Your first step in estimating is often to establish whether a project is financially feasible, given your budget. You probably have a number in mind that you are comfortable spending, based on savings and potential borrowing — and a higher number that’s a stretch. With a budget number in mind, you can start to assess the cost range of the project you have in mind. Is it in the right ballpark, or are there changes you can make to bring it into the ballpark?
Many contractor’s are leery about giving a quick “ballpark” or “drive-by” estimate, since they are afraid that you will want to stick to this number even if their actual bid comes in higher – as it often does. If you get an “estimate” from a contractor, clarify whether this is a binding bid or just a rough estimate of what the job might cost. The word “estimate” is used both ways so it can be confusing.
For simple jobs handled by a single trade – roofing, siding, drywall, wood floors, etc., an experienced contractor or subcontractor can often give you an accurate estimate in minutes. Subcontractors can usually generate precise estimates very quickly because they work within a single trade and know their unit costs well. They have up-to-date material costs and know what factors will make the work go faster or slower and therefore can toss off a precise bid quickly and accurately.
For more complex jobs involving several trades, the estimating process takes more time and has a larger margin of error. Providing an estimate for a complex job is difficult without knowing a lot of details since new construction costs can range from under $100 to over $300 per sq. ft. depending on the type and quality of construction. Remodeling is even more variable.
It’s not that different from cars. No one walks into a car dealership and asks what their cars cost per square foot. The number, of course, depends on whether the car is a Hyundai or a Mercedes Benz. Building costs can be almost as variable when you’re comparing a basic starter home to high-end custom with all the bells and whistles.
Nonetheless, an experienced contractor has a pretty good idea of what his costs are to build – say, an 1800 square-foot Cape or bungalow, or to build a 16×16 two-story addition, or to remodel a 150 sq. foot kitchen. With a few questions about finishes (vinyl vs. wood windows, carpeting vs. hardwood floors, vinyl siding vs. brick, ceramic tile vs. resilient flooring), a contractor can narrow costs down to a reasonable range.
If you don’t have a contractor willing to toss out a ballpark figure, you can get a rough idea of a project’s cost, plus or minus about 20% by using the techniques below. It’s best to use more than one technique to see if your numbers hold up.
SQUARE-FOOT BUILDING COST BOOKS
Using square-foot construction costs, you can quickly establish roughly what size house (or addition) you can build at a given quality level. These are used by appraisers and others looking for a quick ballpark estimate of whole buildings. A number of companies publish construction cost guides based on actual cost data from across the U.S. These give complete project costs per square foot for different types of buildings and remodeling projects, with multipliers for different cities. For example, you might find out that the cost of an 1,800 sq. ft. one-story home built to a high quality (but not luxury) level would cost about $143 per square foot in your area (including overhead and profit).
Some whole-building cost books list over ten quality levels with their respective costs. Picking the right quality level is important since square foot costs can range from as little as $100 per square foot for the most basic, code-minimum housing to well over $400 for high-end custom work. At the low end of the range, you can get a basic box with “builder-grade” windows, doors, floors, cabinets, fixtures, and trim. At the top end, you can get expensive finishes and lots of bells and whistles. You can further fine-tune the number with various fudge factors for shape of building, rural vs. metro, and special site conditions. If you use this type of guide, read the small print and apply all the multipliers to get the best number you can.
View a sample page from a whole-building cost book, the National Building Cost Manual The sample page is reprinted from the 2017 National Building Cost Manual with permission from Craftsman Book Co.
While no one would bid a job based solely on these numbers, they can get you in the right ballpark. I’m most familiar with Craftman’s National Building Cost Manual, but similar guides are available from RS. Means, BNI Building News, and others. If you’re just looking for a ballpark number, you can usually buy last year’s guide online at a steep discount.
When using these guides, make sure that you read the fine print and use the proper modifiers. Do the prices include permits and fees? Overhead and profit? Utility connections? Ignoring these issues, or choosing the wrong quality level, will render the price estimate pretty useless.
The house next door. If friends recently had a house built, an addition completed, or kitchen remodeled, and your project is similar in size and quality of finishes, you are safe to assume that your project will cost somewhere in the same vicinity.
NEW HOMES FOR SALE
This approach takes a little digging and certain amount of guesswork, but is another useful data point. Let’s say a developer is offering new 2,000 sq. ft. homes on a quarter acre for $400,000. He may be offering lots in the same development for $100,000, allocating $300,000 to the house. You can also ask a real estate agent what the breakdown is between land and house, or check the town appraisals which are broken down by land and building, and are public record.
Now take the $300,000 sales price for the house only, and divide by 2,200 to get the unit price of $150 per sq.ft. Next deduct 20% for overhead, profit, and marketing expenses. You’re left with $120 per square foot of “hard” construction costs, not including land, overhead and profit. Visit a couple of the homes for sale and look at the interior and exterior finishes. Then make adjustments up or down based on what you have in mind.