Episode 98: How to Talk Budget with Your Clients

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[@raystraining3206]

"I didn't create this monster, you did" and "I agreed to build the house, not pay for it" are two saying I'm going to remember for future clients. Steve has a memorable quote on almost every episode.

[@stevenbaczekarchitect9431]

I try buddy - been out here 30+ years........got lots of stories

[@DaleKuester]

Matt, This topic deserves much more depth. One of the best you have produced.

[@jaretbishop7909]

Just some thoughts from someone that’s had terrible luck with a renovation and trade workers. It seems like such an entirely different world that you guys are talking about as professionals that do great work, compared to some of these guys that just want to get in and out as quick and cheap as possible. My uncle does bathrooms and tile work, and he always brags about how ‘rich’ people ask him how much a project will be, so he asks them their budget and ALWAYS happens to go over 10-20%. I told him I had a budget of $1000 for my very small bathroom, and even bought the tub, fixtures, and tile myself. He ended up sending me a bill for $1500, stating that his friend the plumber had to spend much more time than planned, and the plumbing wasn’t even done right. That’s the exact reason people are afraid to talk price. Similarly, I had a roof redone. It’s a tile roof and didn’t have decking, so I knew it would need decking to meet code. I spoke with over a dozen roofers. Half wouldn’t even come out, I got a couple send me a quote with satelite data for the rood, and another few that came out to actually inspect. Quotes were from $28k-$50k for the same project. I ended up going with the $28k guy not because of price, but because he came prepared with all materials, samples, etc and explained everything to me. I was very clear about the project and what I was looking for, and he assured me the quote included everything, even the decking. Flash forward to 6 months later, there is a dumpster in my driveway and tiles are 2 weeks out, he shows up and starts ripping the roof off, and I get a phone call ‘sir, your roof doesn’t have decking, we are going to have to put decking on and that’s going to be an extra $5k.’ I just told him to get out. He threatened to sue me for breach of contract but I told him if anyone was breaching it was him for refusing to honor his quote. I could go on with similar stories for my AC and the work in my house like flooring and cabinets. I’d love to build in the future, but I’m terrified that we’d pay hundreds of thousands of dollars for these professionals who claim to be craftsmen, only to find that the end result was just garbage. I don’t know how to tell the difference until it’s too late.

[@Casmige]

I’m in my 60’s. I’ve had to learn auto mechanics because of what you just outlined. I’ve had to learn plumbing, electric work, HVAC, drywall, painting, & everything else having to do with remodeling or building a house because of what you just said. I hired Brennan Enterprises (Arlington Tx) to install some high-end Anderson Alder-Wood casement windows that cost me $15,000 for 4 window openings AND I bought all the Proseco products, zip stretchy tape (2 different sizes), along with 2 3-Gal Redgard ($300.00/pail), the sausage guns, spatulas, paint brushes, & every implement including the zip-systems roller in order to install the windows & they completely ignored my request to use the products that I had bought. They nailed on the Picture-Frame trim but didn’t punch the trim-nails & put in wood filler. They had to cut out the top of the 2 master bedroom window frames (exterior) so the windows didn’t hit it when you opened them But they didn’t use a planer, a sander, or even a router bit to make it nice & even & match the rest of the exterior window trim. & below those windows? they trampled the crap out of my holly bushes (3 of them) Completely destroying them. Upon revisit on the punchlist? All they did was paint over the roughhewn area above those windows, they didn’t punch the trim nails inside before simply overlaying the nail heads with wood filler which instantly flaked off naturally & this is the guy that’s on their KZbin videos as a Mennonite supposedly doing a Craftsmans approach to a work ethic that I had, as a regular Joe Schmoe DIYer, High expectations of them than most. What a disappointment & I’m yet burned again on my trust issues because now I can’t even trust a highly reputable company to put in 4 windows without absolutely screwing the pooch & not listening to me as a customer who had several meetings & several multipage eMail communications with them on the matter over the course of 8 months while we waited for the windows to be delivered IN ORDER to have the job done according to MY SPECIFICATIONS. I absolutely hate the majority of contractors & builders because of this bullshit approach that they know better than even the DIY’er Homeowner. Yes & I guess next year? I’ve got to learn how to do roofing. What a bunch of bullshit talking shysters this industry is full of.

[@claireh.7605]

You are cheap penny pinching customer looking to get free information through free estimates that waste people’s time unpaid while you collect professional info so you can shop around better, then you demand a magical accurate quote without paying for all the investigation and planning - if there is work that’s not in the quote you have to pay for it as it is a change order. If you paid for an actual design and scope of work, and guaranteed result price - then I can see you wanting free decking included just because it wasn’t in the quote.

[@daveschmidt5713]

As a future customer, I think I'd go with design-build contractors. It seems the architects are an added cost appropriate for high end homes.

[@odie00zero]

This is perfect timing for me. This is very informative for customers to watch.

[@ts9971]

Maybe there should be tiers of it. Ex: basement/ shell/ plum/ elec vs turn key. That way the client can budget as they go. Even having diy options for them throughout the process.

[@MegsCarpentry-lovedogs]

Atlantic Canada, Prince Edward Island, chiming in and totally appreciating this presentation. Lots of tidbits for a home owner waiting for a build in 2 yrs....and meeting with draft person this late Fall. 🇨🇦 ☺👷‍♀ Possible additional challenge is that I am a female in a world of men mindset...so.....got to get all I can from Steve Bazcek, Jake B and Matt R. ONNNNN The Build Show! 👍💪👷‍♀

[@fritz4345]

Another great talk every homeowner should listen too. Quality costs money no matter what you do. And in a world where everything has to be cheap and just more, it is a tough sell.

[@daverohner271]

Looking forward to these every week!

[@user-vn6hi2bi3g]

Run with bad news to clients, contractors, employee, and subs, If this is adopted everyones life will be simpler and trust will continue to build. One does not even need to bother with good news, I have never had a relationship sour over overlooking positive news and conversly never had a relationship that was not negatively impacted by not telling or delaying bad news. I believe one is always well served by immediatly passing along challenging information to the principles and workers. Building a bisness with this as the number one objective is akin to starting with a good foundation.You are always 100% in control of lettimg involved parties know so this rule is one of the very few in business that you are able to always deliver. Ray Stormont

[@157-40_T]

One of your best Podcasts!

[@smallsthecontractor718]

Learned so much from this podcast the points made are spot on to what actually happens

[@DeuceDeuceBravo]

Thank you Jake for talking real dollars! You're absolutely right that builders throw around percentages like it's no big deal. Most people have been saving and making sacrifices for many years to afford a custom build. Every dollar matters. Today's market is already crazy enough. Respect other people's hard-earned money and the process will be much smoother for everyone.

[@RobVespa]

Been a good ride. All the best.

[@DrMJJr]

OMG, those basement prices in TX sounds absolutely INSANE!!!

[@dlg5485]

What this conversation tells me is that I'll never be able to afford a custom home. It's just crazy to me that 7 figures seems to be the norm for a custom house these days, and not even anything overly extravagant. The days when even an upper middle class earner could afford to build a custom home are long gone. It just goes to show how the cost of housing has dramatically outpaced incomes in the USA. The so-called American dream no longer exists for most people.

[@ykciR]

These guys build 4 thousand square foot homes lol. You can build customs homes on a much smaller scale.

[@zstarwarsz]

First of all, look up American dream, i.e home ownership from 1945 to 1970 - most of them are sub 2000sqft cookie cutter row homes (i.e building builds 10-20 of them at the same time). This is not it, this is custom, one of a kind home with premium features, that MOST people want, but do not need. You do NOT need a pool, you do NOT need a fire place/places, you DO not need multiple balconies or huge windows and high end slicing doors. You do not need a subzero or a 10ft x 5ft island. You want those things... and when you add them, the price adds up. Fine craftmanship costs money, and the reason they can chanrge it is because they are in demand and have experience doing it. They can anticipate things you couldn't even possible think of, where as a new builder with less experience will have to backgrand, and amend the quote...

[@dlg5485]

@@zstarwarsz Blah blah blah... None of that means a damn thing. The American dream was ALWAYS bullsh*t because it was only available to white people until just a few decades ago. Since then, fewer and fewer full time workers every year can afford a house, regardless of its size. The USA is becoming more and more like a 3rd world country everyday....with haves and have nots, and not many in the middle.

[@dlg5485]

@@ykciR The average cost of a new house is about $350k in the USA, while the median household income is about $70k. With that income, the most you can responsibly spend on a house is about $175k and that's with 20% down payment. This country isn't working for average earners anymore, hasn't for a long time.

[@MrAPCProductions]

I live in the middle of fly over country. In a state that is listed near the bottom of every metric used by the Fed. I cannot imagine a home being built for 300sqft, when Steve said 500sqft, lolwut.... then Matt said 1000sqft.... I had to pause the video to rethink my life..... what the hell.

[@zstarwarsz]

it's all about the cost of land, the address, and what's the potential. Unless you're made of $, building a $900k house in the area that avg sale is $200k-$250k is not worth it...

[@jonesconrad1]

I love topics like this, they cross industries.

[@alexmills2043]

Appreciate the info and all your videos. Think the podcast format i s great, but would highly suggest changing the set a bit, especially if you're set on using a single camera. Setups more in-line with talk shows, maybe three chairs and no desk, maybe a desk and two chairs, etc. Background tool rack is pretty distracting, although I know it fits the theme. Something more simple/clean will likely help people stay focused on the topics and flow I'm sure you put a lot of effort into. Just my two cents as someone who watches/learns from many different podcasts.

[@JonDunnmusician]

Good point! And it seems at times Matt is hidden in the back, further definitely would take the hat off, & gentleman in front turn to face camera. Super interesting conversation.

[@vapeurdepisse]

So if I'm telling you a number you will just charge me that + 20% more?

[@ArneAsada69]

I like this episode.

[@sstrick7728]

On the same token will you share your profit % with clients?

[@trampfossil]

What about Appraisal values?

[@maltanno]

In an episode with so many examples of how things can go over budget, I'm surprised that Steve started by saying that people shouldn't have a contingency.

[@RobToGame]

Hey Matt, Would you come out to Scottsdale to consult on a remodel of a house? Attempting to incorporate several updates such as geothermal for both the house and new pool, solar, battery storage, gray water system, and water well. Trying to get as close to net zero as possible once completed. Might even be a cool mini-build video series? Thanks

[@Joseph-ny5rr]

Hey Matt. If you were building a new house, middle class budget, southern climate, would you encourage 8 foot or 10 foot ceiling heights? Single story house. I like higher ceilings but is it worth the extra money??

[@FR-yt5ik]

Go for 9’.

[@zstarwarsz]

8ft is too low. 10ft prob too high. 9ft is perfect.

[@captainwilly9793]

Build your own house and save a bundle of cash.

[@abcdefghijklmnop514]

so change orders make sense. But like don’t you guys go over in detail what the clients is purchasing? appliance packages, lighting schedule, window schedule, door schedule, designs, material allowances? shouldn’t the home owner know what time expect going in since it’s a custom home or every-time the ask for something it’s automatically extra?

[@Casmige]

The plain naked truth is that it’s ALWAYS going to be over rather than under or even “at” budget. A. L. W. A. Y. S.

[@4himsanctified]

The question always that comes to my mind is, where do people work that have 1 mil budget, let alone $300k?

[@zstarwarsz]

actually, it's quite easy... say you make $100k, and your spouse at $70k, then you likely will qualify (depending on area) for a $500k+ loan. You only need 100k down and if you saved a bit, then that's what you have. Then you pay it off over 30 years, at which, you hope, your house will triple+ in value, to cover all the extra loan payments you made. If you take care of it, if your neighborhood doesn't go into the crapper, you sell it 30 years later, and probably come out neutral or better.... That's the IDEA anyway... so, with that in mind, your $500k house is actually costing you $100k.

[@4himsanctified]

@@zstarwarsz those incomes are in the stratosphere as far as Im concerned. Master's degree and I'm making 35k and there aint no moving up.

[@zstarwarsz]

@@4himsanctified I don't know but 35k is minimum wage mcd's in major cities...

[@fredbell4803]

As a future client I have to say this architect is the problem - not the client. In his own example, at 15:38, he mentions sending an email that says “nothing in this meeting is advantageous to the budget”. That means to any human being that the budget has not decreased. It absolutely does not mean that the budget increased. This is basic Boolean logic 101 how can this guy be an architect and such a moron at the same time. He is the problem. Just tell your client the budget increased and by how much and why at each meeting. It really is not that complicated if you were an honest party and worked in the interests of your client like you pretend to do. I mean bloody hell, just listen to yourself. He then a few seconds later says that it means the budget increased, and moved from 1 million to 1.6 million and only discussed that increased 6 months later when his client asked a question. Everything this man did, if he is telling the truth, is wrong. If that story ever happened the man should be sued and put out of business. Probably the most unprofessional architect I have ever heard of. You are required to tell your client when the budget increased and by how much and why. Don’t tell them nothing is advantageous to the budget, who do you pretend to be? Some asshole trying to sounds like a mafioso? You end up just sounding like a clown.

[@scottapt5291]

He's not the problem, already you are not listening. The client initially said 800k, he said no, more like 1 million. Later, after each meeting, he told them about the budget and the discussions not being advantageous (meaning not decreasing) which they ignored and added more the next time. Open your ears and pay attention, if you start out 200k above your budget, stop adding and think about subtracting or find a way to get more funding.

[@markstipulkoski1389]

Lighten up Francis. I am a digital logic designer by trade. The context of his statement is important, as the previous commenter said. The ongoing communication with the client was that they are $200k short for the house they want. So it was understood that their their ADDITIONS were not going to free.

[@adamr1637]

You need to get to know him better--Steve is extremely straightforward and a great communicator.

[@markstipulkoski1389]

I think you are also are confusing the architect and the builder. I have not dealt with an architect directly myself, but my contracted builder did, communicating modifications of the plans after the builder and I agreed on the price difference. That price included the time of the architect to update the plans. So price discussions were with the builder. I would expect that if hired an architect first, I would give him/her my requirements and wishlist and target price. I would expect the architect to be able to give me an ballpark estimate and I would be satisfied with his/her job if the price quoted by the builder was no more than 20% over. That actually would have been what I had anticipated. I would then work with the builder/architect team to get my cost back to the target, knowing that I would have to pay them for their time if it wasn't already part of their fee. Once the builder agrees to the updated plans and price, I would anticipate it might actually cost me 20% more, than that. I would have paid what I expected.

[@JonDunnmusician]

​@@markstipulkoski1389LOL

[@iran4u]

It'd be interesting to hear about pricing models. Customers are leery of putting out a budget because they're afraid it's a blank check for an inefficient or greedy builder. My company (@HolisticUtilitySolutions) works with commercial customers and I find that using open book pricing with a clear understanding of where margin is being applied and hourly rates for design and project management builds more trust. The client usually doesn't have an issue paying a premium for better quality materials and install, but they don't want to pay a premium for a builder to make high margins and/or be inefficient on a job. All the cost per foot discussion doesn't explain if it is a material/subcontractor problem or a builder problem.