Friday, April 08, 2005

Construction Cost: A Definition

Construction Cost has a very specific meaning in the trade. Construction Cost is the cost of everything inside the footprint of the house. Construction Cost doesn't include Sitework, or Soft Costs. When we talk about a cost per square foot, we mean "the construction cost per square foot, not including sitework or soft costs."

Sitework Cost includes the cost of everything outside of the footprint. For example providing utilities—a septic system or connecting to the city sewer as they case may be, providing telephone and electrical service, digging a well or connecting to city water. Sitework also includes landscape work, like a driveway or sidewalk for example, as well as any landscape planting and reseeding. A city lot usually requires a lot less sitework.

Project Cost is Construction Cost plus Sitework Cost.

Soft Costs include the architect's or consultants' fees, boundary and topographical surveys or site analyses like a geotechnical engineer or wetland biologist might provide, as well as building permit fees and reimbursable expenses. Depending on the site and the jurisdiction and how many external expenses you account for (such as the cost of financing the project, living elsewhere while the project is being built, or moving once or twice), Soft Costs run 10% to 22% of the Project Cost.

Of course, you've got to have a place to put the house, don't you! We'll call that the Land Cost. Most people who come to us looking to build a house already have the land, but if you haven't, we may be able to open up some interesting possibilities. If you buy a piece of land without services like water, electricity, and sewer or septic, a lot of great green alternatives are going to make much more sense financially. More on that later.

So the grand total expenditure for a new house is going to include...
Land + Construction + Sitework + Soft Costs.

1 comment:

  1. This is a very nice article. It gives idea on how to build a house with details. Thank you for sharing.