The biggest over budget things involve things you cannot do anything about but pay to correct. Structural problems that are currently hidden behind walls. The need to upgrade the electrical. The plumbing that's discovered to be full of pin holes. The fact that you can't match an existing feature of the home that needs to be duplicated in the addition without going custom.

Put your money in the invisible. Anything else can be replaced at a later time. But you can't go back and put in nicer windows after the fact without a lot of trouble. And you can't do a new kitchen at all without a large enough electrical service.

In one of our remodels, we had additional costs with change of roof line, securing the addition so it met earthquake codes, and upgrade of AC system and electrical panel to handle the additional sq ft.
1 year later, after completion, we discovered we had a frog pond under the addition because the builder didn't install a french drain (as he said he would). He also poured concrete steps incorrectly and while repairing those we found one of the 4" septic T's had newspaper stuffed in one of the openings....then covered with siding! Just a few of the things that can happen when you try to remodel while living in another part of the state!

How it ties into the existing wall and/or roof line. It needs special attention to flashing details to tie in correctly both cosmetically as well as structurally/soundness = no leaks.

If you have it figured extremely close for costs of materials, any subs used, deliveries, etc., figure in another 20% above what you have come up with. That would be right down to the last fasteners, not off of a ballpark figure, but down to the gnats ars as close as you can get it. Consider variables of any changes you might make or decisions...flooring types as an example and figure in the higher of those for estimating.

What will it cost, best you can figure? How long will you live in this house? What will the house be worth with and without the addition. In other words, do you come out ahead to do this? In many current bust RE markets you can buy existing RE for much less than you can build anything, even a plain jane space. (And you don't have to have your lives disrupted for months.)

Will your existing HVAC and electrical box support the addition? Does the roofline follow existing? Can you match exterior and roofing to the existing house? Is there access to the rear of the house to dig a foundation or pour cement? What will permits cost? Landscaping?

Also, new next to old tends to make the old look...well, old. lol

I don't know about where you live, but here is Massachusetts we have had two tornadoes, some property damage from the earthquake that hit Virginia and severe flooding.

They are just now finalliling all the insurance investigations and beginning the actual recovery so the availability & price of building materials is increasing daily.

On top of that, they are adding fuel adjustment charges on many of the material deliveries to both the job sites and to the wholesale suppliers.

Labor is presently at a premium because most of the good tradesmen are now working on the recovery or have gone out of state to work on flood and storm damage elsewhere.

One problem that comes up quite often on older homes is asbestos or lead that has to be dealt with as Hazardous waste, which runs the cost out of sight.

ditto hollysprings.

If your advisors are good, everything will be foreseen, except something truly unexpected. Then, going "over budget" is only to correct something unforeseen and unexpected.

Almost everything can be foreseen if you know where to look and what questions to ask yourself. Ask experienced people to come over and talk pessimistically when they give your place a quick look.

If you are really on a tight budget, building an addition probably isn't a good idea. Something WILL go wrong. If you don't have some extra cash on hand to cover that expense, you should put off the renovation until you do. A good rule of thumb is anticipating 20% over the quote.

Also remember that you probably don't just want an empty box on the back of the house, so be sure to budget for furniture, drapes, that new TV to fill the larger wall etc.

Agreed with Bill - I've generally found that peoples' budgets aren't quite realistic, even with quotes. 10%-20% is a good figure.

What could make you go over budget? Decorative items like trim.

"What would make you go over budget on an addition?"

An unrealistic budget from the beginning. Get multiple bids on an extremely detailed spec list of what is involved. A lowball bid on a poorly spec'd bid document is a recipe for financial ruin if you don't have a healthy cash cushion. I've known people who lost their house for less.

I agree with Green Designs' answer.

Don't start you bid request formulation with this framework: "I have XXX $, show me a quote.

Instead, say, for my existing home, this age, this municipality, this electrical, this HVAC, this roof age, this roof type, this exterior type, this subdivision zoning board, this age/type of existing window/trim/fit/finish/build quality/flooring/wall type....what would it be expected to cost to do X? Then add 20%

We just got a quote for a similar addition and it came back DOUBLE our budget. For that money we'd be better off buying a different house. Since we don't want to move, we are on to plan B...remodeling the interior space without adding square footage (roof and foundation were the huge money items). I am budgeting 20% for overages. Remember, too, that furnishings are expensive so hold some money back for that.

Your choices will have a large impact, but you can control that (or maybe not, only you know your level of frugalness). The big cost unforeseen factors that could impact budget are termite damage that needs to be repaired while the wall is open, structural corrections and beam work, electrical, changes to bring things up to code, upcharges, and things like "oh, you mean the estimate didn't include gutters, base molding, etc. Also, the snow ball effect. While I am doing this, this also needs to be done (i.e. matching roof, siding, replacing things while the wall is open).

Sorry this post is so long, but...

It is my firm belief, and I have experience on both sides of this (I am a homeowner and a general contractor in the San Francisco Bay Area), that the seeds of budget disasters are invariably sown during the sales, quoting, and contract process.

You need to be obsessive about the details and about exactly where the money is going. If your budget is super-tight, I'd prefer as a contractor to get everything out in the open at the start of the project. You need to be prepared to add several sheets of specifications to the contract. The good news for you is that when it comes to contractor's services, it's a buyer's market right now.

1) Unknown items - termite damage, dry rot, in-wall damage to electrical system. Rot and termite damage are potential budget-busters, but they can be investigated beforehand, by crawling around under the house, poking holes in your interior walls and maybe in the exterior siding and seeing what's there. This can often be investigated for not much money. You can ask a contractor where the problems are likely to be found, and you or a handyman can poke some holes in the walls and see what's there. Most handymen can do a good job of covering up the holes if you find trouble that will drive you over budget. In many neighborhoods, contractors know what to expect: termites and dry rot are very often endemic to an area. If you find problems, get a clear statement of the extent of the problems into the contract, and a firm statement of the contractor's requirement to fix or work around those problems. You may have to decide not to do your project.
2) Unsurprising surprises: "The city says we need to add a new branch circuit for the new space, and ....". Specify in the contract that you are paying for all necessary work, including rough, and finish work, to deliver each of the items in your contract. For example, you are not paying for the installation of 3 new receptacles. You are paying for all electrical work, rough and finish, including any necessary upgrade of existing electrical systems, that is necessary for the installation of 3 new receptacles. Ditto for roof, HVAC, drainage, plumbing, etc. Even if you don't expect there to be changes in interior plumbing fixtures, make sure that the contract covers any plumbing changes required by structural changes. None of these things are really surprising to the contractor or the subs.
3) Changes in plans: changes in layouts require new plans, new permits, and an opportunity for the contractor to charge you for additional costs. Decide what you want and don't change your mind.
4) Unspecified details: Specify every single item you can imagine, specifying if you can exact brands and models of electrical receptacles, outlet covers, lights, types of switches (old-fashioned toggle or Decora-style sliders), exact flooring brand and quality and finish brand and quality, brand, color, quality and gloss level of paint, and whether it should be sprayed, brushed, or rolled, and on what. Specify window types, drawings or photos of window and door trim, for every window and door, and get exact window and door trim samples, and any base or crown moldings. You should investigate every single detail of every single item you can think of, by visiting stores and looking on-line. You or your potential contractor should buy samples of trim ahead of time. Every single detail should be written down and initialed.
5) Ask for a detailed schedule of values and payment schedule for the project, including labor and materials values, relations between those items and the payment schedule, and including the contractor's planned profit. The contractor should anyway be using the SOV to make his quote, and should be comfortable describing built-in contingency and profit percentages. These things aren't big secrets.
6) Commence the whole project, including asking for bids, by letting your candidate contractors know exactly the level of detail and nickel-and-diming that you expect. Contrary to what at least one other poster says, let the contractors know your budget for the project, but giving them the number that is 75% of the budget that you have in mind. Some of them will opt out right away. Do some homework ahead of time, searching for typical remodeling/addition costs in your area. There are books on remodeling costs, that include some total project costs, with adjustments for areas. They're not perfect, but they're a start. If you are firm about budget, and it appears that your project is strongly constrained by budget, most contractors will try to figure out how they can find efficiencies so that they can do your job, and will not be figuring out how to pad the job to spend all your money.
7) Get the documents on-line that most states have for property owners. California has great documents for homeowners, explaining how home improvement contracts must be written, what your rights are, etc.
8) Your contract should state that all changes, including details of the work, effect on payments and schedule, must be signed. California provides a good model.

9) Most contractors will hate all this, and will protest that you are making them feel untrusted, it's unprofessional, it's not how they do business, it's not how anyone has ever done business, how can you be friends, etc. etc. Ignore all that and continue to stick to the details - the contractor really doesn't want to be your friend anyway. Many if not most of the contractors will not be able to provide the quality of quote that you need, but you should be able to get at least one or two good quotes. Those quotes will be for significantly more money than they originally estimated, as there should now be fewer changes later in the project, and more of the risks of the project are now shifted to them. Additionally, under the pressure of providing a firm quote, they should have gotten firm quotes from subcontractors, rather than just making an optimistic guess. Don't ever let a contractor bully you by saying, "Don't you trust me?". The answer is always, "This isn't about trust, because of course I trust you, which is why I am hiring you as my contractor. This question (or item, or spefication) is just the way I do business (and this is a business relationship, isn't it?): by being obsessive about the details. I'm sure you can understand that." Some contractors really like to play games. Be very wary of contractors who throw in freebies - "I like you so much 'll give you a driveway for free." Well, no, it isn't free. It's either irresponsible and careless on the contractor's part, or it's an attempt to distract you from some other item.

10) As you compare quotes, make sure you are comparing apples-to-apples. If items appear in one contract but not the other, ask that they get added into the other. Make your documents part of the contract. Home improvement contracts may have plenty of legalese, but the description of exactly what work will be done and for how much money should be absolutely clear, to professionals and to non-professionals. This isn't to prepare for legal problems; it's to avoid misunderstandings. Be careful about asking a contractor to compete against a specific price from another contractor. If the contractor responds with a lower price, understand that something has changed or been taken out.

11) Go over the contract, and add more details.

11.5) Ask the contractor to specify in the contract, all the items that must be paid directly by you, NOT to the contractor. For example, the law may require that the homeowner pay some special inspection fees relating particularly to safety - for seismic, welding, or other purposes - in order to avoid any conflicts of interest. Those fees may be in the hundreds or thousands of dollars.

11.6) Get information from your city about permit costs, which may be significant.

12) Add 25% to 40% to the number that the contractor gives you, and if you've been obsessive about details, you may be in the ballpark of what the project will cost. There will be some true surprises (the pin-holes in the existing gas plumbing, the rattle-snake nest under the addition, etc.). You will also make some changes in finishes and other choices, either because you really must, or because you can, because you have a cushion.

13) Do some due diligence - reference checking, a little bit of work on the internet - to see if your contractor has the resources to do the job or has visible money or legal problems. Many projects go overbudget when the original contractor fails or disappears, and the project must be finished by someone new, always for more money. Requests for money in advance, including money for materials, are red flags. Contractors should be able to fund their work; in California, except for a small advance, contractors can't bill homeowners until work is done or materials are delivered to the site. Understand that you are taking a very large risk if you hire a contractor who doesn't work entirely legally. If things go bad - for example a worker is injured and the contractor doesn't carry workers compensation insurance - the homeowner will be the one to pay in the in end. Check licenses, insurance, and if you have an older home, EPA lead certification. Licenses and lead certification can be checked on-line. Insurance companies issue notices of coverage every day. Any reticence on the part of a contractor to provide documents should be considered a huge red flag. The risk with lead - apart from the health risk - is that if the contractor doesn't do it right, and a neighbor complains, the costs can escalate into very big numbers, very fast. All these comments about working legally are coming from my perspective, because I work legally. Your contract with someone unlicensed or uninsured may be cheaper at first, but with potentially huge financial penalties if things don't work out. Figure out your personal tolerance for the financial and legal risks.

14) If the contract amount works for you, sign the contract. During the execution of the project, continue to be involved and obsessive in all details, including adherence to payment schedules, including not paying a contractor ahead of work done, for materials not yet delivered, or ahead of the payment schedule in the contract.

15) Be fair: if you find a contractor who can work with you this carefully on costs, pay promptly and without complaint, and when the occasional surprise happens (the rattlesnake nest under the addition), accept the additional cost.

Speaking as someone with experiences on both sides of this, I don't know why any homeowner would be any less than obsessive about costs and details, for a project of any size. Even if you're not strictly limited by money, I believe that being obsessive about costs and details at the beginning of the project helps elimination misunderstandings and helps set expectations. If your contractor is willing and able to be thorough and careful about the details in the sales phase, he or she will likely be the same during the execution of the work, and you have started the project correctly.

Sorry for lecturing. I've seen too many projects that were started on the wrong path at the moment the contract was signed.

Here are my suggestions for things that you can control (versus surprises when you open walls) that can run up the budget:

(1) Be extremely specific when you put your project out to bid. Do you want crown molding throughout? Put it in the specs. Speaker wiring? Window moldings? Ditto. 27 outlets or 52 outlets? How many can lights? You get the picture. You really can't be too specific. Remember, anything that is not in your spec sheet can be considered a change order or "extra."

(2) Check your allowances. Can you find tile for what they have given you in the budget? Lighting/plumbing fixtures? Appliances? This is an easy area for contractors to low-ball to make their bids look competitive.

(3) Don't change your mind once you've started. Every change costs you money and time. You can do this by being meticulous about your plans before you start. Examine every possible square inch and option from every possible direction. Have other people look at them. It's basically free to make changes to the plans before you start, but very costly to make them after you start.

We did a 1100 sq ft second story addition in earthquake-prone Northern California that was only 5% over budget (and half of it was due to structural issues that were unknown before we started tearing open walls). It is possible to keep a tight budget, but it takes a lot of discipline, and a contractor (and subs) you trust.

THANK YOU SO MUCH everyone!!!!!!!!! much appreciated!!! haven't moved forward yet...alot to think about and prep for....

Be aware that it usually costs money to control costs unless you are in the construction business yourself. The most obvious way to do that is to hire a design professional to document the work in detail and anticipate potential problems and cost overruns. Unfortunately, experienced professionals don't work cheap even in bad times.