Why Accurate Residential Construction Estimating Starts Before the First Bid

The house measuring 2,400 square feet is quoted by a builder on a Friday afternoon and secures the project deal on Monday. By the time he gets to pour the foundation, he is $7,000 off budget. The geotechnical survey revealed that deep foundations were needed at one corner of the plot but not read by the estimator before giving the quote. The wall frame was estimated at 9 feet but should have been 10 feet based on the plan. This is what accurate residential construction estimating entails.

Residential Cost Estimation Begins With Reading the Plans

Residential cost estimation starts with a full read of the drawings, specs, and any soil or survey reports. These individuals identify the particulars that cost money: a vaulted ceiling with an engineering beam requirement, a sloping driveway with a need for a retaining wall, windows with a specific package of nonstandard sizes. It only takes about two or three hours to go through an initial walkthrough, and the observations from it guide all prices that follow.

With the scope determined, it is easy to divide the costs into several categories. Each trade or building component receives its own category. This way of handling the estimate enables the estimator to compare projects against each other. Within a year, certain trends become visible. The plumbing may be off by 6 percent in two-story houses or the finish carpentry may always come in under budget.

Home Construction Estimates That Homeowners Can Follow

Good home construction estimates read clearly to someone who has never built anything. Each item entry must include its name, quantity, and unit cost. “Kitchen cabinets, 28 linear feet at $420” communicates a lot more to an owner than “Cabinets, $11,760.” Allowances should be listed along with information on the cost increase or decrease of a selected item. 

Items that are not included should get just as much attention. In the case where landscaping, windows, appliances, and utility connections are omitted from the estimate, these exclusions should be listed on the first page. That is where many conflicts arise when the homeowner thinks the driveway was included and the builder thought otherwise.

Material Quantity Takeoffs Where Errors Hide

Material quantity takeoffs are the counting stage, and mistakes here are expensive because they repeat through the whole estimate. The estimator counts the number of studs, pieces of plywood, yards of concrete, roof squares, and trim based on the drawings. This process is made easier through software tools such as PlanSwift or Bluebeam, but someone has to make sure that the scale of the PDF file is accurate, because a miscalculated print can change all of the measurements by 10 percent.

Waste and ordering information is equally important to know along with exact counts. Drywall requires an additional 10 percent, hardwood flooring between 8 to 12 percent, while tile for diagonal installation may require up to 15 percent more. Lumber is sold in specific lengths; therefore, a 9-foot wall requires 10-foot studs and waste cannot be used elsewhere.

Residential Project Budgeting Over Time

An estimate gives the total. Residential project budgeting sets out when the money gets spent. The vast majority of contractors price the project in increments that coincide with progress milestones such as the foundation being finished, framing completed, rough-in approved, drywall hung, and completion. Each payment is often preceded by an inspection, so the schedule and the budget need to work together.

Contingency needs to be added as a separate line item in the budget. In new construction where there are no hidden surprises, a 5 percent contingency is sufficient. Renovation or addition to an old structure will probably require 10 to 15 percent of the total budget. Real costs need to be checked against the budget weekly, not when the final bill arrives.

House Building Cost Analysis After the Job Closes

House building cost analysis is the step many small builders skip. After the project is complete, compare the estimate versus actual cost. Take into consideration labor hours, wasted material, change orders, and overages from subcontractors. An error of 4 percent on framing labor among three houses indicates a productivity rate that needs addressing. Bad months happen.

The unit cost per square foot is a good barometer, although not exact. Two houses could be worth anywhere from $40 or more per square foot difference between them for construction with the same finish value. Always compare like houses. Maintaining a list of projects done from 10 to 20 projects will give any estimator a true comparison figure, which is much better than anything provided on websites using national averages.

Final Thoughts

The best guesses will always be made by those who reflect on past events. A brief discussion at the end of every job involving the estimator, the site superintendent, and the project manager normally reveals a couple of lessons: a craft that underestimated its bid, an item that caused confusion to the workers, an allowance that proved to be inadequate. Writing them down and changing the format would take about an hour. Otherwise, we will just repeat our mistakes on the next home and the one after that.