Homebuilding – Early Cost Estimates

     I was asked this question recently. How do I go about determining the likely cost of building a new house without having to go through the expensive and time-consuming task of completely designing the house and creating the final bidding and construction documents (drawings and specifications)? If the price comes in too high, the design and documentation process will have to be done all over again. That will add more cost to the design services and, by extension, reduce the construction budget. So, how do you get a feel for where things are going on cost at an incomplete stage in the design and documentation?

     Well, I don’t just guess. That can get you into trouble. In the early design stages, I depend on some rough cost-per-square-foot rule of thumb. I discuss how to calculate the square footage in my book, Designing Your Perfect House in some detail. This rule of thumb guideline will work for the initial preliminary design to at least get you in the ballpark. But before the work of finalizing the documents can be done, I talk to a builder who builds houses at the level my clients are expecting and ask him to give me a calculated estimate based on my preliminary plans, site plan, and elevations.

     This is still not a finite figure that can be used for a construction contract. But it is better than the early guess based on the cost per square foot. I ask him to give me a “bracketed” number. The low number is an amount that the cost of the house could not possibly be lower than without doing surgery (reductions or redesign) on the plan. The higher number is the amount we are unlikely to exceed unless we start selecting exotic things. This budget range could be as much as $200,000 on a large house. But I’ve found this to be helpful for my clients. If we are at the top of their budget with the builder’s low-end number, then it’s back to the drawing board. If it’s within the range, then we proceed, always cautiously, with our eyes open. If the budget is well above even the high number, which really never happens, we go have a party.

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Bill Hirsch

Bill Hirsch

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