Scope Creep

What it is

Scope creep is what I call the give-a-mouse-a-cookie problem. You know how the book goes — if you give a mouse a cookie, he’s going to need a glass of milk to go with it. If you give him a glass of milk, he’s going to need a straw. And then he’s going to need a napkin, on and on until you’re giving him your routing number and buying him Amazon gift cards.

That’s exactly what happens on a house flip when you don’t change horses midstream. You put in some new floors, but then you need some quarter round to go with it. And once you put in new quarter round, well, now all that old trim doesn’t look good anymore. So you slap some fresh white paint and caulk on it, but now the walls look old and grimy. So you paint those too. And now you’re doing a humongous renovation when you planned on spending a few thousand dollars.

The biggest problem is most of that extra work has a terrible ROI. You bought that wall. You bought those countertops and cabinets when you acquired the house — they were good enough at the time. That was all figured into your ARV and your comp. Now you’re throwing all of it away and spending more without moving the sales price up fast enough to match.

Why it matters

Things that seem like they’re going to be a simple fix always snowball into these big renovations that you didn’t account for. I’ve been saying that for years. Once you have a plan for a house, do not stray from it. This has been a very important lesson for me.

The people who conscientiously spend more on the rehab than they’re ever going to get on their sales price — I don’t think they know they’re doing it. They’ve watched a little too much HGTV and they know all the styles. Mid-century modern, farmhouse, ultra modern, craftsman, Victorian, Cape Cod. They get excited about it, buy their first flip, and then end up doing all the styles. Maybe in the same room. What that actually does is confuse buyers and make the house feel smaller. Instead of buying a house, they’re buying rooms — because each room is a separate style. It’s not cohesive.

That’s why when we flip houses we run the same floors from the front door to the back door. No transitions between rooms. Same paint colors in every room. Same hardware throughout. The house feels bigger. One style, executed consistently.

How it shows up

The classic setup is walking the kitchen with fresh cabinets installed. The countertops suddenly look cheap against the new cabinets. You upgrade countertops. Now the backsplash looks wrong. Now the lighting looks wrong. That one room just ate $4K of margin and pushed the timeline by a week. The cabinets were fine. They were on scope. The rest was chasing a feeling.

The fix is building a smart scope on the front end and not changing it. You can always make a list of potential upgrades and look at them at the end — but ask whether any of them will change the appraisal, the offer price, or the days on market. Almost none will. The ones that will are real audibles. The rest is emotional spending.

Tools like the jobs menu help because every job has a price tag before you start. When you see the total dollar cost of your creep list, the urge usually dies fast.

Related

hgtv dilemma, baseline, scope of work, change orders, give a mouse a cookie, jobs menu