Residential Construction Estimating 101

Editor’s note: If you’re planning on building a custom home in the near future, this article will give you an overview of cost considerations and likely some new “construction jargon” you may not be familiar with.

HomeWrights Custom Homes encourages you to study this page with an open mind for learning. Although you may not understand every term in this article, you will begin to become familiar with the important language of construction estimating. Keep an open mind. The more you learn, the more you can save as you prepare to build the custom home of your dreams!

New Construction Estimates in the Denver Area

How much is this all going to cost? This question comes up with any construction project no matter how large or small. The answer should always be: “It depends.” There are many factors that are taken into consideration with any good construction estimate. From Colorado Springs to Boulder, from Loveland to Englewood or anywhere in the Denver area, understanding construction-cost language is going to make your new home construction less stressful and more affordable.

While every general contractor will have a different way of calculating the cost of a project, at HomeWrights Custom Homes we have developed a method that works well for us and the clients we’ve served for the last 16 years. Let’s break it down into the basics, then touch on a few of the details.

Our sample project is a scrape and replace, 3000 square foot two-story custom home, with an unfinished basement and two-car garage in the Denver, Colorado metro area. Let’s take a look at how we can establish realistic estimates in this scenario. We have two main expense categories: soft costs, and hard costs.

Soft Costs in New Home Construction Estimates

Soft costs include intangible items like permits, design and engineering for plans, tap fees, insurance, and builder fees. Hard costs are sticks and bricks and labor, i.e. the physical items that go into the house.

Soft costs can generally be calculated by researching fee structures at the building department. There may be plan review fees, permit fees, affordable housing fees, and taxes including use tax. Use tax is basically prepaying the city tax for the materials that go into the project. Check with your suppliers and they may be able to remove city taxes from your invoice if you’ve already paid use tax and can provide a copy of the permit.

Your water purveyor can estimate tap fees based on tap size and usage, but our sample project includes a tap. Architecture, design and engineering fees can vary wildly so it’s best to select an architect or draftsman and request a quote or range.

Builders can structure their fees in many ways, but all builders will find a way to include enough money to cover day-to-day operations, supervision at the construction job site, insurance, and profit. At HomeWrights Custom Homes, we prefer a cost-plus approach to our fees for turn-key projects.

Hard Costs in New Home Construction Estimates

The hard costs for any building project are a little more challenging for a builder to estimate simply because there are so many items to consider. We have about 200 line items that we consider, broken down into eight main categories including:

• Site preparation
• Utilities
• Foundation and concrete
• Framing and structure
• Mechanical systems
• Interior finishes
• Flooring
• Tile
• Miscellaneous items

Your custom home builder needs to know enough about each component in order to estimate the cost accurately, or s/he’ll need to get a hard bid from a subcontractor, which can take time.

Simple square footages can drive some numbers with reasonable accuracy. For example, if we know that our best flooring contractor can supply, install and finish a 4” wide, white oak floor with three coats of finish for $8/sf. Some simple math will put us in good shape on that line item.

Concrete flatwork can be similar, but with a twist. A concrete flatwork contractor in the Denver area might start at $5/sf for a 3500psi, 4” thick slab with 6” x 6” WWM (welded wire mesh) reinforcement, with a simple broom finish. If we have a 1000sf driveway this is easy to calculate.

However, if we also want to pour a front and back porch at 500sf each, and there are wrap around steps on the back porch, and a thickened finished edge on all sides, then we will pay more for these slabs because of the extra concrete, extra reinforcement and the extra labor to pull the forms at the precise moment to finish the vertical face of the slabs and steps.

Each concrete contractor has their own way of calculating these costs. Your new home builder should know that these details will increase the cost of simple concrete flatwork.

Estimating Lumber Costs in New Home Construction

Another big-ticket item that is tough to estimate is the lumber. An accurate lumber bid starts with a good take off, which is basically a list of the lumber required to build the house. The take off is sometimes created by a third party, then priced out by the lumber salesman.

To create an accurate lumber take off is part science and part art, with a healthy dose of experience, hopefully. From a good set of plans, a skilled lumber take off guy, will estimate the number of floor joists and their length, floor sheathing, appropriate hangers and hardware, number of studs, wall sheathing size and quantity. There may also be house wrap, window flashing, specialty fasteners, special order lumber (e.g. beams or strong wall panels), also soffit, fascia and lots of other bits.

Some items are directly called out on the plans and can be easily included. For stud count though, there are several ways a take off artist might approach this. If the exterior wall layout is 2 x 6 studs at 16” o.c. with a bottom plate and double top plate, then we can assume we have exactly 75 studs per 100’ of wall. We also need to include the additional studs at window and door openings, corners, and bearing points. We will also want additional bracing material, and some extra material for blocking, backout, interior soffits, etc.

Managing New Home Construction Costs

You’ll hear it frequently from HomeWrights Custom Homes. Plan More = Spend Less. Planning out your construction project takes time but the time you invest is going to reduce headaches and needless spending. For example, it’s easy to add a bunch of extra material to make sure the framer has enough to work with. If the take off guy gets heavy-handed though, then we risk having surplus material onsite that won’t get used and will deteriorate and twist in the weather rendering it non-returnable.

Lumber companies have an obligation to provide takes offs that are adequate for framing a house, so the framer need not request 100 extra 16’ 2 x 4s. However, we also don’t want 20 extra sheets of OSB sitting in the mud, just in case.

In addition to lumber, a good project estimate will also include costs for:

• Asbestos testing and abatement (required for demolition in Colorado)
• Shoring (keeps our neighbors houses safe during our excavation),
• Excavation
• Foundation
• Concrete pads and slabs
• Windows
• Doors
• Siding
• Roof
• Gutters
• Decks
• Stairs
• Floors
• Tile
• Hand rails
• Plumbing fixtures
• Electric and fixtures
• HVAC,
• Fireplaces
• Insulation
• Drywall
• Appliances,
• Cabinets
• Countertops
• Built-ins
• Door hardware
• Mirrors
• Shower glass
• Landscaping
• Retaining walls
• Sprinkler systems
• Fences
• And more

This list might be a little intimidating but use this article as a way to immerse yourself in the language of new home construction. A good builder is going to guide you through this process, but it will help you a lot if you have some familiarity with the language of residential construction.

As a good builder puts the construction estimate together s/he will reference past projects and track material and labor increases and include them in the construction estimate. Some more complicated items may warrant a call to a subcontractor for clarification. Never hesitate to ask for clarification.

In the interest of producing an estimate quickly though, your builder should have enough experience with building and pricing to create a workable-project estimate within a few hours. If a client wants to lock down pricing with hard bids, it could take weeks to get hard bids on all the major components in a new custom home.

What it Really Costs to Build a Custom Home in Denver Area

If you are ready to get an estimate on your own custom home, the folks at HomeWrights Custom Homes have a few different building options available. You can be your own general contractor and invest your time to save a lot of money and build equity fast or you can use the HomeWrights Custom Homes Turnkey Program and let these experienced custom home builders do it all for you.

Whichever way you go, HomeWrights can help you build your very own detailed project estimate, based on current market prices and 80 years of combined experience. Call to set up an appointment to find the best approach for you.