When a builder gets a complete set of building plans, the builder is expected to give the client a cost estimate or quote as it is commonly referred to.

When I started in the building business, the standard way of estimating a house was to take the lot cost and the cost of “lumber” which at that time encompassed windows, doors, roofing products and other related items, average these costs, use a multiplier, and cost the house. That method outgrew itself in the late 1970s.

I was fortunate to have worked for an engineer from a commercial construction background who taught me to estimate “from the ground up.” His theory was that any size project should be estimated the same way, no matter how large or small. He taught me the necessity of a solid sound estimating system. I still use the same basic format today, except the computer has quickened our methods.

Today there are so many products and choices available to the builder and buyer. It is ever the more important for a detailed estimate and a detailed scope of work or specifications. It establishes a budget that will be used throughout the building of your house or project. If a haphazard or incomplete cost estimate establishes the budget, someone will suffer financially.

I personally feel that every builder should use a detailed take-off system to cost the project. When relying on salespersons and subcontractor take offs, they are subject to that person’s interpretations of items and practices used by that person. Without a detailed take off or your own, you have no way of knowing whether that person is correct or not. When it is time to finalize your project, the salesperson may say, “You asked me to do more than I quoted. Get the quote and see what I estimated as compared to what I put in the house.” It is always the other person’s fault. A good take off of your own could have prevented this, as it would have red-flagged the difference in your estimate and theirs.

We all are much happier in the end when we have established a sound estimate. If you, our client is satisfied, we get to build that second or third house. And that keeps us in business.

1) Legal pad and pen:

Something as complicated as a custom home needs more detail than a legal pad with some numbers, unless of course you want to be off budget and in an argument in the middle of the project.

2) Cost Plus:

Another questionable way of pricing homes is what’s called “cost plus”. This means the builder says we’ll buy whatever materials and pay for whatever labor are involved and we’ll add our percentage to the bottom line. Seems transparent. Seems fair. Nice gig for the builder, and sometimes the customer thinks it’s good for them. Here is the problem. No accountability to a budget. That $375,000 home just came in at $450,000. Whoops!

3) Options, Options and Options

Nothing really wrong with pricing this way, but it really shouldn’t be lumped in with custom building. I’d call it semi-custom. You can get a great house this way, but you won’t get a custom home with the little nuances and intricacies that were so important to you in the dream phase. You also will have a tougher time staying on budget not knowing where all the dollars go for each individual decision.

4) Price per Sq Ft

This one can be as bad as the legal pad and pen. Because it seems more quantified and you hear the terms thrown around very loosely. What do we mean? Well let’s say for example you and I are trading homes. We base a fair trade purely on the square footage. I have 3400 sq/ft and you have 3400 sq/ft. Deal? You suddenly are filled with questions right? Does your home have double hung windows, mine does? The windows alone can add $8 to $10 cost per sq/ft. What about granite tops? Is there custom cabinetry or just stock cabinets? How many HVAC units? What area are you located in? Is your exterior siding, hardiplank or brick? Still want to trade? Still want to rely on a price per square foot estimate?

5) Our way!

Get a detailed estimate that breaks down the costs for every line item of the home. You may care less where all the dollars go, but this approach creates total transparency from the builder fee all the way down to the price of a splashblock. It also allows you to easily add and subtract upgrades and options while still knowing where your budget stands.

We provide a detailed cost estimate, and you receive a complete set of specifications, allowing you to see what is going into your house, from the foundation to the final cleaning.

See a sample screen recording of our estimate here.

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An estimate for a construction project is arrived at much like an estimate for your car repair after an accident. You list the parts and labor and give an estimate. With one huge exception: the construction estimate does not have a standardized cost manual like the automotive repair center does. Additionally, there are many more products to define for the end cost. For this reason, you must be sure that your building contractor is giving you a good detailed estimate, and not just a “guestimate”.

A detailed estimate will always have “take off” information that drives the list of final costs. If you get a lump sum cost for your project, ask your builder for an itemized list of costs that produces the final number. Ask for the details that define the itemized list of costs. This assures a detailed estimate, and most likely a pleasing and enjoyable final result.

If someone quotes a per foot price, beware! There are no details tied to that figure, and something as small as a faucet or specified window manufacturer can alter the per foot price by thousands of dollars.

Download our detailed cost estimate here.

What’s the difference you ask? Just several months of arguments over costs and fights about change orders. If your custom builder doesn’t have his costs added up, then somebody will pay for the extras. Will it be you or them?

Reminds me of a verse in scripture. Suppose one of you wants to build a tower. Will he not first sit down and estimate the cost to see if he has enough money to complete it? For if he lays the foundation and is not able to finish it, everyone who sees it will ridicule him, saying, this fellow began to build and was not able to finish. ~ Luke 14:28-30

At P.L. Lyons, Inc. owner Perry Lyons bids every custom home and remodel himself. He takes off the plan and inputs it into his proprietary estimating program. With over 60 pages of detailed costs, formulas and options, the estimate can narrow your buildout down to the last dollar. Customers are walked through the 60 page estimate and are allowed to take the 3-page cost analysis with them. It’s such an impressive system that Perry has been asked to teach the Advanced Estimating course at the Louisville Home Builders Association the last several years.

There are many reasons why using an estimating program is a must. We’ll get into those on future posts. For now just take our word for it.