Key takeaways
- Structural problems, outdated electrical and plumbing systems and code violations are the most common sources of hidden renovation costs, and none of them are visible until work begins. Talking to your local building department and arranging inspections before work starts can help you identify these issues early.
- Set aside a contingency fund of 10% to 20% of the project's overall budget before any work begins. It keeps cost overruns from derailing the project or your budget.
- Hiring a reputable contractor is the single most effective way to control unexpected costs. A good general contractor or design-build firm typically absorbs risk from material price increases, schedule delays and permit fees within their original quote.
One of the biggest advantages of owning a home is the ability to renovate it the way you want. Remodeling can also be a smart financial move.
The return on investment for some renovation projects can reach 100% or more, according to the Remodeling Impact Report from the National Association of Realtors.
But every renovation carries the risk of surprises, and surprises usually come with a price tag.
Here are seven common hidden costs associated with home renovations and steps you can take to manage them. Estimated pricing is sourced from home services marketplace Angi.
Hidden structural issues
Structural problems are among the most common unexpected costs in a renovation.
"You can open up the floors and find unexpected termite or water damage. Or you expect to find a support beam, but there's nothing there," said Shannon Kirsch, a sales manager at Lane Homes & Remodeling in Richmond, Virginia who has more than 15 years of industry experience.
Common examples:
- Water damage: Hidden leaks can cause mold, mildew and warped wood. Repairs typically cost $1,350 to $6,300.
- Pest damage: Termite damage can compromise a home's structural integrity. Repair costs range from $1,000 to $10,000.
- Foundation instability: Foundation repair typically costs $2,225 to $8,135. Major repairs across the full structure can exceed $25,000.
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Outdated electrical and plumbing systems
Electrical: Homes built before the 1960s often have outdated systems such as 100-amp panels or knob-and-tube wiring. Upgrading an electrical panel ranges from $518 to $2,191 with an average price of $1,345. It can reach $4,500 when including breaker box replacement, moving an electrical panel or expanding the amperage.
Plumbing: Outdated plumbing can lead to leaks, and in some cases the entire system may need to be replaced. Faucet and fixture replacement costs $150 to $600. A main line water leak repair costs $600 to $4,500. Water heater repair costs $150 to $700 while installation of a new unit is $800 to $2,000.
HVAC and insulation upgrades
HVAC: The average lifespan of a heating, ventilation and air-conditioning system is about 15 to 20 years. If your renovation adds rooms or changes the interior layout, the existing system may not be adequate. A new heating system costs $3,800 to $7,500 while a new air conditioning system is $2,600 to $6,200.
Insulation: Homes built before 2005 often have insulation that does not meet current energy efficiency standards. Replacing it adds to the project cost but can reduce energy bills over time. Insulation costs range from 30 cents to $6.75 per square foot depending on the material.
Permitting
Permits: Most remodeling projects require a permit from local officials to confirm the work meets building codes. General contractors and design-build firms typically include permit fees in their quotes. Without a permit, you risk fines for noncompliance. Permit fees vary by location and project type, with a typical range of $525 to $3,114.
Code violations: Older homes often have elements that do not meet current standards. If your renovation touches those areas, an inspector will require them to be brought up to code.
"Pulling a permit can often lead to unexpected costs," Ward said. "If we are working on someone's basement, and the fire alarm system is outdated, the inspector is going to want us to fix all of the fire alarms in the home."
Common code-related costs:
- Asbestos removal: $1,215 to $3,278
- Egress window installation: $2,723 to $5,898
- Knob-and-tube wiring removal: $12,000 to $36,600
Unforeseen material costs
Price increases: Material costs can shift during a project. A contractor may absorb that risk by honoring the original quote, but do-it-yourselfers should budget about 10% above estimated material costs to account for price changes.
Supply chain delays: Shipping disruptions, weather and other factors can delay materials, leading to additional labor costs, rescheduling or substitutions.
"I am working on a kitchen remodel that went a few weeks over schedule because of issues with the granite countertops," Kirsch said. "Typically, a design-build company will cover any extra costs associated with supply chain issues."
Unexpected labor costs
Contractor estimates generally account for standard labor and some schedule overruns. However, costs can rise when a specialist is needed to address an unforeseen issue such as termite damage or a pipe leak that was not visible before work began.
Waste removal and disposal
Renovation debris adds up. A standard truckload of waste removal typically costs around $300 to $800. Costs increase when hazardous materials like lead or asbestos are involved. Asbestos disposal rates vary by state but typically range from $10 to $150 per cubic yard.
How to avoid hidden costs
- Hire a reputable contractor: A good contractor often absorbs some risk. Their quote may hold even if material costs rise, the project is delayed or additional permits are needed. "The only time we adjust our initial quote is if the client wants a change or we find something outside the scope of the project, like termite damage," Kirsch said.
- Set aside a contingency fund: Industry guidelines recommend reserving 10% to 20% of the project's overall cost to cover surprises. Some contractors build this into their quotes.
- Do your homework upfront: Check local building codes, arrange inspections and finalize a detailed plan before work begins. "Drawing plans and doing a site walk-through with your subcontractors helps you build an accurate estimate," Kirsch said. "It's a sizable investment of time and resources but is essential if you want to cut down on unexpected costs."
- Watch for scope creep: It is common for homeowners to keep expanding a renovation once work is underway. If you are remodeling a bathroom, repiping the entire house to improve water pressure may be tempting, but unplanned additions are one of the fastest ways to blow a budget.
This updated article was originally reported by Catherine Lashley.