How to Estimate the Cost of Building a New Home

This will serve as a help guide by providing some tips and techniques for estimating the cost of building a new home. As an expert residential estimator there are many things to consider before you begin estimating.

Construction estimating can be difficult and it does require a high level of accuracy and detail. It also requires good math skills and a little geometry knowledge. It requires the ability to read and understand construction drawings and details and how they are applied. Basic construction knowledge helps and being familiar with the local building codes.

You may want to enroll in a construction estimating course at the local college or technical school. Another option is to purchase an estimating manual from your local bookstore or go to estimating.org which offers online courses and has a bookstore.

One of the rules that I have learned along the way is the old saying, “measure twice cut once.” Whenever I do a takeoff or an estimate I always follow this rule in order to help minimize mistakes.

What will you need to put an estimate together?

You will need a notepad, a calculator, an architectural scale, and an engineering scale. These are the basic tools you need to put an estimate together.

Architectural & Structural Drawings

Now you are ready to open the plans and begin to review them. The easiest thing to do is look them over and get a feel for the basic building concept. You should get familiar with the information that is contained on each sheet.

Most construction projects have a set of architectural drawings and a set of structural drawings. I will explain the difference between the two.

It is important that the plans are to scale and have all the required details and wall sections needed to properly estimate from.

What is typically included in a complete set of architectural plans? The drawings at a minimum need to contain the following sheets: a title/cover sheet, a site plan, a floor plan, a foundation plan, four elevations, a roof plan, an electrical plan, a sheet with a typical wall section, a sheet with the window and door schedules, and a sheet with the necessary building and architectural details.

The structural drawings are drawn by a structural engineer, not the architect, unless the architectural firm has an in-house engineer. Any interior shear wall or bearing wall is detailed on these drawings.

The engineer calculates all the uplift and bearing loads of the roof trusses on all the interior and exterior. After doing the calculations they determine which walls are shear or bearing or both and what is required to properly support those uplift and or bearing loads. The engineer will put a structural note on any wall that is bearing or shear. The note will indicate the sheet number and detail number illustrating how that wall needs to be built.

A load bearing wall for example could have a thickened concrete footer with two pieces of steel and the wall above it may need to be framed out of southern yellow pine versus spruce with special metal hardware. These should be highlighted on the plan so they will not be overlooked. Sometimes the hardware called out by the engineer is a special order and can take several weeks to get. So if you wait until the framing package needs to ordered and there are a two or three shear walls with special order hardware it could delay the construction.

You need to make enough copies of the architectural and structural plans for multiple subcontractors and suppliers bidding the job. To save you money, ask your architect and engineer to convert the drawing files to a PDF file. This will save you time as well and make it convenient because you can email them to as many subcontractors and vendors as you like.

Specifications

A list of product specifications must be provided so all the subcontractor and vendors are bidding apples to apples. This is a list detailing all the products and finishes you want in your new home. It does not make sense to send the plans out to bid without a set of specifications. Without this, the bids you receive will not be apples to apples. Then you will need to have them all rebid the project. It wastes a lot of time and creates a lot of unnecessary work for the subcontractors. Remember these guys do not need practice bidding and some of them may not submit a bid without a set of specifications included. Therefore, everything from paint colors to the floor finishes need to be selected. They need to be listed on the plan or on a separate document.

Doing the Takeoffs

It is too technical to put in a written guide how to quantify the concrete, masonry, lumber, and shingles just to name a few. For example let’s assume you need to quantify the masonry block on a single story block home. You have to know how the wall is assembled which includes the ability to visualize and understand construction methods. If the exterior walls have multiple heights, a regular block (8x8x16) needs to be added and a lintel block needs to be deducted in each location where the plate heights change. If some of the walls are on a 45 degree angle you need to be able to know whether to estimate an angle block or butterfly block. The door and window openings need a certain quantity of regular blocks deducted plus a half block every other course on each side of each opening. You could have too much of one size block and either not enough or some units not accounted for at all. These inaccuracies will throw off your budget and cost you time and money. This ability and knowledge can not come from a book but through hands on experience combined with years of estimating experience.

If you decide to quantify the materials yourself I suggest you refer to Walker’s Building Estimator’s Reference Book, frankrwalker.com which has instructions on how to estimate the quantities of concrete, masonry, lumber, drywall, etc. It is considered the bible for construction estimators and it is one of required books included in the study guide for most state contractor’s exam. Just keep in mind that these reference books do not have tips and tricks as well as real world experience as explained above.

You can employ the help of your subcontractors bidding the work or your suppliers. You may pay more for their product or service or you can hire us. Either way you are paying for someone to review the plans and quantify what is needed to build the project.

If you have your lumber yard quantify the material remember he is trying to win the job so he may provide a takeoff that is too tight. This does not benefit you if you have to keep reordering more lumber. The obvious answer to this is to have your framer put together the lumber list for you. Well that does not work either because he will over order so he does not run out of material and have to make additional trips to finish. They want to finish as fast as possible so it can get inspected and they can get paid. The bottom line is neither are working in your best interest.

I recommend you do not attempt to quantify the materials yourself. I have outlined valid reasons why. It is very technical and requires someone with years of estimating experience combined with hands on field experience.

Soliciting Bids

This part of preparing an estimate can be done by most anyone. I suggest you contact your local builder’s association to get subcontractor referrals or use Angie’s List, angieslist.com which prescreens contractors as well

You may have heard the term RFQ – Request for Quote. You want to solicit at least contractors. Most people will say three bids, so why do I recommend five bids? Let’s say you contact five contractors and all five contractors bid the project. You got to figure one will be the high bid and one will be the low bid. So those should be set to the side because chances are the low bid is probably missing something and the high bid is priced too high. The remaining three bids should be reviewed thoroughly to make sure you are comparing apples to apples.

When you contact all the subcontractors that you want to bid your project be sure to give them a bid due date. That way you do not have to chase them. Give them a reasonable amount of time to review the plans and specifications, typically a week or two.

Analyzing the Bids

First organize all your bids by trade, such as putting all your electrical bids together. A three ring binder with dividers and tabbed with each category is a good way to organize all the bids.

Once you receive the bids you need to read them carefully and review them against the plans and specifications. They should have the project information and the date. They need to be detailed and itemized. The cabinet bid should not say “cabinets”. Instead it should list and quantify all the cabinets by finish, style, size, and location, example 15 lnft of 42″ oak raised panel kitchen cabinets, 1/ea 60″ melamine master bath cabinet, 1/ea 36″ melamine hall bath cabinet, etc. If it does not include the countertops it should state that so there is no misrepresentation.

When a proposal needs to be revised, make sure it states the revision date or states “revised”. That way when you compile the bids and you need to refer back to them you will be looking at the latest one.

The proposals should also indicate workmanship and warranty. All this is important, especially if the contractor does not perform and mediation or worse litigation is required.

How to Negotiate the Best Price

Once you determine the three competitive bids the hard part is negotiating with the contractors. You have to assume that all the quotes will be inflated with the understanding you will negotiate less. Therefore, you need to get them down as low as you can to the real number. I always ask my subcontractors and vendors if the bid is negotiable. Remember it never hurts to ask, the worse they can say is no. And if they say yes, then I ask them what is the maximum they can cut their bid. They normally respond with, “how much do I need to cut it to get the job” and again I put it back on them by saying, “the maximum you can cut your price”. Never name a price first! You should already have a budget of what you can afford to spend on each item. You never know whether or not they would be willing to do it for less than that.

Once they lower their bids and you determine the low bidder you need to compare warranty, workmanship, and references. Price is important, but if they can not finish the job the price does not mean anything. You definitely need to check both project references and credit references. The bottom line is you want the best contractor for the least amount of money.

Preparing an Estimate

Once you have awarded the job to each subcontractor you will want to prepare an estimate. I recommend using Microsoft Excel to organize your estimate. It is the easiest and mostly widely used spreadsheet application, especially in construction.

It helps organize your estimate. You can use a separate worksheet for each trade within the Excel workbook. You can enter all the material lists and bid amounts you receive. You can track the job to make sure you are on budget. You can email your local suppliers your material lists so they can enter their unit prices and they can email it back to you.

One of the sheets needs to be the estimate summary which has the total cost for each phase or trade. It should include your preconstruction costs and direct construction costs.

It should have the estimate total at the bottom.

There are endless possibilities you can do with Excel and the level of detail is up to you.

We have for sale blank estimates that are in Excel. These are templates that we use which can help you calculate some of the material quantities and can also be used to prepare your estimate. They contain prebuilt formulas for calculating concrete, steel, masonry, and lumber. All you need to do is enter counts and lengths where indicated and the quantities are calculated for you. Contact us to send you a sample template.

Conclusion

I hope this has provided you will some good information on how to prepare an estimate if you are building a new home. We are available to answer any questions you may have. We can help you put together an estimate for any type of construction project, big or small, residential or commercial.

Source by Lou Cinelli

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