How Much??? Creating Realistic Budget Expectations for New Construction…

Generally, one of the first questions we receive from a prospective client is, “I love this design, how much will it cost me?” As much as we would love to say this is an easy answer, it typically takes 50-100 hours of exploratory effort by a builder AFTER a new home’s design work and blueprints have been completed before an accurate price can be attached to the turnkey budget. That timeline is typically broken down over 1-2 months as the builder does site visits with subcontractors, waits for pricing from suppliers and subcontractors and then once everything is received, compiles your turnkey construction proposal. A floor plan sheet is merely a piece of marketing material to start to understand the initial design preferences of a new customer. There are simply too many unique variables to each property and too many cost considerations depending on personal design and finish preferences to accurately provide pricing without architectural blueprints engineered specific to a client’s build site.

So, how can you determine what is a realistic budget? For decades, realtors have used square footage estimates as a starting point for budgeting, but these estimates are inherently faulty. For example, a very basic, 4 sided, 1500 square foot 2 story home will have a much different completion cost when compared to 1500 sq ft ranch house with multiple bump-outs, rooflines and premium finishes. A 1500 sq ft chalet may seem like the perfect design for your build site, but you have to make sure that you don’t fall into the trap of assuming it’s completion cost is similar to other 1500 sq ft homes.  A 1500 sq ft chalet with a cathedral ceiling great room and loft overlook likely has a completion cost similar to an 1800 sq ft cape. How could that be, is the builder just charging a premium, because this a home style with so many desirable features? Reality is a 1500 sq ft chalet is in most cases an 1800 sq ft cape where roughly 300 sq ft of 2nd floor living space potential has been eliminated in favor of the cathedral area.  The home’s footprint is the same as the 1800 sq ft cape in terms of excavation costs, foundation size, roof size and overall cubic volume of the home. Yes, we may have eliminated $1500 worth of 2nd floor subfloor and we’re not finishing that 1st floor ceiling area or 2nd floor finished flooring, but we’re still installing a larger furnace, finishing/trimming the ceiling to the peak and likely installing fixed gable glass in the great room which often costs $5k-$10k depending on size, design and number of windows (all of which need to be tempered glass).

As you can see, even basic design features can have a significant impact on one’s budget. All too often after having a basic budget discussion with a client, we’ll provide them with a square footage range to consider when searching out floor plans and they return a few days later telling me they found 1 or more designs that would fit well with their tastes. It’s never a surprise when they come back with a design that is a 1 story ‘sprawling’ ranch. This is a term we use for a 1 story home that features multiple bump outs and complex rooflines that have tall roof pitches similar to a cape, but favor cathedral ceilings instead of 2nd floor living space. Then we get to the non-living space extras- attached garage (sometimes with living space above), screened in porches, decks, walkout-style basements, custom fireplaces, 9’ or taller walls, etc. Basically, the customer has selected a beautiful, feature rich home- a ‘luxury’ design, but have made the assumption that they can afford this home style, simply because the square footage aligns with the estimator provided.

So far we’ve only discussed design features, but what about construction style? Is this a modular or stick framed home finished with entry level or premium vinyl siding or are they looking for premium wood or composite finishes? Maybe it’s a solid log, timber frame or post & beam home. Each construction style will have different material costs and completion costs; especially if more on-site hand craftsmanship is required. As a company that manufactures solid log, stick framed and panelized homes as well as being the regional supplier for Westchester Modular Homes, we at Dorini Custom & Log Homes can confirm that both material and labor costs will vary greatly depending on construction style and materials used.

Finally, we have to look at finishes. Although we won’t go into great detail here, we would suggest reviewing our blog on ‘What is Standard in New Home Construction’ to gain a better understanding of the differences between standard, custom and luxury as well as how one can’t assume finish styles they see in the resale real estate market for existing homes are also within financial reach for new construction. That’s because it is common practice for homeowners to upgrade their 10, 20, 50 or 100 year old home with luxury finishes when modernizing and upgrading, while having foundations, windows, construction features, utilities and insulation that would not meet current building and energy code requirements.  All new homes constructed must meet the most up to date building and energy codes, which are much more strict than those of homes completed just a few years prior. These codes provide very energy efficient and sturdy construction for all new homes, but all of these ‘upgrades’ come with a price.

So, how does the average new home buyer determine what home design and what finishes will work within their budget? If you intend to get a mortgage to pay for the completion of your new home, the first thing we suggest is to talk with a lender and complete a pre-qualification, so you have a clear understanding of your budget ceiling. It is important to provide your home supplier/builder with this budget limitation. Initially, one may assume they should keep their budget private, but this leads to more difficulty and potential frustration in the long run. Despite what you may believe, this is an area where honesty is the best policy; you shouldn’t withhold budget allowances because you don’t ‘trust’ your builder or assume they will charge you more once they know your budget. 

When designing a new home it is much easier to increase the square footage of a smaller home, make the design more complex or upgrade your finishes if budget allows after determining a turnkey construction cost. In contrast, if a home supplier/builder comes back with a price that is too high for your budget, its often not a matter of ‘sharpening the pencil’ when amending the quote; it’s time to flip the pencil over and start erasing features that the customer has become accustomed to throughout the design process, because they have proven to be unattainable within the project budget. This is a much more difficult scenario, because it can lead to disappointment and frustration when needing to abandon features you assumed would be included.

Early in the design and budgeting process we suggest these assumptions-

  1. Basic estimators are best for a basic home– Initial square footage estimators will be the most accurate when used to determine the cost of completing a simple home design with basic finishes that are standard for the home supplier.
  2. Complexity- The more complex the design, the more expensive it will be to complete
  3. All those pretty bump outs- The more angles to the foundation; the more expensive the home. Bear in mind that each additional bump out requires both more materials and more time to complete, which results in a higher completion cost.
  4. Look at that roof- The more roof lines to the home; the more expensive the home. Also note that the taller the roof the more expensive and cathedral areas cost more than flat ceilings.
  5. Utility Access- If your property requires private utilities like well and septic; your construction cost will be more, especially if the septic needs to be an engineered/built up system. We initially estimate $10-12k for a well and a starting price of around $20k for an engineered septic. If your actual site costs are less- great, that means you have more funds to apply to other portions of the project. If your property has public utilities, the initial land cost was likely more, but the hook ups are typically significantly less. When comparing two similar sites, one with public utilities and one requiring private, we suggest a starting comparable value of well and septic alone around $30k-35k. This means if the site with public utilities is only $15k more expensive, in the long run it is probably the ‘better deal’.
  6. Privacy– Depending on your soil conditions a driveway can cost $5k or more per 100’. Electric service cost can also skyrocket if a home is setback too far from the road requiring a transformer box. Now you know why it’s common to see home built close to the road even if they have significant acreage.
  7. Crawlspaces vs full Foundations– In places like our home state of NY, foundations need to be 9’ tall per building code to allow for a minimum of 8’ from floor to lowest hanging utility. Foundation walls also need to be insulated with an R-21, which adds to the base construction cost. Even so, a crawl space isn’t a major savings since you still need to pour a 4’ subterranean frost wall and builders typically still include a floor system. This means the only savings from a full basement is the extra yards of concrete for the taller foundation wall. We typically suggest a full foundation for the added utility, storage or future finish capability, unless a high water table or difficult excavation conditions exist.
  8. Assume a square footage estimator is based on living space only– all non-living space features like garages, decks, porches, cathedral areas or walkout basements should be considered ala carte extras. They aren’t a part of the square footage, but still have a significant cost to complete. Currently, we suggest adding at least $25k for an attached, 2 car framed garage with vinyl siding, at least $5k for upgrading to a walkout basement and $8k-20k or more for that big front porch or rear screened-in porch. Suddenly it’s easy to see how a build can be $50k more than anticipated based on the square footage estimator.
  9.  Smaller homes cost more per square foot to complete– Homes under 1500 sq ft will typically cost more per square foot, because a home’s construction cost doesn’t exponentially grow as the size of the home increases. A 3 bedroom, 1000 sq ft home will have similar site costs to that of a 3 bedroom, 3000 sq ft home with the same driveway, well and septic cost while the baseline cost for excavation and foundation are similar (aka making the foundation three times the size doesn’t necessarily mean it will be 3 times the cost).
  10.  Vinyl is final– during initial meetings clients will frequently tell me they don’t want vinyl siding, because they don’t want their house to look cheap. Much like automobiles, there is a significant different in quality between entry level, moderate and premium and there are thousands of $500k+ homes finished with premium vinyl siding. Yes there are quality alternatives out there, but many of them come with a heavy ‘luxury’ price tag.
  11. No, hardwood and tile floors are not standard– Yes, you may see these popular features in an older home on the real estate market, but in many cases this is because alternative options weren’t available when the home was built. They may also be renovation upgrades to make an older home more desirable, but it still may feature a stone foundation, single pane windows, old plaster, uneven floors and very little insulation. The average new home, particularly those in a development, may feature engineered hardwood floors (just a wooden top veneer on an interlocking engineered base) in a living room, but will often have carpet in bedrooms and either laminate or vinyl plank flooring elsewhere to stay within price point.
  12. Land Costs– Unlike square footage estimators used by realtors, when addressing new construction costs, home suppliers and builders don’t include the cost of vacant land (unless you are specifically building within their own subdivision or on their ‘built to suit’ property). This is a common practice, because vacant land cost will vary greatly depending on location and site acreage. This is of particular importance when speaking with a new client that doesn’t already own land (or has purchased the land without a clear expectation of turnkey completion costs).  For example, we were recently working with clients that came to us relocating to our region with a seemingly comfortable budget of $500-550k for a 2,000-2,300 sq ft log home. However, as we delved deeper, we discovered they were looking at a parcel of waterfront land for $200k! Suddenly, the log home with custom finishes that would cost around $450-500k to complete would be unattainable. Luckily, we were able to educate our client on budget expectations and even assist them with finding an alternate property they loved just as much for less than $40k, making the custom log home a more realistic goal.

At Dorini Custom & Log Homes,  we pride ourselves in our ability to custom design each home to match a customer’s unique needs, wants, tastes, lifestyle and budget. As a custom home designer and supplier, we remind clients that ‘custom’ doesn’t inherently translate to ‘more expensive’.  Providing a custom designed home means we are willing to dedicate more time with a client during the conceptual design phase, to determine the proper layout to meet their needs and wants within their project budget. We would rather invest time with the customers we are working with rather than spending tens of thousands of additional dollars in initial advertising and marketing.  We also recognize the realistic truth that if we can’t provide a home a client loves within their budget, we won’t be selling them a new home, so it’s in our best interest to work with them to create realistic budget expectations. Being a manufacturer with our own dealer network of builders completing homes for their clients, we also recognize that our pricing is extremely competitive- so much so that if a client can’t afford to build a specific design with us, they likely won’t find another supplier who can. As such, the only option will be to modify and simplify the design by reviewing the finishes, design features and if necessary the square footage of the home to make it align with budget limitations.

We hope that we have provided you with a greater understanding of why ‘How much will this home cost me?’ isn’t a simple question to answer, while also providing more realistic budget expectations based on the features that are important to you and your family for the completion of your new home. Ultimately, in order to provide a reasonably accurate price quote, a home supplier / builder will need to have at least a preliminary blueprint to work from and final pricing will be subject to change by final engineering.

Are you interested in more information regarding the custom design of your new home with the proper budget to match? Contact Dorini today and ask about our Dorini Design Agreement and how we developed it to provide new customers with a minimal financial investment that will result in the completion of a custom design for their new home relative to their family’s unique needs, taste, lifestyle and budget expectations.

-Justin Metz, partner- Dorini Log & Custom Homes  www.dorinihomes.com

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