How Do Builders Charge for Building a New Home?

The cost of building a home is not a simple figure estimation. Although an initial bid is accepted for the estimated cost, there is not a guarantee that the cost will not increase. Home builders must include several factors when calculating charges. The home builder will discuss these factors with you when you sign the contract.

How Do Builders Charge for Building a New Home:

Step 1: Calculate land costs. The cost of the land is included in these charges, if the home builders own the land originally. In most cases a home builder owned property is included in a subdivision project. If your new home is part of a subdivision, you will purchase this land from the home builder company. The builder will include the cost of land development into this purchase price. Development includes preparation for utilities, landscaping, and any other changes required to this land.

Step 2: Calculate floor plan selection cost. Home builders have floor plans with a specialized price list. This list price is now added to the cost of land as a jumping off point. In this calculation, the home builder adds the cost of the square footage of the home. Increases in the original square footage of the floor plan will increase the building costs. Other factors that will increase this price are building supplies, adding additional features to the floor plan, and the shape of the home. Building supply changes frequently include: changing the flooring from carpet to hardwood, changing the materials used to construct the exterior, and adding tiles to the walls. Additional features often include: adding additional rooms, constructing a bar in the kitchen, and increasing the size of existing rooms. The shape of your new home will increase the cost of building it. For instance, a rectangle or square-shaped home will cost less than any other home shape.

Step 3: Consider the increases in prices due to inflation, market condition, and budget overages. It is possible that the cost of building your new home will increase by 6% yearly. If you work with the builder to make decisions for the construction of your new home only one year prior to construction, there is still the possibility of this increase. The increase is based on market analysis conducted by the home builder. If prices for a specific location have increased, the cost of building your new home will also increase. The home builder will add this increase to the cost of building your new home.

There is always the possibility that new home building will exceed the budget. Realize that any overages will increase the cost of your new home construction. The home builder will consult with you once there is a potential of budget overage. You will have the opportunity to discuss alternatives with your home builder to keep costs down.