If you’re starting to plan a custom home or major renovation, one of the first questions you’ll probably have is:
How much is it going to cost?
It’s a completely reasonable question. And naturally, getting a few quotes from builders can seem like the obvious place to start.
The difficulty is that early in a custom project, there often isn’t enough information available to accurately determine the final construction cost.
That doesn’t make an early estimate useless. It just means it’s important to understand what the number is based on and what still needs to be worked through.
Why Accurate Pricing Takes Time
A custom home isn’t priced from the number of bedrooms and bathrooms alone.
The cost can be influenced by the site, engineering, construction methods, materials, finishes, selections, services, approvals and the level of detail within the design.
Early in the process, many of those things simply aren’t known yet.
A builder can still provide an indication of where a project may sit based on the information available, and that can be extremely useful when deciding whether a concept and budget are aligning.
But it shouldn’t be confused with detailed pricing for a fully developed scope.
As the project progresses and more information becomes available, the pricing can become more detailed too.
Estimate, Quote and Fixed Price: They’re Not the Same Thing
These terms can sometimes be used interchangeably in everyday conversation, but they’re worth distinguishing when you’re comparing builders.
An early estimate is generally based on the information known at that point in the project. It can help establish whether the proposed design and budget are reasonably aligned, but there may still be unknowns and assumptions that need to be resolved.
Detailed pricing comes later, once substantially more information is available. Plans have progressed, engineering and other relevant documentation can be considered, selections and specifications are clearer, and trade and supplier pricing can be obtained against a much more defined scope.
For builders working under a fixed-price contract, that detailed information is particularly important. The builder needs to understand what they’re agreeing to build and what has been included in the contract price.
That’s why a price provided very early in the design process shouldn’t necessarily be compared directly with a fixed contract price developed after months of design and pre-construction work.
They’re based on very different levels of information.
So What’s Wrong With a Free Quote?
Potentially, nothing.
A free initial estimate can be a useful part of exploring a project.
The important question isn’t necessarily whether the builder charged you for the number.
It’s what information was available when they calculated it.
If you’re comparing prices, ask what each one actually includes.
Was the builder working from developed plans or an early sketch? Have site conditions been investigated? Is engineering available? Have selections been made? Are trade and supplier prices being used? What assumptions have been made? What hasn’t been included yet?
Two prices can look very different on the front page while also representing completely different scopes of work.
Understanding what’s behind the number makes the comparison far more useful.
What About Prime Cost Items and Provisional Sums?
Prime Cost and Provisional Sum allowances aren’t automatically a warning sign either.
They have legitimate uses within residential building contracts when particular costs or selections aren’t known at the time the contract is prepared.
What matters is understanding what has been allowed for, why an allowance has been used and whether the amount is realistic for the project you’re planning.
For example, if a particular selection hasn’t been finalised, an allowance may be appropriate. But the client should understand what that allowance covers and what happens if the eventual cost differs.
The clearer the scope and selections are before contract, the more information both the builder and client have when establishing the contract price.
Why There Are Costs Before Construction
This is also why custom building usually involves work, and costs, before a construction contract is signed.
Before we can confidently price a project at Manning Homes, there is a significant amount of information that needs to be developed.
Our process begins with a Concept Stage, where we start developing the design and prepare a preliminary building estimate to see how the concept and budget are aligning.
From there, the Preliminary Stage gets into the detail. Depending on the project, this can include engineering, detailed drawings, approvals, selections and further documentation needed to properly define what we’re building.
As that information comes together, we can obtain detailed pricing and develop the scope towards a fixed-price building contract.
The purpose of those stages isn’t to make the process more complicated.
It’s to replace assumptions with information.
Compare the Process, Not Just the Price
When comparing builders, the number on the page is obviously important.
But so is understanding how they arrived at it.
Ask what information the price is based on. Look at the level of detail within the inclusions. Understand which items are fixed, which are allowances and what hasn’t been determined yet.
And most importantly, make sure you’re comparing the same thing.
A lower number based on an early concept isn’t necessarily better or worse than a higher number based on developed documentation. Without understanding the scope behind each price, there may not be enough information to meaningfully compare them at all.
For a custom home or major renovation, good pricing develops alongside the project.
The more clearly the design, site conditions, selections and scope are understood, the more accurately the construction cost can be established.
Planning a custom home or major renovation in Forster-Tuncurry or the surrounding area? Get in touch with our team to learn more about our process and talk through where to start with your project.
