Avoiding Change Orders in Commercial RE Projects

Change orders in commercial construction projects are inevitable. Use these tips to better equip yourself for success when changes occur.

What Is A Change Order

Change orders are documents that address things that must be added, removed or changed after plans have been finalized and the construction of a project has begun.

Commercial construction projects will inevitably require a change order at some point in the process. Even with substantial planning and a diligent team, it’s still possible that things don’t go as planned and changes will occur. Changes can be frustrating as they often result in increased costs and time. However, there are ways that you can reduce the amount of change orders for a given project.

What Causes Change Orders

For commercial real estate construction projects you can expect between one to five change orders per project on average.

Most change orders result from local governing authorities requesting specific things to be added, changed or removed after construction has already begun. Cities have certain requirements that buildings must adhere to, therefore it is extremely important that plans are drawn up correctly and are void of errors. Plans containing even a minor error can cost a significant amount of time and money.

Another reason for change orders are tenant/owner requests. Tenants/owners may request that adjustments be made after the project has begun. You have to consider whether the cost of keeping your tenant happy is worth it or not. Making changes requested by your tenant could be costly, however, it may ultimately be a more fruitful decision in the long run.

Supply disruptions are very common and can cause change orders. In order to avoid significant delays, some builders will choose to substitute materials, requiring a change order to cover the variation in the building process and timing.

Tips For Avoiding Change Orders

  1. Superior Communication - Having clear communication between the owner of the property and the builder for the entirety of the project is extremely important when trying to avoid change orders.
  2. Exhaustive Planning - While it may seem redundant to review plans multiple times over, it will save you time and money. This is important at every stage of the process, but especially before construction gets started.
  3. Expect the Unexpected - Allocate time and money for unexpected interruptions, such as inclement weather, supply challenges, or changes in regulatory requirements.

Change orders are hard to avoid completely, however, these tips should help reduce the amount of changes affecting your project. If you go into a project knowing the potential pitfalls, you will be better equipped to handle changes along the way.

If you have a commercial construction project in need of financing, CALCAP Lending can help! Check out our resources page to watch a short, helpful video about construction loans.

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About CALCAP Lending

A division of CALCAP Advisors, CALCAP Lending benefits from the expertise of a seasoned team of professionals with extensive, successful track-records covering a variety of disciplines and leading large, nationally-recognized institutions. A private money direct lender, CALCAP Lending provides short to mid-term financing for property investors and businesses looking to purchase, refinance, renovate, and construct residential or commercial properties.

Lending FAQs

You've got questions, we've got answers.

What is private money lending?

Private money lending is a collateral-based lending strategy that is often associated with shorter terms and more attractive features. A private money loan offers more flexibility than a conventional mortgage or bank loan.

How does a private money loan work?

Private money lenders provide financing using money from private entities. Private money loans often work as bridges to help investors gather funds to achieve their short term real estate goals, but long term, permanent options may also provide.

Why would I choose a private money lender?

There are many advantages to using a private money lender for your real estate investments! Private money lenders can be more lenient when it comes to borrower credit issues, often there are no prepayment penalties, you can leverage your cash to buy multiple properties, and private money loans are quicker when compared with institutional loans.

Can I get prequalified for a loan?

CALCAP has a responsive loan team who are able to prequalify you. Contact a loan specialist at 833.816.5580 to get started.

How long does the lending process take?

Private money lending can be a quick and painless process. From start to finish, 30 days is common, however, turn around times can be as short as 10 business days.

Can I still be approved for a loan if I have bad credit?

Generally yes, we understand that people have temporary financial issues that come up, and we want to work with you to help you rise up financially to a better place. Offsets to credit concerns may include experience as a real estate investor, good cash reserves, and/or larger down payments.

I am a broker or investor, how can I work with CALCAP?

Business is built on relationships. Ours is no different. CALCAP Value and Preferred Partners receive exclusive rates and services. For more details and to submit your application, visit our partners page.

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