Change Orders: Stop Leaving Money on the Table
Construction change orders are a fact of life for general contractors on residential projects for a multitude of reasons, such as client requests for changes in finishes, fixtures, and design, market demand affecting material costs, the availability of trade partners, and unexpected site conditions.
And all these situations can impact the original contract price and, in turn, your bottom line if you're not managing them properly. That means using change orders as part of your construction project management to capture the project changes that invariably crop up during a remodel or a custom build, adding them to the overall project cost.
What is a Change Order and Why Do They Happen
A change order is an amendment to a construction contract that changes the remodeler's or custom home builder's scope of work. Change orders are used in the construction industry to ensure that we aren't diluting our profits by covering extra work that is job costs. That typically involves adding both additional time and cost to the overall project budget.
Changes in original scope will occur for a variety of reasons - no matter how accurately you've estimated the project during pre-construction and how well you've tried to anticipate all the potential issues your team may encounter during the build.
Streamline your change order process with BUILDWISE. Book a demo today.
What are the Most Common Reasons for Change Orders
While there can be many different reasons for change order requests during construction projects, we can break down the most common reasons for issuing them into four categories:
Site Conditions
Engineering or City Inspector Requests
Client Requested Changes
Economic or Workforce Changes
Let's explore them briefly:
Site Conditions
It's not unusual to encounter latent site conditions on a job site right after the demolition phase, which changes the project's scope and the project timeline. That's when you and your team get a chance to "peek behind the curtains" and see what's been hiding underneath all the finished walls and floors. This is where you might find things you weren't expecting, requiring extra work, and where you could need to add additional contract time and additional compensation to the contract price.
Site condition change work isn't limited to remodels but can also occur during the excavation phase of a new build. Issues like latent soil conditions, such as buried fly ash, require remediation before continuing with the build. Something like this will extend the completion date and add additional cost to the original contract.
Engineering or City Inspector Requests
Despite doing your best to reasonably estimate and account for reports, inspections, and approvals needed for the build, an engineer, city inspector, or other involved parties might often have additional project requirements you didn't anticipate. That involves extra time, material, trades, and consultants being brought into the project, which, if not accounted for via change orders, will come off your bottom line.
Client Changes
This is the big one that will likely drive most of the change orders on a project. I've yet to work on a remodel or custom build where the client didn't add to, delete, or modify the original scope of work, or make significant design changes in some form.
Whenever you have to pivot away from the original plan your clients agreed to, you're going to end up spending additional time doing behind-the-scenes work, like coordinating with vendors and trades, pricing out materials, and adjusting the project schedule. That, along with the additional costs for materials and labor to execute project changes, is billable time you could be charging to other revenue-generating projects, and it's the fastest way to bleed money on a project if you aren't capturing those costs via a change order form.
Economic or Workforce Changes
During the pre-construction process, you bid components of the build to your trade partners and assign material costs based on current commodity pricing. But a lot can change between this phase and the point in time when you hire your trade or actually purchase the material.
A trade partner's schedule might have shifted, and suddenly, they are not available for the work, or their project scope has changed from our assumptions during the pre-construction phase.
Material costs can also be volatile. Take lumber, for example. Soft lumber trades as a commodity, and its price changes daily, which means the price you quoted at the start of the project could be significantly different from the price you actually paid for it.
Those additional costs are NOT your responsibility to absorb.
Track material costs accurately and in real-time with BUILDWISE.
The Legal Importance of Change Orders in Construction Contracts
Change orders aren’t just a paperwork formality. They are part of your contract documents and a critical legal tool that protects both you and your client when project details shift, as they inevitably do. Whether it’s a change in materials, layout, finishes, or scope, a well-written change order ensures there’s a clear record of:
What’s changing
Why it’s changing
How much will it cost
How does it impact the schedule
Why Change Orders Matter Legally
Without written change orders that your client has approved, you’re exposing yourself to unnecessary risk. Verbal agreements or casual “go-ahead” approvals, even in text messages, often lead to disputes over scope or expectations and clients refusing to pay for extra work you’ve done. That puts you in a position to take on liability for changes they didn’t formally agree to and could dispute because a verbal agreement isn’t enforceable.
To protect your project’s bottom line and your business, your best bet is to ensure that every change order is submitted the same way: with a written change order that your client has to sign and return to you. This gives you the opportunity to keep a record of every approved change.
Best Practices for Legally Enforceable Change Orders
To make change orders enforceable and reduce the risk of non-payment or legal challenges, you need to build clear change order language into your pre-construction process and your construction contract terms from the start. Here’s what that should include:
1. Require Written Approval for All Changes
Your contract should state that no changes to the scope of work will be made without written approval from both parties. This prevents miscommunication and gives you legal ground to stand on.
2. Define How Pricing and Timeline Adjustments Are Handled
Clarify that any additions or changes will affect both the project cost and schedule, and that those adjustments must be approved before new work proceeds. This helps keep your client’s expectations realistic and prevents them from claiming they were surprised later on.
3. Include a Payment Clause for Change Orders
Specify how and when change orders are billed (e.g., due upon approval, added to final invoice, etc.). If clients understand that changes are billable, they’re less likely to argue about them later.
Change orders protect you and your client. They keep communication transparent, reduce surprises, and—most importantly—create a legal paper trail that supports your right to get paid for the work you’ve done.
Create, send, and get client approvals on change orders easily with Buildwise’s easy-to-use change order builder. Send them to your clients for digital approval before the work is done.
Charge for Your Time to Explore Change Orders Too
Whether you operate as a fixed-cost or cost-plus builder, the time you spend creating change orders is outside the original cost you've quoted to your client. So, if you're spending additional time working on change orders, it's critical you get paid for it.
There's a lot of work that happens in order to properly capture the additional time and costs for even minor changes, and this is billable time. It's also important to think about how many pricing exercises you might do for the owner and the designer on the project that they don't opt to proceed with.
Here are ten reasons why you need to charge for your time:
Identifying the scope of work through conversations with clients, trade partners, and professional partners.
Communicating the change in scope from the original plan to project managers, trade partners, and vendors.
Chasing down answers and pricing from trade partners and vendors.
Verifying that the pricing and scope match and is clear with your trade contractors and vendors.
Preparing the change order to present to the client.
Managing back-and-forth conversations, answering questions, and revising the change order.
Creating the final change order for owner approval and sign-off.
Communicating approvals to trade partners and vendors for the project changes.
Updating the project schedule and reaching out to other trades in the queue to advise of project delays.
Updating project financials and communicating with your accounts person to ensure all the information is captured correctly.
Best Practices for Using Change Orders
If you've read this far, you're likely on board with the idea of using change orders in your residential construction business to ensure you're not bleeding profit, but you might be wondering how you can incorporate them into your overall process.
Here are three best practice steps to get you started using change orders in your remodeling business:
1. Talk About Your Change Order Process Upfront
Clients don't like surprises any more than you do, so talking about your change order process early sets the correct alignment between you and your clients, so they aren't shocked when you present them with one.
Build it into your upfront sales and pre-construction processes so that discussing it becomes second nature, like discussing tile selections or paint colors.
In doing this, also advise project owners to budget for at least 10% above the contract price for changes in the project scope. I don't recommend carrying that contingency in your contract price, but ensuring they have access to these additional funds is critical to setting the right alignments from the beginning.
If you want to hear more about Contingencies vs. Change Orders, click here.
2. Do Them Early And Often
Clients don't like the sticker shock of being invoiced for a lot of additional work at the end of a project when they've already committed so much financially.
Instead of leaving the "extras" for the end, issue change orders as each proposed change comes up. You'll avoid uncomfortable client conversations about project costs later on and ensure you're not left on the hook for those additional costs.
3. Get A Signature
Clients have short memories, especially when it comes to project changes that will increase the cost of their project. Getting their signature on a written change order document or electronically through Buildwise acknowledges that they are aware of the additional costs and time added to the project, protecting you in the long run.
How to Calculate and Price Change Orders Correctly
Pricing a change order isn’t just about materials and labor—it’s about capturing the full cost of the work. That means factoring in current rates and schedule impacts and protecting your overhead and profit.
Use these four steps as a guide for building your change orders correctly:
1. Don't Miss Project Costs
It’s easy to overlook costs that aren’t part of the change itself but are tied to it, like toilet rentals, temporary fencing, and other site services. If the change extends the schedule (which it usually does), you’ll be billed for the extra cost. Those added costs belong to the client, not you. If you don’t include them in your change order, you’re leaving money on the table and cutting into your profit.
The best rule of thumb is to do this:
Use your project estimate as a guide when filling out change orders to ensure you capture ALL the direct costs associated with change requests.
This is one of the most common profit bleeds I see in construction businesses that are issuing change orders, so it's critical that you think of every "connected cost" to the change on the project and include them in the change order form.
2. Charge For Your Time As Well
As mentioned above, a lot of work goes on before a change order is even written, like sourcing product options, speaking with vendors and trades, pricing out the work, and adjusting the schedule to accommodate those changes.
Change orders need to reflect the additional time you've spent preparing them and the time you could spend on another billable project.
3. Charge The Right Markup
Being a compassionate "good human" is natural when working with clients who are spending their life savings on their construction project. But this line of thinking can stop us from properly compensating ourselves and our businesses by not charging a markup on extra work or requested changes.
In fact, I recommend charging a higher markup when proposed changes arise during the project because it reduces your overall throughput for the year. We want clients to be happy with the finished product, but it's also important to respect that your business has overhead and profit to make.
4. Institute A Minimum Fee
Clients and Designers love to ask the question, "How much do you think it will cost to …?" I have one client whose designer asked this question 27 times on a project and only accepted three change orders. As a fixed-cost remodeler, he spent hours doing the legwork for the other 24 questions without compensation.
Include a clause in your construction contract that states that you charge a minimum fee to investigate any proposed change to the project. It doesn't matter how much you charge, just that you do. So the next time the designer and owner ask the question, "How much do you think it will cost to..." you can reply, " The answer starts at X dollars."
And most importantly, follow through and charge it!
Change Order Templates: What Every Contractor Needs
Change orders aren’t the most exciting part of the job. But if you’ve ever eaten the cost of a client change because you didn’t have it in writing, you already know how important they are.
A change order template saves you time, keeps your paperwork clean, and protects your business when things shift mid-project. And let’s face it—they always do.
So, what should a good change order include?
1. Client and Contractor Details
Start with the basics: names, addresses, and contact info. Make sure both parties are clearly identified so there’s no confusion about who agreed to what.
2. Description of the Change
Spell out what’s changing in plain language. Is the client swapping tile? Adding pot lights? Moving a wall? Be specific. Vague descriptions lead to arguments later.
3. Cost Breakdown
If your Cost Plus, don’t just drop a single number. Break it down so the client sees what’s driving the cost—labor, materials, trades, and markup. Transparency builds trust and leaves less room for pushback.
4. Schedule Impact
Even small changes can throw off your timeline. Be clear if the change will add extra days or weeks to the job. This helps set expectations and keeps the pressure off you when delays happen because of scope creep.
5. Signatures
This is the part that makes it official. No change order is valid without signatures from both you and the client. Digital or in-person—doesn’t matter, as long as it’s documented.
A clean, professional change order form shows clients you run a tight ship—and it saves you from headaches down the road. Once you’ve got a solid template, you can use it on every job, tweak it as needed, and keep your projects (and payments) on track.
Your Change Order System Doesn't Need to be Perfect at First
The most important thing to remember about implementing change orders is that "done is better than perfect." If you're just starting to use change orders in your remodeling business, don't get hung up on thinking you need to have the perfect system in place first.
It's critical that you actually do them, and the best system is the one you'll use. It can be as simple as a PDF that you send to a client for electronic signature, or a Microsoft Word or Excel (or Google Doc/Sheet) change order form that you print off for them to sign in person.
The trick is to avoid not doing them because you're stuck figuring out "how" to do them. You can't move forward until you've implemented the perfect system, and you can tweak your process along the way.
Even if it means a short project delay while you gain the required approval, you'll be far better off than doing the extra work and then having a hard time collecting from the owner later on.
Master the change order process with BUILDWISE’s easy-to-use change order builder. Easily create and send change orders to clients digitally for approval.
How Buildwise Makes Change Orders Fast & Easy
If you’re like most contractors, you probably don’t wake up excited to fill out paperwork. Change orders? They get pushed to the bottom of the to-do list—especially when you're busy managing trades, clients, and schedules.
But here’s the problem:
Delaying change orders is one of the fastest ways to lose money.
When changes aren’t documented right away, things slip through the cracks. You forget to charge for extra work, and clients “forget” they agreed to it. And before you know it, you’re covering costs for work you should’ve been paid for.
Buildwise changes all that by making the whole process faster, easier, and way more professional.
Here’s How Buildwise Helps You Stay On Top of Change Orders
Easy to Use Change Order Builder
With Buildwise, creating change orders is as easy as building your estimate — no complicated steps, no messy workarounds.
Instant Digital Approvals
There is no chasing signatures or waiting days for an answer. Clients get a link, review the change, and approve it online—on their phone, tablet, or laptop.
Everything in One Place
Once a change order is approved, the budget is automatically updated in Buildwise. There are no extra steps or paperwork in different platforms—just one clean system.
If change orders are still a messy, manual process in your business, it’s time to level up. Buildwise does the admin for you, so you can stay focused on the build, not the back office.
How to Handle Common Client Objections to Change Orders
Even with a solid contract and a clear scope, clients might still push back on change orders. It’s one of the most common pain points in residential construction—and a big reason contractors search for things like “how to explain change orders to clients.”
If you’ve ever found yourself in a conversation that starts with, “Wait, I didn’t know that cost extra,” you’re not alone.
Here are the most common objections—and how to handle them without burning the relationship.
Objection #1: “I thought this was included in the original price.”
What to say:
“Totally understand—that’s why we always refer back to the signed scope of work. This specific item wasn’t included, so this change order covers the added cost to make it happen.”
👉 Tip: Keep a copy of the contract and the approved estimate handy and highlight the relevant section. Scope creep usually happens when expectations and documentation don’t match, so show them what was agreed to.
Objection #2: “Why do I have to pay extra?”
What to say:
“This change goes beyond what was included in the original agreement, and it requires additional labor and materials. That’s why there’s an extra cost.”
👉 Tip: The key is to connect the cost to the change itself. When clients understand that extras come from added work, they’re more likely to accept the adjustment.
Objection #3: “I found the material cheaper online.”
What to say:
“I hear you. But what we’re charging for isn’t just the material—it’s the time and coordination it takes to integrate the change into the project. That includes sourcing, ordering, scheduling, and making sure it’s covered under our warranty.”
👉 Tip: Emphasize the full scope of what you’re delivering. Clients often see just the price tag, not the behind-the-scenes work that ensures everything runs smoothly and is backed by your team.
The Bottom Line
Despite all of the upfront work you might have done in the estimating phase of a project, things will happen during the construction process that need to be accounted for in the overall budget to avoid profit bleeds and reduced cash flow.
These are costs you'll have to pay, which means you need to issue change orders to pass those costs on to your client and ensure you aren't funding them from your profit.
Having a conversation about executing change orders may feel uncomfortable, but not nearly as uncomfortable as not being able to run a profitable remodeling business that supports your family and rewards the team that's worked hard for you all year with a well-deserved bonus.
I created BUILDWISE to help remodelers get paid for all their work by streamlining their change order process with easily customizable templates that they can create, send, and track all in one portal.
See how BUILDWISE can help your residential construction business. Request a demo today.
Life is too short to work for free!
