The budget trade-off component of the Triangle deals with the hard dollars available to fund the project.   A home owner can create more spending power either by adding dollars to the budget bucket or by stretching the dollars that have already been committed.  This blog will discuss the process of defining the size of the budget bucket and some options for filling it up.  My next blog will address levers for stretching the designated budget dollars.

The first budgeting task that home owners must address is defining the targeted size of the budget bucket for purposes of bounding the design process.  In my experience there are two issues that interfere with specifying a realistic budget target – level of disclosure and exclusion of costs. 

Level of disclosure addresses the tendency for home owners to withhold information regarding their true budgetary intentions.  This behavior may be a result of a legitimate lack of information on construction costs and a desire to err on the low side.  However, often the behavior is based on the misguided belief that the owner is entering into a negotiation and that it is better to play the budgetary “cards” close to his/her chest.  In either case the behavior bounds the design process with a false set of constraints that will cause design trade-offs to be triggered that are not relevant.

Exclusion of costs is the sometimes intentional but usually unintentional tendency to ignore or underestimate costs during the early stages of the design process.  A good architect or building designer should police this, however without the early involvement of a general contractor to provide a comprehensive budget perspective and grounding of project costs, it is likely that the early budget target and subsequent estimate will be incomplete and inaccurate.  For example, some of the components of CSI Division One and Division Two costs (General Requirements and Site Work) are often unintentionally excluded from the design budget — landscaping costs are almost always under specified.  In some cases budget items are intentionally excluded in order to move the design process along.  I’ve seen this happen around HVAC costs where the owner wants to consider a range of complex alternative energy options.  This approach always leads to surprises down the road that can trigger last minute trade-offs which could have been better anticipated with a more comprehensive and disciplined budgeting process early on.

Once the budget is defined, the design process will inevitably lead in directions that will compromise the designated amount.  The simplest trade-off to make is to increase the amount of funding for the project by reaching deeper into your pockets.  Obviously, for most home owners there is a hard limit to this type of funding.  At times the objectives of the project change so there is no other alternative.  This happened to Timberdale a few years ago when the economy went into a tailspin.  The owner’s original renovation objective was a limited fix up of the home to meet near-term family needs with an eventual sale of the home to downsize. When the real estate crash occurred, the home owner made the decision to increase the budget to make the house more suitable for long-term occupancy in order to ride out the economic storm.

There are two other funding levers commonly used by homeowners to add money to the budget bucket.  One is to phase the project over time.  As more financial resources become available in the future, the investment level can be increased over time to add space and features that were postponed in the initial construction phase.  The trick to making this work is to design the project at the outset for progressive construction.  There are at least three benefits to this early planning:

• The designer can help the homeowner decide which spaces are best for building now and best for phasing in later.  In some cases space can be designed to perform one function today and be converted to another later.
• The designer can organize the floor plan and spaces of the house so there is a logical connection point between the phase-one construction and the phase-two expansion. This will minimize disruption.
• The mechanical systems and other components of the house can be sized and positioned in phase one to support and easily interconnect with the phase-two space.

The other lever for adding funding to the bucket is to secure better financing terms that will provide more money for a specified, affordable mortgage payment.  This can be accomplished either through fortunate market timing or through better homeowner diligence in identifying and negotiating financing options.  At its simplest this involves securing a mortgage loan with a lower interest rate — as financing terms improve, a homeowner has the choice of either lowering the size of the mortgage payment or borrowing more money to invest in the project.  Most homeowners are familiar with this lever to a fault, so enough said on the subject.

At a more complex level, there are a number of energy-efficiency related rebates, tax credits and loans that are increasingly available for retrofit remodels and new home construction.  Some of these programs can contribute a significant amount of money to the installation of selected energy-efficiency building components.  A knowledgeable general contractor is invaluable in identifying and securing these funding sources.  Timberdale's affiliate company Green Energy Systems is an expert on these types of programs.