Most new-home budgets do not fail because the builder's price was wrong. They drift, a few thousand dollars at a time, through changes, upgrades, allowance overages and surprises on site. Each one seems small when you approve it. Together they can add up to more than your contingency.
A change order is a written amendment to the building contract that changes the scope, price or schedule. Some are unavoidable, such as rock found during excavation. Many are optional, such as moving a wall or upgrading a floor. This guide explains how change orders are priced, where overruns usually come from, and the habits that keep the final cost close to the number you signed.
Key takeaways
- Overruns usually come from owner changes, allowance overages, unforeseen site conditions and items left out of the contract.
- Change orders carry the builder’s markup and often an admin fee, and can delay the schedule.
- The cheapest time to change something is before the contract is signed; the most expensive is after it is built.
- Keep a separate contingency, insist on written and priced change orders, and track every change in one log.
Where overruns come from
Overruns on a new house tend to come from five places:
- Owner changes. Moving walls, adding windows, changing the layout or upgrading materials after the contract is signed.
- Allowance overages. Choosing cabinets, flooring, tile, fixtures or appliances that cost more than the allowance in the contract.
- Unforeseen conditions. Rock, poor soil, groundwater or buried debris found during site work and excavation.
- Scope gaps. Items missing from the plans or contract that turn out to be needed, such as a retaining wall, an extra utility run or code-required changes from plan review.
- Time. Delays add loan interest, rent and carrying costs, and on some contracts expose you to material price increases.
The first two are mostly in your control. The third can be reduced by surveys and soil testing before you buy the lot. The fourth is reduced by complete plans and a careful contract review. The fifth follows from all of them.
Typical change orders on a new house
Some changes come up on almost every custom build. Knowing them in advance lets you decide on them before the contract instead of during construction:
- Adding or enlarging windows once you see the views from the framed walls.
- Extra outlets, lighting, USB and data points, and under-cabinet lights.
- Upgrading flooring, tile or counters during selections.
- Adding a covered porch, a larger deck or a patio.
- Raising ceilings, adding a tray ceiling or changing the stair design.
- Extra fill, drainage or a retaining wall after the site is opened up.
- Changes required by the building department during plan review or inspection.
Walk through the framed house with the plans in hand before rough-ins start. It is the last cheap moment to adjust window sizes, outlet locations and lighting, and it is when most owners first get a real sense of the rooms.
How change orders are priced
A change order is usually priced as:
- the cost of new materials and labor,
- minus any credit for work or materials no longer needed,
- plus the builder's overhead and profit on the change,
- plus, sometimes, a flat administration fee per change order,
- plus any cost of undoing work already done, and restocking fees for returned items.
Builder markups are significant. In the NAHB 2024 survey, overhead and profit together averaged about 26% of construction cost.[1] Your builder's markup on changes may be higher or lower, but it is never zero. Credits for deleted work, on the other hand, are sometimes given at cost without markup. Ask how your contract treats both.
Changes also cost time
A change can hold up the next trade while it is redesigned, re-permitted or re-ordered. Ask the builder to state the schedule impact on every change order, not only the price.
Why timing matters so much
The same change gets more expensive at every stage of the project. Moving a bathroom on the drawings costs a designer's time. Moving it after the slab is poured means cutting concrete to relocate drain lines. Moving it after drywall means tearing out finished walls, re-running plumbing, re-inspecting and patching.
A rough guide to when each decision should be final:
- Before you sign the contract: layout, room sizes, window and door locations, ceiling heights, foundation type, roof shape, and the HVAC system.
- Before rough-ins: kitchen and bath layouts, lighting and outlet locations, low-voltage wiring, plumbing fixture locations and appliance specs.
- Before drywall: blocking for TVs, grab bars and shelves; any change in insulation.
- Before ordering: cabinets, counters, tile, flooring, fixtures and paint colors.
Our guide to how long it takes to build a house walks through the order of work so you can see when each deadline falls.
How to prevent overruns before you sign
- Finish the design. Complete plans and a detailed specification leave fewer gaps for change orders to fill.
- Make your selections early. The more you choose before signing, the more can be priced as fixed items instead of allowances.
- Set realistic allowances. Visit the builder's suppliers and price what you actually want. A low allowance is a guaranteed overage.
- Investigate the site. A survey, soil report and utility check before you buy the land reduce surprises in the ground. See how to choose a building lot.
- Read the exclusions. Anything excluded will come back as an extra. Comparing bids line by line helps you find them.
- Agree the change-order rules. Written, priced and signed before work; markup stated; credits explained; schedule impact listed.
- Choose the right contract. Our guide to cost-plus vs fixed-price contracts explains how each handles changes.
How to control changes during the build
Even with good preparation, changes will come up. A simple routine keeps them from snowballing:
- Never approve a change verbally. On site, a quick "yes, go ahead" can become a disputed bill months later.
- Ask for the price and the schedule impact in writing before work starts.
- Keep a change log. One list with the date, description, cost, schedule impact and status of every change order and allowance overage. Add them up every month.
- Check the contingency. When you approve a change, take the amount out of your contingency in your log so you always know what is left.
- Tell your lender. Many lenders need to approve changes that raise the loan amount, and may require you to pay them in cash. See construction loans explained.
- Visit the site regularly. Mistakes caught early are cheap to fix; mistakes found after drywall are not.
How big should your contingency be?
A contingency is money you set aside, not money you plan to spend. Its size should reflect how much is still uncertain. A finished design, firm fixed-price contract and well-investigated flat lot need less. A design still evolving, a cost-plus contract, a rural lot or an owner-builder project needs more.
Keep two separate buffers. One covers surprises: rock, extra fill, code changes. The other covers your own choices: upgrades and changes you decide to make. Mixing them is how the upgrades eat the money you needed for the surprises.
Our calculator applies a contingency percentage to the building costs (construction, overhead and profit), not to the land, because the land price is usually fixed when you buy. You can set it anywhere from 0% to 25% and see how it changes your total or, in the budget tab, how much house you can afford.
If the budget is already slipping
If your change log shows the contingency running out, act early:
- Review upcoming selections and look for places to step down, such as flooring in secondary rooms, lighting fixtures or exterior hardscape that can be added later.
- Ask the builder for value-engineering ideas that do not affect structure or systems.
- Defer work that can be done after move-in, like finishing a basement, building a deck or adding landscaping, if your lender and certificate of occupancy allow it.
- Do not cut the things that are hard to change later: insulation, windows, structure, waterproofing and mechanical systems.
Our guide to the hidden costs of building a house lists the costs most often missed at the start, which are also the ones most likely to show up as change orders later.
Plug your house size, land price and quotes into the free calculator. It uses the same NAHB 2024 averages as this guide.
Frequently asked questions
What is a change order in construction?
A written amendment to the building contract that changes the scope of work, the price or the schedule. It should be priced and signed before the work is done.
Do builders charge extra for change orders?
Usually yes. Most add their overhead and profit to the cost of the change, and some charge a flat administration fee per change order.
How can I avoid change orders when building a house?
Finish the design and selections before you sign, set realistic allowances, investigate the site before buying, and read the exclusions in the contract.
Who pays for unforeseen site conditions?
It depends on the contract. Many contracts make the owner responsible for conditions like rock or poor soil that could not be seen when the price was set. Read that clause before signing.
Sources
Figures last checked October 18, 2026. National averages are a planning guide, not a quote. See our editorial policy and data sources.
