BTW – This post is just 1 in a series of Home Design and Build posts. You can find them all right here: Positively Jane's Home Design and Build.
Listen on the Podcast:
Here you are…building a home! Whether you are building it from scratch (buying the land, picking an architect, and builder) or you found a plan in a neighborhood that you love and want to add your ‘personal touches' to – there are expenses attached to building your new home. And everyone's expenses are different.
Your builder will give you a price for your home. Typically this is based on what you have said that you love and would like in your home. Or what you saw in a model home or photos you showed your builder. Keep in mind – A LOT of assumptions are included in this quote.
Some builders will give you a line-by-line quote. Meaning that he/she will break out the foundation costs, framing, sheetrock, drywall, painting, roofing, etc. Others will give you a grand total.
But in either case – you will receive ‘allowance $'s'. Builder allowances are NOT fixed costs – they are numbers that the builder adds as a placeholder for you. Typically builder allowances are for:
For example – Your builder has given you an allowance of $6,000 for plumbing fixtures, $12,000 for appliances, and $20,000 for cabinets. (Usually those allowances are LOW! The builder does not want to scare you away with ‘real life' numbers).
Most people look at the bottom line and say – ‘Ok, that is good. I can afford that – and they sign on the dotted line'. High fives are all around and the excitement is HIGH!
And then they go shopping – and find out that appliances are $18,000 for the ones they love and really want. That the plumbing fixtures are closer to $10k. Not counting the cabinets – which are way above the budget.
The excitement dissipates because the unknown sets in.
You ask ‘How in the heck can I afford to build this house? Everything is more than I thought.'
You wonder if you can get an increase in your loan? Or, how to eliminate/choose less expensive things – even though you didn't think you were being overly extravagant.
So, this is how I do it…and I promise you, this system will save you so much heartache and anxiety down the line.
In fact WAY before you get to the point of final pricing, go shopping.
Go to the recommended appliance store (your builder will have one and normally a person for you to talk to). You can also ask your builder what his ‘typical' appliance allowance is – just so you have the $'s in mind as you peruse those amazing and wonderful expensive appliances.
Pick out the ones you love and think are within your budget. And get a quote. Let's say that your builders ‘typical' appliance allowance is $10k. You have chosen ones that are $14k. You know, BEFORE you get your final pricing, that you are $4k over your budget. You KNOW!
Do the same thing for ALL of your allowances. Sometimes you might be under the budget…but most times you will be over.
Then add up all of your ‘overages'.
This is the number that you need to add to the bottom line quote from your builder.
Say the quote from your builder is $445,000 to build your house. You KNOW that the overages are $21,000. You now KNOW that it will actually cost $466,000 to build your house (or close to it).
Builders do need to be paid. Typically they add a percentage to the total. Using the above example of $445,000…$404,545 is the total to build the house. When you add 10% (the average $ amount of builder fees) and you have $445,000 as the total.
The same thing will happen with your overages. That $21,000 is now $23,100. You can decide if you want to pay for those overages separately and save the $2,100 or add it into the total cost. This depends on your budget and loan and how you are paying for your new home
Before you sign the dotted line when building a home make sure that you know the REAL numbers. Most people who build their homes go over the quoted price by AT LEAST 10%…sometimes up to 25%. That is because they did not go shopping before they said yes.
This even applies to other things:
ALL of these will add to your final builder cost. Know before you sign…and you will have an amazing house that did not go far out of budget.
Here is a great article about figuring out house prices: How Much Does it Cost to Build a House?
Joyful Living is ALL about not letting the circumstances of YOUR life determine who you really are. You learn to choose YOU instead! Not sure how to do that? Let me help!
To begin, go ahead and read: