What goes into figuring the costs to build a home? Most of the time all we want to know is the bottom line, total cost or the cost per square foot. But, when we get the total we begin to question why.

I thought it might be helpful to take one of my Owner-Builder clients and break down everything that factored in when figuring his cost to build. I think it will serve to help you understand the various components of the process as well as provide you with fodder when questioning any quotes you get.

Home Owner Builder – Darren G.

Darren is as typical as I could find for an owner builder. He used some of his own labor and that of friends but he also hired many subcontractors to provide the needed labor. He built his home using some panelization for the wall framing but most of the materials came from purchases from local lumber yards, contractors, and other suppliers.

Here is the breakdown of his project. Your project will vary … maybe significantly, but it’s a good start. I’ve included percentages to give you a look at how the money is spread throughout a project.

• Cost/Pay-off for the land: 18%

Land costs often vary considerably from project to project and market to market. I’ve encountered percentages anywhere from about 5 – 50% of overall costs.

• Permits, fees, inspections (local building authorities): 4%

In some markets, the cost for permits and fees can be very high. Always check with your local building department as they will provide you with a complete breakdown.

• Architect & Engineering fees: 2%

You have many choices for your home design from purchasing stock house plans or getting plans “free” from your materials supplier, to hiring an experienced architect to design a truly custom home. The costs for this can go much higher.

• Land Improvement – Utilities, hook-ups, surveys, etc: 5%

Drilling wells, building engineered septic systems, and planting power poles are examples of how the cost of preparing your building site can be significant.

• Financing Costs & Reserves: 10%

I recommend that you always factor in the points, appraisals, fees and interest charges on your construction loan. A construction loan is really just another cost of building. Can be tens of thousands of dollars.

• Complete Materials Package (included some labor): 30%

Some materials purchases come with installation included as it did for Darren.

• Labor for construction (included some materials): 25%

In many cases, subcontractors supply their own materials. This is often the case with plumbers and electricians.

• Coach/Advisory fees: 4%

As an Owner Builder, Darren used professional help to guide him throughout the project. One major mistake avoided is worth it. This advisory fee is well under the cost of most General Contractors fees and therefore represents a savings.

• Miscellaneous (deliveries, insurance, etc.): 2%

Hopefully this view of Darren’s project will take some of the mystery out of what goes into pricing out a home building (or even a remodeling) project.

If you’re in the process of having a General Contractor quote you on a project, make sure you know what he is quoting and what he is omitting. For instance, he may not be factoring in financing costs or land costs among other things. If you’re remodeling, you can eliminate the land costs and probably lower the financing costs.

This is just one step in understanding the complexities of costing out a project.

You can learn so much more about home building and remodeling online. One great option is to take advantage of a very informative yet simple to follow *free* e-course that you can find by clicking here http://www.DreamHomeCreation.com You will also find other tips and tools, surveys, videos, and additional articles by Mel Inglima.