Cost estimation for the planning process of your custom home build.
When planning to build a new custom home in Edmonton, it is essential to learn as much as possible about the process of building a custom home. As part of the planning process, it is important to understand the costs associated with home building, as well as the different phases of the cost estimate.
The purpose of cost estimation is to predict the quantity, cost (both hard costs and soft costs), and price of the resources required to complete the build within the projected scope. The cost estimation process helps in identifying project risks, and provides the option of discussing alternatives if new requirements need to be added. An accurate project cost plan enables one to weigh the anticipated benefits against the anticipated costs to assess if the project makes sense.
When you are ready to build your custom house, the first question to ask is how much it will cost to build. This point of the planning process is when you start looking for a quote, reaching out to several custom home builders with the expectation of a quick estimate for your construction. Most of the information you'll have at this point is limited to the most basic, such as house size, stories, some general specifications, some photos, perhaps a layout, etc. For an accurate estimate, however, a custom home builder requires the home’s design, floor plans, and specifications for most of the project’s items, amongst other things, to be able to determine the cost of labor and materials.
You can also find the average cost on the internet, but this varies from one province to another, from city to city, and so on. Unfortunately, it is not recommended that you use this average cost to estimate the cost of your project, because all custom homes are unique, and they all have different specifications; although size and even the design can be similar, the cost will surely not be equal. Using this average construction cost to estimate your project may lead to a high level of frustration once you know the actual cost.
We ensure you that we provide the best information to our customers to help you make the decision of building a custom home, while also following the most recognized and accepted industry guidelines for classification systems stablished by AACE (Association for advancement of Cost Engineering), Edmonton Custom Home Builders uses three types of estimates based on accuracy:
Class 3 Estimate
This type of estimate, also called an Order of Magnitude estimate, is a rough estimation of costs used in the very early stages of a project, particularly during the evaluation and planning stages of your custom home. The purpose of this type of cost estimate is to give an idea of the general and total expenditures, instead of itemizing expenses based on project activities and deliverables.
This estimate uses the historical cost of previous projects, and, at this stage, no house floor plans are required. To help with this process, Edmonton Custom Home Builders requests that its clients complete a “Project Information Form,” which will help with the project estimation.
Typical accuracy ranges for Class 3 estimates are -10% to -20% on the low side, and +10% to +30% on the high side.
Class 2 Estimate
After the Class 3 estimate is completed, you will have a better idea of the possible costs of your custom home with a deviation of +/- 30%. If this fits with your needs from the financial point of view, the next step is to get a more accurate estimate, either a Class 2 estimate or a definitive Class 1 estimate.
The purpose of the Class 2 estimate is to generate a preliminary itemized list of expenditures based on the major components of the project. Therefore, this is done within the actual planning stage of the project.
For this estimate, an Issue For Pricing (IFP) drawing is required, which means that we have to work with an architect to design your home, not with all the details, but at least with most of the relevant information and design aspects that can be used to determine cost of the project. For contractors, this class of estimate is used as the “bid” estimate to establish contract value.
Typical accuracy ranges for Class 2 estimates are -5% to -15% on the low side, and +5% to +20% on the high side.
Class 1 Estimate
This type of estimate is a definitive estimate, and has an accuracy of around -10% to +15%, and in some standards, around -5% to +15%. Sometimes called a Detail Cost estimate, this type of cost estimation is not only more accurate than Order of Magnitude estimates and budget estimates, but are also more detailed.
Reports generated from a definitive estimation include an extensive itemized list of project activities and deliverables, with brief descriptions either for justification or clarity. Note that conducting a definitive estimation is only possible, however, with a fully developed design and a work breakdown structure.
With this estimate in your hands, you are in position to use the report to secure the financing for your project, knowing that the projected cost is as close as possible to the actual cost. There are still some extra expenses that can happen during the construction of your project, but this can be managed within the scope; to address this, it is recommended you allocate some contingency in the budget.
Are you ready to build your custom dream home in the Edmonton or Fort Saskatchewan area? Contact us today! We will prepare a free quote, and provide you with more information about our beautiful custom homes in Edmonton area!