The Costs of Building a New Home

Building a new home can be one of the most daunting tasks you may ever undertake. While you are more likely to achieve your dream home, this project can also result in headache, cost overruns and even litigation. Understanding the costs of building a new home might be helpful as a starting point, but you should also be aware that the number is only an estimate. Be realistic in determining how much you plan on spending in building your new house.

Get a Ballpark Figure
While it's almost impossible to estimate the cost of building a new home based on the cost per square foot, it can help you determine your goals. Relying on that analysis throughout the project, however, is a terrible idea and will only lead to failure since so many variables are associated with building a new house.

In order to begin estimating the cost of building a new home, you should decide what type of home you want, be it ranch style, rambler or cottage. In addition to location, lot size and type of house, decide what size of house you want to build. Variables also include the size and shape of the lot, house and rooms, as well as the amenities you plan to pack into it, including appliances, flooring, fixtures and heating and cooling systems. Many people are surprised at how this gets out of hand in a hurry.

You can find a number of online cost calculators that can help establish a starting cost. These calculators, however, cannot help you estimate all of the costs associated with building a new house. That final number is going to depend to a large degree on the profit margins your contractor is looking for, which is a number you will never know in advance. It's best to start with a set amount you're willing to spend, and then find a contractor who seems capable of arriving at that number.

The Where and the What
Location is a major factor in determining the cost of building a new home. A number of new housing developments have popped up in virtually every livable space across the country, from metropolitan suburbs to truly rural towns. To build a new home in any of these areas, figure in the cost of the building lot. Depending on how much lots are going for in that area, you might also be forced to settle on a particular lot based on availability or cost. If you decide to build in a newer housing development, consider the lot cost in addition to future costs, like homeowners' or community association fees.

Once you know where you want to build, turn your attention to what you want to build. Custom homes are wonderful, but the costs associated with custom home construction can be overwhelming. It might make better fiscal sense for you to buy an existing home plan; one already designed by an architect, designer and engineer, rather than hire those professionals for yourself. You can find existing home plans easily, both online and with building companies. If your heart is set on a custom home, plan on the cost of hiring a designer and architect.

To Hire a Contractor or Do It Yourself?
The next and perhaps most important cost of building a new house is determining whether to hire a general contractor or to attempt to handle general contracting duties on your own. If you've never engaged in this sort of building project, seriously consider hiring a contractor. A general contractor oversees the building of your house. If you decide to go it alone, you are going to have to hire and direct the subcontractors, a group that includes such specialists as framers, masons, roofers, electricians, bricklayers, stucco specialists, window and door installers, HVAC installers and finishers. Given the level of expertise associated with building projects, it makes sense to hire a general contractor.

Hiring a general contractor is the most important decision you'll make in the process and may have the most direct impact on the cost of building a new home. If you hire a contractor, you will enter into a contractual arrangement that will govern the relationship between you and the general contractor. This arrangement should be carefully negotiated. Given that a number of building projects end in litigation due to contractual breaches or cost overruns, you don't want to make attorney's fees part of the cost associated with building a new home. Try to interview a number of contractors, quickly walking away from anyone who just doesn't feel right or who seems too good to be true.

Whether you hire a general contractor or try to do it yourself, understand that labor will be one of the costliest items associated with your building project. Plan on most of your cost coming from hiring subcontractors to do the work, and plan accordingly.

Finally, understand that you are going to pay additional amounts at almost every stage of the process. You will need to pay building permit fees and inspection fees, plan changes, cost overruns and any finance costs associated with building your house.

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