Do I Need A Contingency Fund?

While creating a strict budget is helpful, homeowners should also have an emergency fund prepared if the remodeling job goes over budget. It is common for remodeling jobs to go over schedule and rack up additional costs, so having extra cash stored away can help homeowners get out of this jam. Contingency funds are for these unexpected items that present themselves during the course of the project.

 

The guideline is to set aside between five to twenty percent of the quoted estimate for contingencies. The actual percentage depends upon the complexity of the project and the age of the house. For instance, a new roof generally does not require other ancillary items be repaired or altered in order to install the roof. Therefore the minimum contingency of five percent is usually sufficient. On the other hand, a large addition to your home involves many more trades and materials that likely require the maximum contingency of twenty percent. For example, relocating one load-bearing wall could likely involve re-engineering; demo subcontractor; concrete subcontractor; framing subcontractor; structural connection supplier; steel supplier; architect; general contractor; lumber supplier; etc. As a rule if any portion of your existing walls, floors, or ceilings must be demolished or opened up in order to install the new materials you need a contingency towards the maximum. Although a contractor may have vast knowledge of the construction process he does not have X-ray vision. Often times there are situations that complicate construction contained within these areas that cannot possibly be known about until the area is opened.

Therefore, it’s advisable to thoroughly ‘live thru’ the plans in a patient and comprehensive manner, so that when one is confronted with the real world reality, it’s no surprise.