The following is another article by Al, where he describes what goes into preparing a preliminary budget for a modular home. It should be noted that Al's budget example is based in California and consequently dollar amounts shown would vary by location.
Also of note, the completed modular home cost depends on the quality of the building process by the modular home manufacturer. Preliminary budgets can not take into account problems resulting from poor assembly in the plant and which by their very nature are hidden in the walls and under the floor. Costs to correct such flaws are typically very large and may or may not be covered by the manufacturer. Please see earlier postings regarding problems with Champion Genesis modular homes.
As always, please feel free to post your comments about this article or any entry/comment on this blog. The main goal of this site is to provide as much information to potential modular home buyers as possible so they are able to make informed decisions about purchasing and building a modular home. In addition, this site allows existing modular home owners to compare their experiences and by doing so informing potential buyers of what to look for in selecting a modular home manufacturer.
MODULAR HOMES 101
Article Six
Preparing a
Preliminary Budget
budget
Noun: 1. An itemized summary of estimated or intended
expenditures for a given period along with proposals for financing them.
2. A systematic plan for the
expenditure of a usually fixed resource, such as money or time, during a given
period.
3. The total sum of money allocated
for a particular purpose or period of time.
Verb:1. To plan in advance the expenditure of….
2. To enter or account for in a
budget….
Ref. Internet Dictionary
of definitions and pronunciation
The above
reference pretty much says it all.A
budget is a budget and most of us
have an idea of
what a budget is or is not.How do we
prepare a budget?
Your Budget
A budget showing all of your estimated costs should be
prepared regardless of the total cost of your project.When preparing a budget it is important to
develop a budget ‘form’ that you will feel comfortable to use.As time goes on your budget will take on
certain characteristics that provide comfort and meaning to you as well as the
consultant.The project budget becomes a
valuable tool, but just like the schedule it takes time to accurately develop
this useful tool.
Budget information is independent of the schedule, although
in my example below the schedule helps in the preparation of the budget by
providing a useable format.A budget can
be developed from information obtained from your local government overseeing
permits and inspections of the project and other sources. A budget should include all things that are
newly constructed and those items that need some modification, so as to meet
local governmental requirements and the owner’s desires for site and house improvement.Consultant costs, site improvements, house
placement and all construction related items must be covered as well as the
cost of the modular house itself.Budget
estimates will vary considerably depending of the price of materials,
availability contractors, weather and many other factors.There are many books and computer programs that
show how budgets are prepared and these sources will help you prepare your
preliminary budget.Qualified
consultants can provide preliminary budgets for your modification and use.
The budget will also give the consultant and owner a basis
to determine the validity of licensed contractor’s bids.Please obtain at least three contractor bids.Don’t make the mistake of signing a contract
with the first contractor who shows an interest in your project.
I’m avoiding attempting to enter the strange arena of
preparing a bid document, bidding and selecting a contractor.I believe that is beyond what I want to cover
in this series of articles.However, I
would say that if the general contractor’s low bid is higher than 15% over your
estimated preliminary budget, then it is time to reanalyze everything from the
beginning because there is probably something amiss.It may also be a clue if bids are grouped
very close together or if they are considerably spread apart.In these examples it is possible that the
preliminary budget was not well thought out in the beginning or it could be
that the contractors know something that could be a potential problem or the
contractors do not understand the complete scope of the work to be done.It might mean that the bidding documents were
not well prepared. Suffice it to say
that a good bidding process should be clearly written, easy to understand and
available to a number of general contractors.
If any or all of these problems occur the consultant and
owner must attempt to determine what is wrong before proceeding.Above all, do not sign a contract with a
general contractor thinking that you will be able to ‘work out the
problems.’Variations in bidding could
be likened to the “canary in the mine”, a warning of danger.This information as well as bid comparisons
among the bidders provides a clue as to actual labor and materials costs and an
understanding or lack of understanding by the contractors of what work needs to
be done.
I’ve used the schedule presented in Article Five as a
structure to develop a preliminary budget.The budget is shown in this manner only to provide you with a brief idea
of how you might create one of your own.It is obvious that each budget will be different depending upon the
project and many circumstances.
There is more budget information available through books and
computer programs than you will ever be able to handle.My advice is to make it as simple as
possible.If the budget becomes too
complicated it’s value to you as a tool diminishes.With a bit of thinking and some checking on current
costs you should be able to make estimates and set up a preliminary
budget.Just like the preliminary
schedule the budget will change over time so it must be flexible.
As bills and invoices are handed over to you and are paid
you should identify those costs with the appropriate budget category.My example below will give you an idea of how
to do this.
5. 6/15-Licensed land
surveyor surveys site and prepares legal
site plan and plot plan$ 2,500
(budget) $2,115.20 (actual)
Following is a hypothetical budget I assembled to show how a
simple budget might look.
Example of a
Preliminary Budget
1. 5/1--Owner signs an agreement with a knowledgeable
consultant for services
to be
performed throughout this process.
Depending
upon the scope of
the agreement a fair fee for
services could be
10% of those individual
contractor contracts.This is negotiable.
2. 5/3--Owner deposits money with title company for purchase
$ 150,000.
of modular home
3. 5/6--Purchase order submitted to modular manufacturer
17. 11/4--General contractor begins work for franchise and
non-franchise utilities
to the site and upon the site property4,000.
18. 11/29-Factory completes modular home
19. 12/2--Factory representative, consultant and owner
conduct a
‘walk through’ of
modular at the factory and prepare
a punch list (a
list of physical corrections to the modular)
20.
12/5--Factory makes corrections per punch list
21.12/6--Modular house is moved to site –
Transportation Costs3,000.
22.
12/7-Modular house arrives at site and is moved into place over 2,000.
footings
23.
12/7-Modular house is allowed to settle for 5 to 7 days
24.
12/12-General contractor closes house and connects utilities5,000.
25. 12/13-Local
government inspector inspects all activities to date
26. 12/14-General
contractor provides roof setup, block and level house5,000.
27.
12/15-Concrete contractor installs steps and stem wall (independent15, 000.
agreement with owner and concrete contractor)
28.
12/16-Drywall close-up, repair, tape and texture inside, paint,
carpet installation, adjust doors and install fixtures
and equipment 2,500.
29.
12/27-Connect and check fire sprinkler system (note: in San Diego7,500.
County every new home must have a
complete and
functioning inside fire sprinkler
system before an
occupancy permit is issued.)
30. 1/15-Local
government inspection of a completed and working
fire sprinkler System (note: an
inspection may also be
required at the factory before the
modular is moved into
your local jurisdiction.)
31.
1/20-General contractor to provide all special or extra work as
contractually required by owner 10,000.
32.
1/30-Heating, ventilation, air conditioning installation by HVAC
Contractor4,500.
33. 2/10-BMP (Best Management Practices) Environmental
controls such
as gravel, wood
chips, fabric sheets or “sausage” rolls to control
erosion may be
required by your local governmental jurisdiction.
Cost varies
considerably.
34. 2/20-Final
inspection by local government inspector
35.
3/1--Occupancy permit issued by local government, owner
moves into modular
36. 3/5—Miscellaneous contractor costs4,000.
____________
BudgetTotal$ 232,500.
Actual
TotalXXXX
End of Budget
NOTE: THIS IS
ONLY AN EXAMPLE AND NOT A COMPLETE BUDGET!
Your contractor
may require one or more change orders.Change orders are changes or
modifications
that may occur due to bid or contract document mistakes, errors of
omission, acts
of nature or other unanticipated problems.The contractor will require
additional
payment from the owner and that request should be thoroughly documented
before payment
is made.The preliminary budget should
be modified to reflect these
changes.
Conclusion
Your
preliminary budget is only a tool.It is
a device to help you understand the potential
cost of
development of your site and modular home.Keep it as simple as possible and
don’t hesitate
to revise it periodically, as well as add actual costs adjacent to budget items
for appropriate
items.
If you are fortunate, or unfortunate as the case may be, to
develop several budgets for several projects you’ll be able to refine each
successive one and as you do each successive budget will become a more valuable
tool.
The next and last article will attempt to summarize all the
preceding information and provide a ‘wrap up’ of this series of articles.I think I’ll title it “The End of The
Journey.”
