What will it cost to build my new home?

by Dwight K. Martin

I often get inquiries from folks who are considering whether or not they should build a custom home. For most, the budget is most important. If the project cost is too high, it will not move forward. Luxury or economy, most everyone has a total budget figure in mind. Others have found the land or lot of their dreams, and wonder if they will have enough money left over for a mansion or a shack. At this early stage, with design ideas still to be determined, the question arises, “What will it cost to build my new home”?

Fortunately, it is possible to provide a reasonable answer to the question. In over 30 years of building custom homes, I have developed techniques that help me estimate costs with a high degree of accuracy. I use a simple spreadsheet for preliminary quotes, and a very detailed list for contract budgets. Half art, half science, estimating is a skill honed over many years and kept sharp by practice. In this article I will discuss three types of estimates, and examine how they work.

Conceptual Budgeting

The Conceptual Budget is the first budget number given. It is based on the idea of a project, a basic design concept and a proposed location. It is the least accurate, and one of the most important budgets to be considered. How sad would it be to start with too low a budget expectation, buy property, spend design time and money, and then find out you cannot afford to build your dream? I have helped many people redefine a project at this point and bring the project costs back in line with the budget.

How do we get a good budget to start with? I ask a lot of questions. If the client has pictures, it is a good time to see a few. I ask what their budget target is? Does that number include design fees and building permits? What is the construction budget amount? I review my recent projects, and consider the construction cost divided by living space in the home. This number is called the “cost per square foot.”  Considering the level of difficulty of the proposed project, I judge the range of costs in three categories: Site-related, Structural considerations, and Finishes. One might guess that a boxy house, on a level lot, with plastic laminate countertops will be less costly than a timber frame lodge on a sloping waterfront lot with stone counters on antiqued cabinets. But every custom home is a blend of many variables, so this is where art and experience meet science and quantification.

Once I get to know the client, discuss their hopes and dreams, and review the site information, I am ready to make an educated guess as to the appropriate project budget. I try to aim just a little high, and give a range. I think it is better to have a little money left over for furniture than to be stretched to the max.  I have a simple spreadsheet which I use to show the calculations, and what is included. The client and I both keep a copy. Now we have a starting point.

Preliminary Budgets

A Preliminary Budget can be developed once the preliminary design is approved by the Owner. At this point the shape and layout of the house is determined, and options for the interior and exterior finishes are discussed and selected. We may not know exactly which stone is being used on the exterior, but we know there is stone. Now we can make a more detailed cost breakdown and go beyond a simple “cost per square foot” budget. We can use historical cost data on doors and windows to estimate what the cost will be without a firm quote from the vendor, or even an exact size of each window. We can calculate hardwood floor area and compare the cost of a den with carpeting to one with hardwood floors. Although the structural plans are not complete at this time, we can better judge what the degree of difficulty is and place a number on framing and foundation costs. Preliminary budgets are more accurate than Conceptual budgets because there is more information to work with. They are a tool used to make sure the design and finishes are in step with the budget. At this point, it is reasonable to adjust either the design or the budget expectations. Many people skip this budgeting step, but it can be very worthwhile.

Contract Estimate

Once the plans and selections are completed an accurate cost of construction can be made. The “sticks and bricks” are counted, and subcontractor bids are received. We have a detailed list of owner selections which is included in the budget. We update our lumber list to the latest yard prices. I like to have complete material order sheets in hand before I sign a contract for custom construction. This way I am assured a reasonable profit, and the owner has a firm estimate of costs which he can “take to the bank” before the project begins.

I have always believed that the key to a successful custom build is having the numbers right from the beginning. My motto is “No Surprises!” No matter how skilled a builder is,  or how flawless the product will be, if the costs are more than the contract budget either the client will be unhappy (time and materials contract) or the builder will not last (fixed price contract). I will discuss the benefits and risks of the different types of contracts in a future article.

Happy Building and may your best hopes and dreams be fulfilled!