5 Tips to Estimate the Cost of Building a New House
Many people looking to build a home often wonder exactly how much
it costs and how much new home construction costs per square foot –
but this is not an easy question to answer. There are many factors and
steps to consider when estimating new home construction costs.
So, let’s break down the process piece by piece so you have a
framework for better estimating your new home construction costs.
How to Estimate the Cost to Build a New Home
1. Determine Your Floor Plans
Start by selecting a floor plan for your new home that’s been
completed by or adjusted by a local general contractor or architect, or
search online or through books to find the plan of your dreams. Many
builders will have a breadth of floor plans to choose from. These floor
plans will determine the size, style, quality and features you desire in
your new home and will be the baseline for your project from here on
out.
Next, you should find the right local builder. The builder you choose
should be one who routinely constructs new homes that are
comparable in size, style, quality and features to the new home you’re
hoping to build. Finding a suitable builder for your project is important
in maintaining a proper execution, timeline and budget for your build.
They should be able to tell you their cost per square foot to build a
house that is similar to yours, and at the same time they should be
able to give you an approximate idea of what your home might cost to
build. It is always a good idea on your end to ask what exactly the new
home construction cost includes.
2. Get an Idea of What Your New Home Construction Costs Per Square Foot
Arriving at an exact figure for new home costs per square foot might
not be realistic, but getting a ballpark idea should be possible. To do
this, take the total cost of your project, as outlined by your builder, and
divide this number by the total number of square feet in your project.
For example, if your new home is to be 2,000 square feet and your
builder estimated that it would cost $350,000 to build, then your cost
per square foot is 300,000 divided by 2,000, or $175.
You can also compare your desired build to other newly constructed
homes (again, those similar in size, style, quality and features) in your
area, then take the price of the home – minus the land it is on – and
divide this by the amount of square footage in the home you wish to
build. By doing this exercise with a few homes, you can also
determine whether the estimate for your new home that your builder
has provided is competitive and reasonable.
3. Know What Style, Quality and Features Refer to in Relation to Estimating Your New Construction Costs
The final price of your new home won’t just be determined by the size.
Style, quality and features must not be overlooked when determining
new home constructions costs.
Style
Style refers to the architecture of the new home. Homes that are more
square or rectangular cost less to build. The same is true for a twostory
versus a one-story home with the same square footage because
a one-story home will require a larger roof and foundation. As well,
homes that boast a deeper design (greater than 32 feet) might also
require a roof with specially designed trusses. Essentially, the more
angles and corners you add, the more labor, materials and price you
will incur.
Quality
Quality refers to the actual materials used for building. This can
include a myriad of choices. For example: flooring, paint, insulation,
shingles, cabinetry and built-ins, appliances, doors and windows. The
higher quality you choose for each of these items, the more costs your
new home will incur. It always helps to check out your options with
your builder before making a decision, preferably in a design center.
Features
Features refer to design considerations, such as vaulted ceilings, roof
pitches, curved staircases, etc. Each of these additions to a build can
increase the price tag on your new home and elevate the estimated
square footage costs.
4. Leave Room in Your Budget to Accommodate
Any Additional Construction Costs
When estimating the cost to build a new house, don’t forget to factor in
some common expenses that are often overlooked in the excitement
of a new home build. These include:
Site Preparation
If you have to clear a lot of trees, haul in dirt, grade or remove large
rocks, expenses will increase.
Permit Fees
Local building codes, zoning laws and restrictions may mean permits
need to be obtained for work related to sewers, electricity, occupancy,
etc. Depending on the area, these permits can be pricey.
Time of Year
When your build is scheduled can contribute to the cost of
construction. When labor is in demand during times of low
unemployment and economic growth, costs are typically higher as
expenses to employ the many subcontractors and many other trades
involved in building your home will be higher (due to simple supply
and demand).
5. Be Proactive to Avoid Cost Overruns
Above all, it is crucial to prepare for cost overruns when determining a
new home construction cost. If you can actively remember that the
finished cost of a home is often more than the original bid price, you
can work to avoid this outcome. For some, it can be too easy to get
carried away and fall in love with higher-end flooring materials, vaulted
ceilings, elaborate landscaping and so on. But every time this
happens, the price of your new home build increases. When
something is chosen that is outside the contract this is called a
“change order” and if you are working with an experienced builder
they should be able to quantify these upcharges for you so you can
make an informed decision.
Start by working with your new home builder to create as detailed a
construction contract as possible. The more detail this contact reveals,
the more accurate your estimated new home cost will be, and the
more likely you are to stay within your budget.
Some key components to identify in your contract should include:
Realistic allowances
How you define heated or unheated spaces
How a garage or basement is might be included/handled in the
contract
If land is included in the square footage costs
Liability insurance costs
Utility connection costs
Septic system costs
Driveway costs
Sidewalk costs
Landscaping costs
Subcontractor costs
Green material costs
Inflation for a delayed build
In the end, it is a good idea to assume an additional 10% to cover
unexpected costs, but the right new home builder should be able to
help you stick to your budget. Also, you can always work backwards to
keep within your budget. This means knowing what you can spend
then designing a house to be built in an area you can afford with the
style, quality and features that will fit your finances.