When pricing your new “custom” home with a builder, make sure you know what you’re getting. Not all builders price the same way. Some methods are just plain scary. Here are a few examples of ways builders price a home.
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.
We get a lot of questions about our advanced estimate. We get questions from customers, from subcontractors and from other builders. We’ve been teaching the Advanced Estimating class at the Home Builders Association of Louisville for several years partly because of our estimating program. This quick video gives you a glimpse into how we use our estimate to drill down to every area of a custom building or remodeling project. We’d love to answer your questions about our estimate. Leave them in the comments below or feel free to use our online contact form. We’d also love to estimate your project, but I’m sure you knew that already.
You can enlarge the screencast tutorial video by clicking the bottom right button to full screen mode. You can exit by clicking the esc button.
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.
Ask the Builder. No strings attached. Perry will answer your questions. Perry Lyons has over 35 years experience building and remodeling custom homes. Perry is a member of the HBAL board of directors and was named 2009 Remodeler of the Year. Perry teaches advanced estimating and specification writing classes for the Home Builders Association of Louisville. Perry also serves on the codes committee.
What do you mean estimate verses “guestimate”?
