Episode 9: Contingencies
Your Guide to Managing Risk and Building Confidence with Contingencies
Episode Summary
In this episode, Rick Bell explains how to budget for your custom home with clarity and confidence. From managing allowances and contingencies to identifying soft costs and overages, Rick walks you through the budgeting tools and strategies Landmark Custom Homes uses to keep builds on track. You'll learn how to protect your investment by understanding where the real risks lie and how to plan for the unexpected—so surprises don’t derail your dream home.
What You’ll Learn
- Why budgeting is about more than just picking a number
- How to approach building costs from the top down
- The difference between hard costs, allowances, and soft costs
- What line items are often missed or underestimated
- How to work with your builder to stay on track financially
- Why contingencies matter — and how to use them wisely
Glossary of Terms
- Allowance: A preset budget for materials or fixtures not yet selected (e.g., lighting or tile).
- Contingency: Extra funds set aside to cover unforeseen costs or scope changes during construction.
- Hard Costs: Direct construction expenses such as labor, materials, and site work.
- Soft Costs: Indirect costs such as architectural fees, permits, insurance, and legal expenses.
- Overage: Any amount spent over the initially budgeted allowance or total contract price.
- Draw Schedule: A predetermined timeline for releasing construction funds tied to project milestones.
Resources & Links
Connect With Rick
Below is the full transcript of Episode 9 of The Insider’s Guide to Custom Homes, hosted by Rick Bell. In this episode, Rick explores the role of contingencies in custom home budgeting — how to plan for the unexpected, use allowances wisely, and avoid costly surprises while keeping your project financially on track.
View Full Transcript – Episode 9: Contingencies
Episode 9: Contingencies (What Could Go Wrong?)
Welcome to The Insider’s Guide to Custom Homes. I’m Rick Bell, founder of Landmark Custom Homes. After four decades building custom and semi-custom homes across South Florida, I created this show to help you navigate the journey — from dream to design, all the way to move-in day. Whether you’re building a cozy retreat or a 10,000-square-foot legacy estate, this podcast is your roadmap to building smart. In each episode, we break down the process — from assembling your dream team to choosing the right materials, managing timelines, and protecting your investment. No fluff, no jargon — just real-world experience and straight talk to help you stay in control.
Over the years, I’ve seen it all — the highs, the hiccups, and the unexpected in custom homebuilding. This show is where I share those lessons to help you build smarter, avoid costly mistakes, and turn your vision into reality with confidence.
Today’s Episode: Contingencies
In this episode, we’ll delve into a critical line item in your budget: the contingency. What is a contingency, and how does it apply to custom home construction?
Webster’s defines a contingency as “something liable to happen as an adjunct to or result of something else.” In construction, it refers to unforeseen conditions. The contingency budget line allocates money to address these surprises.
Real-World Example
On a recent project, the architect designed a 7-foot-wide overhang for a Polynesian-style home using Ludowici concrete tile and Brazilian Teak on the underside — both extremely heavy materials. Unfortunately, the engineer didn’t account for the weight, causing sagging throughout the structure.
To resolve it, steel brackets and additional plywood were added — all paid from the contingency. This avoided delays while any design liability was sorted out.
Other Common Uses of Contingency Funds
- Scope Gaps: Tasks not clearly assigned to any subcontractor. For instance, if waterproofing isn’t assigned to either the painter or tile installer, the contractor must issue a change order — funded by the contingency.
- Design Omissions: If an architect misses a code requirement (e.g., omitting an egress window), it may need to be changed mid-build. Contingency funds can cover it while liability is resolved separately.
- Code Changes & Inspector Demands: An inspector may require an outlet not shown in the plans. Instead of fighting it, you cover it with contingency and keep the job moving.
How Much to Budget?
The recommended amount varies:
- 5%+ for complex designs with custom features or cutting-edge technology.
- 2% for traditional, straightforward homes.
Every custom home is unique, so a well-thought-out contingency ensures your project stays on track despite surprises. It provides peace of mind and flexibility when things don’t go as planned.
You’ll find key terms and a summary of this episode in the downloadable show notes on TIGTCH.com.
Coming Up
Future episodes will explore topics like Payment Applications, Building Mockups, and managing Change Orders effectively.
If this episode helped you, please subscribe and share it with anyone planning a custom build.
I’m Rick Bell — and this is The Insider’s Guide to Custom Homes.
Let’s build your masterpiece — the Landmark way.
Stay tuned — and enjoy the journey.