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How To Develop Your
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COST VS WORTH Your banker may be able to give you some idea of what the home will be worth . This has very little relationship to its cost! To illustrate: You and builder Brown are building identical homes. The home will require 14 rolls of wallpaper in the dining room. Builder Brown pays the retail price of $10 per roll. Total cost is 10 x 14 = $140. After a little shopping, you find the same paper on sale at a discount house for $3 a roll. Total cost is 3 x 14 = $42. Your cost on this one item is 70% less than builder Brown's! The lesson here is clear. If you are a careful shopper and are willing to haggle a little and look for bargains, you can significantly lower the cost of your home. The worth of the home will not be affected. |
GROUPING COSTS
One way to get a mental picture on all of the construction
costs involved in building your home is to group them as follows:
| LOT
COSTS Purchase Price Closing Costs |
| FINANCING COSTS Lot Construction Loan Permanent Financing |
"HARD" COSTS Labor Materials Utilities |
| "SOFT" COSTS Design Permits Construction Management Inspections |
If the home is being built for sale, you'll want to include
| SALES COSTS Advertising Closing Costs Sales commissions |
HARD COSTS
The most time consuming task in developing your home construction cost estimate is to tie down the the hard costs. These home building costs involve some figuring in order to determine the quantities of materials needed. Fortunately, almost all of this work can be done for you by other people - suppliers or subcontractors.
If you buy your plans from a plan service, they will often provide a detailed List of Materials along with the plans. This could save you some real time and effort. In any event, we have included all the information you're likely to need to get a detailed cost estimate together on your own.
Don't worry if you don't know a joist from a rafter! We'll show you where to find people who do - people who will be happy to assist you at no cost.
And of course there is a good selection of construction cost estimate software available for those of you who want total control! Construction estimating software is usually the domain of professional home builders. But we know how some of you are! ;-)
GETTING STARTED ON YOUR HOME CONSTRUCTION COST ESTIMATE
So how do we go about putting all this together? In order to know what your home should cost, you simply need to price all of the different elements and add them together. This is not as complicated as it may sound. There are a lot of people who will be happy to help you - like suppliers and subcontractors.
You already know your lot costs. You talked about your financing
costs when you met with your lender to get prequalified for the
project.
Assuming you're not building a for-sale
home, that leaves the "hard" and "soft" costs
to tie down. And since some of the subs furnish their own materials,
we think is a good idea to start the process with your labor costs.
• The first is to find your subcontractors. Here's some help.
• Once you've found them. Here's some guidelines on getting their quotes.
• Once you have your subcontactors' prices in hand, it's time to get your suppliers' quotes. Click here to get started with suppliers.
• And last (but not least) you'll need a way to record it all in an organized way. Here is how to use our Cost Estimate Forms.
Once you've gotten your quote together, it'll
be time to do some more planning! It's time to plan your Construction
Schedule. Click here to learn how to do just
that!
For additional insight on developing your Cost Estimate,
see Lesson Eleven of our online course
Successful Home Contracting.
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