Construction loans: the change order

When you use a construction loan to build your new home, a change order – also known as a variation order – would be the detailed description within an amendment to your original build plan. Or, the detailed description within an amendment to your original build schedule.

For example, a change order could include increases in time costs incurred by your builder. Time costs which – according to your builder – have been incurred as a result of aligning construction with the amended build plan. Or, the amended build schedule. That amended build plan – or, build schedule – itself, arrived at, also, by way of a previously enacted change order. 

What may trigger the need to enact a change order?

There are several answers to that question. One such answer, among a plethora of possible answers, being…a factor builders have no control over. The weather.

I’ll use an example…

In Kansas City, wet season lasts for half the year. Beginning in March. Ending in September. Each year. During that seven month period, everyday – from June, and on through September – home builders face nearly a 30% chance of rain. Each day. Like baseball…Kansas City home builders can encounter…rain delays.

During wet season each year in Kansas City, builders know that one particular month – out of those 7 months – is the rainiest of them all. And in Kansas City, that rainiest month of all would be…June.

On average, in Kansas City in June, builders could face up to 12 wet days. Nearly half the month.

So, if you are planning on using a construction loan to build your new home in Kansas City… If your construction schedule aligns with the spring, the summer or early autumn… Then thinking through how you would want to negotiate, structure and work through an amendment to your build plan (and your build schedule) through a change order, is my recommendation. 

New home construction…

Carefully craft your plan.

Carefully craft your schedule.

Be prepared to address possible changes.

And…know the weather.