doing flooring? 366 00:22:29,260 --> 00:22:31,980 You know, Okay, that's going to add a lot more difficulty to it. 367 00:22:32,100 --> 00:22:33,780 We've got to go all the way back to the start. 368 00:22:33,780 --> 00:22:36,620 We've got to tear some drywall off, probably put the walls up, 369 00:22:36,620 --> 00:22:39,420 put the drywall back, mechanicals, all that kind of 370 00:22:39,420 --> 00:22:43,660 stuff to think through. So that's basically the 371 00:22:43,660 --> 00:22:45,780 construction aspect of it I would say. 372 00:22:46,330 --> 00:22:50,370 But as far as a an admin or administrative perspective, 373 00:22:51,170 --> 00:22:54,650 typically a change order will be brought up by the homeowner. 374 00:22:54,770 --> 00:22:56,810 They'll say, hey, we were walking the house or hey, we've 375 00:22:56,810 --> 00:23:00,970 been looking at the floor plan. We'd really like to do X or we'd 376 00:23:00,970 --> 00:23:04,770 really like to do Y Okay. Well, let's talk through that. 377 00:23:04,770 --> 00:23:07,210 Let's see what that would cost or what that would look like and 378 00:23:07,210 --> 00:23:10,180 we give them. Typically we'll start with a 379 00:23:10,220 --> 00:23:13,380 range, right, the best we can and a lot of times these things 380 00:23:13,380 --> 00:23:16,340 are very custom. So it's hard for us to give a 381 00:23:16,340 --> 00:23:19,900 pretty targeted price, but we do our best. 382 00:23:19,900 --> 00:23:22,900 So we'll give them a range. This cost could or this change 383 00:23:22,900 --> 00:23:26,300 could be $5000. Is that something you guys are 384 00:23:26,300 --> 00:23:28,060 still interested in at this point? 385 00:23:28,580 --> 00:23:31,420 Homeowners will think about it, say yes or say no. 386 00:23:31,620 --> 00:23:34,930 If they say no, of course, just. Cuts the conversation. 387 00:23:35,210 --> 00:23:37,570 They say yes. Then we really go through the 388 00:23:37,570 --> 00:23:40,810 process of, OK, here's what we'll do, send you a change 389 00:23:40,810 --> 00:23:46,290 order, a change order document. We have a contract basically 390 00:23:46,290 --> 00:23:51,290 through tab that's free or it's a promulgated form. 391 00:23:51,730 --> 00:23:55,730 So we fill that out, we send it over to the homeowner for those 392 00:23:55,730 --> 00:23:57,370 of you. For those of you listeners tab, 393 00:23:57,370 --> 00:24:00,170 Texas Association of Builders. Oh yeah, Yep. 394 00:24:00,610 --> 00:24:02,690 And every building jurisdiction has their own. 395 00:24:03,370 --> 00:24:06,690 An association of builders. So whether your builder uses 396 00:24:06,690 --> 00:24:08,890 those contracts or not, just something to be aware of. 397 00:24:08,890 --> 00:24:12,210 But yeah, we use a tab contract that is a change order specific 398 00:24:12,690 --> 00:24:17,050 and it gives us a section where we write in exactly what the 399 00:24:17,050 --> 00:24:20,010 change order is going to entail. We can even put pictures if 400 00:24:20,010 --> 00:24:22,650 that's easier. We can put whatever is going to 401 00:24:22,650 --> 00:24:25,650 specify exactly what that change order needs to be. 402 00:24:26,650 --> 00:24:29,490 We talk about pricing on that change order sheet. 403 00:24:30,040 --> 00:24:32,560 And then we send it over to the homeowner to sign. 404 00:24:32,640 --> 00:24:35,920 Now there is a clause in there that if we go through all of the 405 00:24:35,920 --> 00:24:38,800 work to get the pricing and everything else for this change 406 00:24:38,800 --> 00:24:42,160 order and the homeowner at the very end decides not to proceed 407 00:24:42,160 --> 00:24:45,680 with it. Then the agreement is that the 408 00:24:45,680 --> 00:24:49,840 homeowners pay us for our time to go chase down all those 409 00:24:49,840 --> 00:24:53,040 numbers and the work through the whole change order exercise that 410 00:24:53,040 --> 00:24:56,280 was not executed. So just something to be aware 411 00:24:56,280 --> 00:24:58,200 of. Most builders will execute that 412 00:24:58,200 --> 00:25:02,960 or enforce that. Some will, so that's more of the 413 00:25:02,960 --> 00:25:05,400 admin side. Once that change order is signed 414 00:25:05,400 --> 00:25:08,640 and agreed upon between the builder and the the homeowner, 415 00:25:09,040 --> 00:25:12,040 then that change order goes into effect as quickly as possible. 416 00:25:12,120 --> 00:25:15,080 The builder will start ordering materials or whatever they need. 417 00:25:15,080 --> 00:25:17,440 They'll communicate with the proper trades to make sure that 418 00:25:17,440 --> 00:25:21,120 that's on the on the books and documented, and then the change 419 00:25:21,120 --> 00:25:24,000 order moves into effect. And ideally. 420 00:25:25,880 --> 00:25:29,440 It goes fairly quickly or as quickly as it can to be worked 421 00:25:29,440 --> 00:25:33,800 into the build. And then after all that you have 422 00:25:33,800 --> 00:25:36,320 your change order now implemented into your new 423 00:25:36,320 --> 00:25:39,480 physical home. So Brian, I'm sure I left some 424 00:25:39,480 --> 00:25:41,680 stuff out. Where did I want to fill any 425 00:25:41,680 --> 00:25:44,720 gaps? Now, a good summary I think. 426 00:25:45,600 --> 00:25:47,920 Let's talk a little bit about the different aspects of cost 427 00:25:47,920 --> 00:25:49,840 plus versus fixed price and how that looks. 428 00:25:49,840 --> 00:25:53,440 So starting with the easy one, fixed price change order is real 429 00:25:53,440 --> 00:25:55,200 simple, right? I mean, you have a fixed price 430 00:25:55,200 --> 00:25:58,440 agreement to build the home and you request a change order. 431 00:25:58,800 --> 00:26:00,320 Who cares how big or small it is? 432 00:26:01,440 --> 00:26:03,720 The builder goes and does all the work and says hey, your 433 00:26:03,720 --> 00:26:07,880 change order is going to cost $15,634, right. 434 00:26:08,040 --> 00:26:10,680 You you don't know how much of that is materials, you don't 435 00:26:10,680 --> 00:26:12,760 know how much of that is labor. You don't know how much of that 436 00:26:12,760 --> 00:26:14,120 is profit. It doesn't matter. 437 00:26:14,160 --> 00:26:16,840 It's just this is the cost or do you want to do it or do you not 438 00:26:16,840 --> 00:26:18,880 want to do it and you sign or you don't sign. 439 00:26:19,200 --> 00:26:25,320 If you don't sign like Stephen said, then the the agreement is 440 00:26:25,320 --> 00:26:28,160 that well, you're going to pay the builder an hourly rate for 441 00:26:28,160 --> 00:26:31,780 their time to go do all this work because they they need to 442 00:26:31,780 --> 00:26:35,860 be compensated for what could be many many hours of of work 443 00:26:36,140 --> 00:26:43,180 putting the change order together, the cost plus I want 444 00:26:43,180 --> 00:26:45,340 to, I want. To add something, don't. 445 00:26:45,860 --> 00:26:46,860 Don't lose your train of thought. 446 00:26:46,860 --> 00:26:50,700 But you said, and I know this is just a wording thing, but you 447 00:26:50,700 --> 00:26:52,620 said it doesn't matter how much it costs. 448 00:26:52,620 --> 00:26:54,860 Well, I mean, for homeowners, yeah, it does. 449 00:26:54,860 --> 00:26:57,860 You know, they're thinking, okay, how much does this cost? 450 00:26:57,860 --> 00:26:59,620 I do want to know where my money is going. 451 00:27:00,080 --> 00:27:04,680 But I think your point is that the builder is wrapping the 452 00:27:04,680 --> 00:27:07,080 whole package up as a present to you. 453 00:27:07,080 --> 00:27:10,080 Okay. Here's what it's gonna cost to 454 00:27:10,080 --> 00:27:11,720 present this change order to you now. 455 00:27:12,680 --> 00:27:15,120 I think a lot of people get tied up in. 456 00:27:15,540 --> 00:27:17,980 You know, this seems like so much money for what we want to 457 00:27:17,980 --> 00:27:19,860 do. But I think what a lot of the 458 00:27:19,860 --> 00:27:23,740 homeowners miss is it changes so many things. 459 00:27:23,740 --> 00:27:26,860 So one simple change that you think is just a minor thing. 460 00:27:26,860 --> 00:27:28,620 Oh, it's no big deal. Just move it over here. 461 00:27:28,900 --> 00:27:32,060 Oh, and look, Google says that this plug is only $30.00, so why 462 00:27:32,060 --> 00:27:35,380 are you charging me 150? You know, it's it's not that 463 00:27:35,380 --> 00:27:38,820 simple. And to pay return trip fees for 464 00:27:39,020 --> 00:27:41,180 trades that have already been out to the house and they've got 465 00:27:41,180 --> 00:27:45,590 to come back and change things. There's I think my point is, is 466 00:27:45,590 --> 00:27:49,470 that there's a lot of other fees that homeowners probably don't 467 00:27:49,470 --> 00:27:52,310 realize when change orders are initiated. 468 00:27:52,310 --> 00:27:55,910 So just to talk through that bit, please don't be scared 469 00:27:55,910 --> 00:27:58,870 whenever you're home or when your builder presents a price 470 00:27:58,870 --> 00:28:01,350 that seems very high to you in comparison. 471 00:28:02,590 --> 00:28:05,990 It's probably not I just want to point out and it's probably 472 00:28:05,990 --> 00:28:10,070 because a lot of things will change and or will be affected 473 00:28:10,070 --> 00:28:12,830 by that change order. So just a. 474 00:28:14,050 --> 00:28:16,450 You know, kind of a clarification there on that. 475 00:28:18,090 --> 00:28:19,050 Yep. Yeah, good. 476 00:28:19,290 --> 00:28:20,410 Good point. Thank you, Steven. 477 00:28:20,410 --> 00:28:25,330 And you're you're right, I think without scaring people because 478 00:28:25,330 --> 00:28:29,010 change orders have happened on every single home that we've 479 00:28:29,010 --> 00:28:31,410 ever built and it will happen on your home too. 480 00:28:33,210 --> 00:28:37,090 The, the cost regardless of whether it's fixed price or cost 481 00:28:37,090 --> 00:28:41,630 plus is probably going to be higher than you think it would 482 00:28:41,630 --> 00:28:44,030 be when you get that final price. 483 00:28:44,030 --> 00:28:48,110 It just is to Steven's point, there are so many other things 484 00:28:48,110 --> 00:28:53,830 that that are often changed even if it's not really visible 485 00:28:53,830 --> 00:28:55,470 right. There's just a lot of behind the 486 00:28:55,470 --> 00:29:01,550 scenes work on from from multiple people and so part of 487 00:29:01,550 --> 00:29:05,110 what what goes into that that final price or final cost. 488 00:29:06,510 --> 00:29:13,960 So looking at change orders in a cost plus agreement looks a 489 00:29:13,960 --> 00:29:16,640 little bit different. So in a cost plus you have your 490 00:29:18,120 --> 00:29:22,760 cost plus the the builder fee builder markup, whatever you 491 00:29:22,760 --> 00:29:29,120 have agreed to with the builder and that might be cost plus 15%, 492 00:29:29,120 --> 00:29:35,200 cost plus 25% whatever it is. So in a change order the the 493 00:29:36,280 --> 00:29:41,410 effort to go through the the the change is still roughly going to 494 00:29:41,410 --> 00:29:44,530 be the same. However the build some builders 495 00:29:44,530 --> 00:29:47,570 may say hey I'm going to go price this out and get all the 496 00:29:48,450 --> 00:29:52,570 all the necessary costs and tell you what it's going to be or 497 00:29:52,770 --> 00:29:56,090 just like the beginning of the bill the cost plus hey here are 498 00:29:56,090 --> 00:30:00,370 estimates here are here's an estimate on what it's going to 499 00:30:00,370 --> 00:30:03,330 cost to build this house but it is cost plus or whatever cost. 500 00:30:03,330 --> 00:30:07,170 We realize you get to see and full transparency in the books 501 00:30:07,170 --> 00:30:14,810 and if it goes if if the cost is above or below the the the the 502 00:30:14,810 --> 00:30:19,410 estimate well then it it comes in and out of your pocket not 503 00:30:19,410 --> 00:30:22,250 the builder's pocket. So where change orders can get a 504 00:30:22,250 --> 00:30:27,690 little look a little bit different and again each builder 505 00:30:27,690 --> 00:30:30,170 is going to do this differently in a cost plus agreement. 506 00:30:30,650 --> 00:30:34,810 They can say well it's going to cost about $15,000 but they 507 00:30:34,810 --> 00:30:36,890 don't really know. And because you're in a cost 508 00:30:36,890 --> 00:30:42,140 plus agreement, it's whatever costs are realized are going to 509 00:30:42,140 --> 00:30:44,540 go into your are going to come out of your pocket and whatever 510 00:30:44,540 --> 00:30:47,860 are not realized you're you're going to essentially and I'm 511 00:30:47,860 --> 00:30:52,220 doing air quotes, you're going to save you know which maybe was 512 00:30:52,220 --> 00:30:54,860 never really a savings but it might look like that on paper. 513 00:30:54,860 --> 00:31:02,430 So I think that the challenge is the builder may approach you 514 00:31:02,430 --> 00:31:06,230 with, well our for example, our building agreement is a cost 515 00:31:06,230 --> 00:31:09,270 plus 20%. So whatever the costs are, the 516 00:31:09,310 --> 00:31:12,790 builder is going to mark up all the costs by 20% and that's what 517 00:31:12,790 --> 00:31:14,550 the builder makes. This is just an example, 518 00:31:14,550 --> 00:31:19,150 obviously, well on a change order it could be rather 519 00:31:19,150 --> 00:31:24,230 involved and they say well I want to make or or I'm going to 520 00:31:24,230 --> 00:31:28,310 make 30% on this. But it becomes very difficult to 521 00:31:28,310 --> 00:31:33,290 manage on the books because you have, you start to have all 522 00:31:33,290 --> 00:31:36,330 these costs that blend together. And oftentimes with the Subs 523 00:31:36,330 --> 00:31:40,890 they're not separating out the the cost of the original, the 524 00:31:40,890 --> 00:31:45,410 original project versus what's included or not included in the 525 00:31:45,410 --> 00:31:48,370 change with the change order. So I don't want to get too far 526 00:31:48,370 --> 00:31:54,370 in the weeds on the the details of a change order with cost 527 00:31:54,370 --> 00:31:55,930 plus. It happens every day. 528 00:31:56,170 --> 00:32:00,250 It's it's handled, it's handled in a very similar fashion. 529 00:32:00,250 --> 00:32:03,130 But just understand the differences and and this is a 530 00:32:03,130 --> 00:32:05,730 great question to ask your builder, if you are going to 531 00:32:05,730 --> 00:32:11,870 sign a cost plus agreement early on, we would give you some 532 00:32:11,870 --> 00:32:15,190 tidbits of insight to ask them about how does a change order 533 00:32:15,190 --> 00:32:17,790 work and if there's a complicated change order, how, 534 00:32:17,790 --> 00:32:21,390 how are you compensated, how are you going to, what's the markup 535 00:32:21,390 --> 00:32:23,910 on that, How do you manage that from an accounting perspective? 536 00:32:23,910 --> 00:32:26,070 If you ask those types of questions early on, you're going 537 00:32:26,070 --> 00:32:29,510 to show that you're really on top of it and have done your 538 00:32:29,510 --> 00:32:32,870 homework from the beginning. Yep. 539 00:32:33,350 --> 00:32:34,910 Yeah. And and furthermore, asking 540 00:32:34,910 --> 00:32:40,010 those questions is going to. Number one, lets you know the 541 00:32:40,010 --> 00:32:42,730 builders thought process on how they're going to handle change 542 00:32:42,730 --> 00:32:46,970 orders, but also #2, let the builder know that you're going 543 00:32:46,970 --> 00:32:49,090 to be looking out for that and you're going to have your eyes 544 00:32:49,090 --> 00:32:52,850 open for those kind of things. So, you know, like we always 545 00:32:52,850 --> 00:32:56,770 say, I mean, pick a builder you can trust and that you feel 546 00:32:56,770 --> 00:33:00,450 comfortable going through these exercises with and know that 547 00:33:00,450 --> 00:33:05,130 they're going to treat you right and do what is right, but still. 548 00:33:05,470 --> 00:33:08,670 Very, very important that the listeners know this stuff so 549 00:33:08,670 --> 00:33:11,670 that they can look out for themselves as well. 550 00:33:13,790 --> 00:33:18,670 And I think that, you know, you brought up a good point, Brown, 551 00:33:18,670 --> 00:33:22,590 as far as accounting goes, that there's just a lot of Gray area 552 00:33:22,670 --> 00:33:25,910 in a cost plus when a change order is initiated, a cost plus 553 00:33:25,910 --> 00:33:27,630 contract when a change order is initiated. 554 00:33:27,630 --> 00:33:31,270 And for that reason, like you said, it's very important that 555 00:33:31,430 --> 00:33:33,710 people understand how their builder is going to handle that. 556 00:33:35,230 --> 00:33:37,830 And I do want to state too that if you are in a cost plus 557 00:33:37,830 --> 00:33:41,350 contract and you initiate a change order with your builder, 558 00:33:41,710 --> 00:33:45,230 it is not uncommon and this is from a builder, but it's very 559 00:33:45,230 --> 00:33:48,710 true, it's not uncommon for that change order to be charged at a 560 00:33:48,710 --> 00:33:53,470 higher builder rate than your your standard contract. 561 00:33:53,470 --> 00:33:56,430 Now the reason for that, and Brian, you kind of touched on 562 00:33:56,430 --> 00:33:59,870 it, is that there's a lot of work that is involved in change 563 00:33:59,870 --> 00:34:03,090 orders. Typically, you know it's doing 564 00:34:03,090 --> 00:34:06,410 backwards work to go back and change things that were already 565 00:34:06,410 --> 00:34:11,449 done or already discussed with the original trades and then of 566 00:34:11,449 --> 00:34:13,489 course adding the new stuff on top. 567 00:34:13,489 --> 00:34:17,889 So it's almost double work in a sense and a lot of times it 568 00:34:17,889 --> 00:34:22,969 requires specialty materials or other things and a lot of 569 00:34:23,610 --> 00:34:27,690 premeditated or thought out processes and procedures and. 570 00:34:28,380 --> 00:34:30,900 There's just a lot of things that go into change order 571 00:34:30,900 --> 00:34:33,940 sometimes and for that reason it's not uncommon for builders 572 00:34:33,940 --> 00:34:39,260 to charge more than their their standard rate on a cost plus now 573 00:34:39,260 --> 00:34:43,820 a fixed price like we mentioned, you know you're already locked 574 00:34:43,820 --> 00:34:46,100 into the price with the builder for the total build. 575 00:34:46,820 --> 00:34:49,739 Any change order initiated would be above and beyond that price. 576 00:34:49,739 --> 00:34:52,699 So it's it's. Almost more transparent in that 577 00:34:52,699 --> 00:34:55,100 sense that it's not quite as wishy washy. 578 00:34:55,100 --> 00:34:57,220 Here's the price that we charged you up front. 579 00:34:57,500 --> 00:35:00,500 Here are your change orders that are added on top of that so you 580 00:35:00,500 --> 00:35:03,780 can see your your total plus your additions. 581 00:35:04,300 --> 00:35:07,020 Whereas cost plus, like you said, it's there's a lot of Gray 582 00:35:07,020 --> 00:35:10,500 area and it's hard to separate out what was added and what 583 00:35:10,500 --> 00:35:13,380 wasn't and then the budget gets a little muddy and. 584 00:35:14,570 --> 00:35:16,530 You know and maybe there's some builders out there that have 585 00:35:16,530 --> 00:35:17,970 found a better way to handle them. 586 00:35:17,970 --> 00:35:21,130 But like we've said, you know we don't do many cost plus 587 00:35:21,130 --> 00:35:24,730 contracts and for that reason, you know we'll be the first to 588 00:35:24,730 --> 00:35:29,690 say that we, we haven't found a winning situation where you 589 00:35:30,010 --> 00:35:32,330 incorporate change orders into a cost plus contract. 590 00:35:32,330 --> 00:35:35,410 So not to scare anybody that's in a cost plus contractor 591 00:35:35,410 --> 00:35:37,930 thinking about going that direction, just be very aware of 592 00:35:37,930 --> 00:35:41,960 how those are handled. Yep. 593 00:35:42,680 --> 00:35:47,920 And I just I wanted we can wrap this up on just really what's 594 00:35:47,920 --> 00:35:52,320 important to us And and I know there's many other builders out 595 00:35:52,320 --> 00:35:56,680 there that that you're talking to if you don't build in in 596 00:35:56,680 --> 00:36:01,440 Central Texas or in our market. But it's extremely important to 597 00:36:01,440 --> 00:36:06,920 us that we are always focused on the customer experience and 598 00:36:06,920 --> 00:36:10,700 that's why we do fixed price agreements, that's why we have 599 00:36:10,700 --> 00:36:14,820 the on time on budget guarantee and we have found that that 600 00:36:14,820 --> 00:36:19,700 makes your experience throughout the build so much more pleasant, 601 00:36:19,740 --> 00:36:21,580 right. And we've we've used those words 602 00:36:22,100 --> 00:36:26,940 many times before on on these episodes, but it is so true. 603 00:36:26,940 --> 00:36:31,220 So my my parting words are change orders are going to 604 00:36:31,220 --> 00:36:32,820 happen. It's okay. 605 00:36:32,900 --> 00:36:35,140 It's we're happy to tackle them with you. 606 00:36:36,190 --> 00:36:38,990 We don't look at change orders as a negative thing. 607 00:36:39,070 --> 00:36:42,150 It's just making sure that the expectations are clear up front 608 00:36:42,150 --> 00:36:46,270 of what it entails and it seems to be much smoother for 609 00:36:46,270 --> 00:36:50,790 everybody. So the other the other piece of 610 00:36:50,790 --> 00:36:55,270 this is and I know this is hard to do in a hard ask but you 611 00:36:55,270 --> 00:36:58,790 can't study your plans enough early on with the architect 612 00:36:58,790 --> 00:37:00,030 right. I mean, you need to be thinking 613 00:37:00,030 --> 00:37:04,430 about every last corner of the house and every last thing you 614 00:37:04,430 --> 00:37:07,550 may or may not want to add. And I know that's hard to do 615 00:37:07,550 --> 00:37:10,230 because it's a snapshot in time when you say hey I've got it 616 00:37:10,230 --> 00:37:12,350 figured out and then something changes down the road. 617 00:37:12,350 --> 00:37:17,150 But the more you can go through your final plan set with a fine 618 00:37:17,150 --> 00:37:20,350 tooth comb, have any of your friends and family look at it 619 00:37:20,350 --> 00:37:23,030 and give their input and opinions and you take them or 620 00:37:23,030 --> 00:37:26,390 don't take some of their thoughts, I think goes a long 621 00:37:26,390 --> 00:37:30,120 way in minimizing the change orders later for your best 622 00:37:30,120 --> 00:37:32,720 interest both from a financial and a time perspective. 623 00:37:32,720 --> 00:37:37,440 But again, change orders will come up and we we work through 624 00:37:37,440 --> 00:37:40,920 them as smoothly as we can to to keep the the homeowners 625 00:37:40,920 --> 00:37:42,720 experience as pleasant as possible. 626 00:37:44,240 --> 00:37:46,760 Well said. I think that's a fantastic way 627 00:37:46,760 --> 00:37:51,120 to wrap this episode up. So yeah, thank you for those 628 00:37:51,200 --> 00:37:52,720 final words. And. 629 00:37:53,350 --> 00:37:57,710 My final words are going to be to ask the listeners for a favor 630 00:37:58,070 --> 00:38:01,750 and this one's free. We would just like to ask that 631 00:38:01,750 --> 00:38:06,110 if you guys listening have found any value in our podcast, we'd 632 00:38:06,110 --> 00:38:09,750 really appreciate it if you could rate and review our 633 00:38:09,750 --> 00:38:12,470 podcast on whatever platform you're listening on and then 634 00:38:12,470 --> 00:38:14,910 share it with any of your friends that are thinking about 635 00:38:14,910 --> 00:38:18,550 building a custom home or a home in general or are in the process 636 00:38:18,550 --> 00:38:21,820 potentially right now, so. Anybody else that can find value 637 00:38:21,820 --> 00:38:25,420 in our podcast, we'd love to have this podcast help them. 638 00:38:25,940 --> 00:38:29,340 And with that being said, I think this will wrap it up for 639 00:38:29,340 --> 00:38:32,620 week 12 and episode #12. Thank you everybody so much for 640 00:38:32,620 --> 00:38:35,700 listening and all your support and we'll catch you guys on the 641 00:38:35,700 --> 00:38:39,020 next one. Thank you all. 642 00:38:39,500 --> 00:38:40,460 Thanks. Steve.