What Is a Change Order and How Does It Affect Your Custom Home Budget?

Every custom home project has change orders. The question is not whether they happen, but how many happen, how large they are, and how they are handled. Projects with 5 to 10 small change orders totaling 2 to 4 percent of original contract are normal and well-managed. Projects with 50 change orders totaling 25 percent of contract are not normal, and they reflect either a badly scoped pre-construction process, a client who keeps revising, or a builder who underbid the original contract and is recovering margin through change. Understanding which situation you are in helps you evaluate whether the process is working.

What a change order is

A change order is a formal written amendment to the construction contract that modifies scope, schedule, cost, or all three. Most construction contracts require change orders to be written and signed by both parties before the work proceeds. Verbal agreements to change scope are not valid change orders and can lead to disputes later.

A typical change order documents:

• The specific change in scope (what work will be added, removed, or modified)
• The cost impact (additional cost or credit to the original contract)
• The schedule impact (any extension to the substantial completion date)
• Sign-off lines for both the client and the builder
• The revised contract total after the change

Why change orders happen

Four common causes:

1. Client-initiated scope changes. The client decides mid-construction to upgrade a finish, add a feature, change a room layout, or expand the project. These are the most controllable and most common.
2. Design or construction document issues. An inconsistency or error in the drawings is discovered during construction and resolution requires cost or schedule adjustment.
3. Unforeseen conditions. Something discovered during construction (soil conditions, existing structure issues on renovations, utility conflicts) requires work that was not anticipated.
4. Regulatory or code changes. Inspector requires something not originally specified, or a code update takes effect mid-project.

Client-initiated changes typically account for 60 to 80 percent of change orders on our projects. The other categories are usually smaller and less predictable.

How to minimize change orders

The most effective lever is preconstruction. Projects that arrive at construction with fully detailed drawings, locked finish selections, and a clear allowance schedule have meaningfully fewer change orders than projects that leave decisions for later. Every design decision that gets deferred into construction becomes a potential change order. Every decision locked in during preconstruction is not.

Second lever: client discipline. On projects where the client keeps revisiting decisions mid-construction, change orders multiply. We have had clients who lived through every selection during preconstruction and added no changes during the build. We have also had clients who made 40 scope changes during construction. Both are the client's choice, but the budget and schedule consequences are predictable.

How SouthShore handles change orders

Every proposed change follows the same protocol on our projects:

1. Written change request initiated by either party
2. Cost impact calculated and documented, including subcontractor pricing and any overhead or mark-up consistent with the original contract
3. Schedule impact calculated and documented
4. Written change order prepared with all details
5. Change order signed by both client and builder before any work proceeds
6. Change order becomes an addendum to the original contract, and the revised contract total reflects the adjustment

No work happens on a verbal "go ahead" or an email nod. The reason is protection for both parties: the client knows what they are paying before they commit, and the builder has a clear scope to execute against.

Common change order categories

Across our projects, recurring change order types include:

• Finish upgrades (tile, stone, hardware, lighting above original allowance)
• Appliance upgrades (Sub-Zero to integrated column, Wolf to higher model)
• Cabinetry changes (adding doors, changing materials, increasing scope)
• Electrical additions (more recessed cans, additional outlets, smart home upgrades)
• Structural or MEP modifications required by plan review comments
• Outdoor living additions (summer kitchen upgrades, additional pavers)
• HVAC zone additions or upgrades

When to be concerned about change orders

Red flags on a change order process include:

• Change orders presented after work is already complete
• Change order pricing that seems out of proportion to the scope
• Change orders for items that should have been in the original contract (finish allowances that were listed as "TBD" without a number)
• Repeated change orders driven by "unforeseen conditions" that should have been identified in preconstruction
• Cumulative change order total growing faster than the client's own scope decisions would explain

If the change order process is surprising the client or the cumulative total is growing beyond a proportional reflection of the scope changes, the builder and client should have a direct conversation about what is driving the pattern. You can read more about our contract structure and preconstruction approach on our [custom home building](/services/custom-home-building) service page.