What is a Change Order?
A change order is a written agreement between the property owner and contractor that modifies the original scope of work, price, or timeline of a construction project. Change orders are the formal mechanism for documenting and approving changes that arise during renovation — and they're the primary cause of budget overruns on rehab projects.
Some change orders are unavoidable. When you open a wall and discover termite damage, water intrusion, or outdated wiring that must be replaced, that's additional work that wasn't in the original scope because it couldn't be seen during the initial assessment. These are legitimate change orders that should be expected on any renovation of older properties.
What triggers change orders
- Unforeseen conditions: Hidden damage, structural issues, code violations discovered during demolition
- Owner-requested changes: You decide to upgrade finishes, add features, or modify the layout after work has started
- Code requirements: Building inspector requires work that wasn't anticipated in the original scope
- Design errors: The original plan was incomplete or contained mistakes
- Material substitutions: Specified materials are unavailable and alternatives cost more
Managing change order costs
The best way to manage change orders is to minimize them through thorough pre-construction planning. A detailed inspection during due diligence, a comprehensive SOW with specific material specifications, and a realistic contingency budget (15-20% of total renovation cost for older properties) reduce surprise costs.
Every change order should be documented in writing before the work is performed. The document should specify: the additional work required, the reason for the change, the additional cost, the impact on the project timeline, and signatures from both the owner and contractor. Verbal change orders are a recipe for disputes at payment time.
Change order pricing
Change order work is typically more expensive per unit than original scope work because it disrupts the contractor's planned sequence, may require reordering materials, and involves additional mobilization. A kitchen cabinet installation included in the original scope might cost $X. The same work as a change order might cost 15-30% more because it wasn't planned into the original workflow. This premium is another reason to get the SOW right before work begins.