Unveiling The Delusions in Home Building Costs - Discovery

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Series: Part 4

Join Bill Reid on The Awakened Homeowner Show as he

navigates the myths and misconceptions of home building costs in Part 4 of the

Discovery Series. This episode delves into the common delusions homeowners face

about project costs, especially the notion of cost per square foot. Bill

provides valuable insights on setting realistic expectations by conversing with

media, friends, colleagues, and professionals. Learn how to ask the right

questions and understand the influence of factors like site preparation,

utilities, and contracting fees. Get ready to build a solid foundation of

knowledge before embarking on your home building journey.

00:00 Introduction to the Awakened Homeowner Show

00:03 Understanding the Discovery Series

00:27 The Delusions Homeowners Face

03:26 The Influence of Media on Home Projects

06:54 Friends, Family, and Colleagues: Misleading Advice

09:42 Consulting Construction and Design Professionals

18:55 The Reality of Cost Per Square Foot

32:45 Preparing for Your Home Project Budget

33:45 Join the

Awakened Homeowner Community

Mentioned in this episode:

The Awakened Homeowner Book

The Awakened Homeowner Book

Which is everything that needs to be done before you start embarking on your project by picking up the phone or calling contractors. Part four is all about delusions. So you may recall, and if you're just diving into this episode and having gotten into any of the previous ones, were in the Discovery series.

When it comes to thinking about a project. A lot of it has to do with cost, I'm gonna get into that a little deeper today, but I'm first gonna talk about some other things surrounding cost. Then we'll dig in deep to this whole thing called cost per square foot. One of the things that I've experienced with homeowners is the emotions that come into play with doing a project, especially a new home project or a substantial remodel.

At least that's what you think. And cost is always the lurking elephant in the room. Really is a tough question to answer, even for professionals, let alone homeowners. So what do you do? You go out and you start asking questions to people. You start reading blogs, you start googling it on the internet, and you keep going and you keep going and you finally find the answers you're looking for.

But do you really know if those are the answers? That are accurate. Human nature is to keep searching for solutions that seem to fit you well, such as a low price, cost per square foot, or a low price for a project. So let's talk a little bit about some of these delusions. There's two questions that really homeowners ask.

that you like, not necessarily that it's true. So what we're gonna try to do is start with a clean slate and back up a little bit so that you can get a good foundation of knowledge before you, you venture off on your project. One of the first culprits that I know is out there, and I'm sure you do too, is the media.

Even social influencers out there that are talking about remodeling homes, and some of them are very responsible, especially on the social influencer side or the social media side. Some people are really responsible out there and try to get the realistic numbers out there for people, but for the most part.

That's was called America's Home Makeover, all these DIY shows, again, from the time and cost perspective. They're filming productions. Some of these shows last a half hour long showing instant transformation of kitchens and construction of new homes. And it really, even though it seems realistic in the half hour, 30 minute episode, it's not, and I'm sure you even know that, but.

Behind the scenes went on hours and hours, if not weeks and months of design work. And specifications and documenting the project so it can be done in a productive way. So put that aside, right off the bat and don't think that you're gonna meet with your architect and then the next day, or even that afternoon, they're gonna just whip out some 3D drawings 'cause it's not gonna happen.

It's just not really how it happens. And if they, claim that it happens, we will remodel this kitchen in three days or five days. The drywall mud takes longer than that to dry sometimes. So I don't understand it. I don't know why they do it, but if you've ever gotten behind the scenes of production, you know that there's a lot of fancy footwork that goes on to make things look.

Like they do on the show, but really aren't reality. You just have to remember these shows are designed for entertainment to make a profit, to build excitement so they can get advertisers. So just keep that in mind and have fun with it. Look for ideas and inspirations, but don't think your project's gonna go that way right off the bat.

The project entirely cost you to your friends. So when somebody asks you how much did you spend on your new home project? People say, oh, I spent $150 a square foot on my project. I'm so proud of that. And then you go, okay, that's great. I'm just gonna bank that information and keep asking around.

But a big part of it is because they're not sharing everything they spent and they're also not sharing that they did a lot of the work themselves, which may not be the case for you. You may want to do it the good old traditional way, which is hire an architect and a designer, hire a contractor, and get your project done efficiently.

So we'll move on to that later, but just remember that when you're talking with your friends and colleagues. When you asked that question about their kitchen remodel project, the second question should be can you tell me a little bit more about what you did? And did you do any of the work yourself?

Which is way distorted when it comes to trying to compare cost on a project that may be similar to yours. So once you know the basis of talking with friends and family and colleagues about projects, understand that, and then you can factor that in as you start to eventually move to talking with contractors and architects about projects.

So that's the second thing about. Delusions that can really throw you off the loop. And if you're not aware of it, you're gonna get sucked into it. And that's what I'm here for you, that's why I'm here for you. The other one his construction and design professionals, construction design professionals, you would think, and they do have more insight into cost of projects, but how you go about asking them.

And I recommend you be very skeptical of some of the answers you get, but use it as a baseline to begin with. So with dealing with professionals, the first thing you need to know is what to ask, and we'll talk a little bit about that. I'm gonna, read a little story about that. The second hurdle is understanding the different roles of the professionals.

You're talking with architects and contractors, and third, you articulating your projects in great detail so that they understand what you're up to. Those are the three, components of talking with construction professionals. So here's a scenario where, you begin to start talking with an architect.

I often see a few scenarios in particular, so here's your example. You go to Fred, the architect with your ideas, and you have Ace, the builder's, $300 cost per square foot budget locked into your brain. Since you're comfortable with ace's price, you begin the design process without bothering Fred with your understanding of what the project might cost.

Fred stares blankly and doesn't believe you, thinks you're sandbagging them because that always happens. Homeowners always exceed their budget. This is what Fred's thinking. So Fred nods and takes your money to design the project. The plans are completed and ready for the permit. You go back to Ace to get a final cost.

And are floored by the budget, which is now double what you had in mind. The plans are worthless, or you go to Fred, the architect and share your budget. And Fred says The budget is unrealistic based on his experience. It's hard to convey how much more it could cost until the design has been completed.

So these are some scenarios when you start to deal with. An architect, you start asking a contractor, what costs may your project be? When you approach a contractor to build a project, and you start asking questions, the infamous question, how much is this going to cost?

Here's what I want to do. How much is this gonna cost? Your architect or your contractor's going to. Say we can do a new home project for about $250 a square foot. And you think to yourself, wow, that's great. I'm think I'm gonna go with that. Most people stop there. They don't keep asking more questions.

When you go to some of these Facebook groups, and I do recommend you, if you're serious about this, join a few Facebook groups and start listening to what everybody's saying. You're gonna get things all over the spectrum, but there are some smart people in there that are saying, don't believe the $150 per square foot number because it's not gonna be accurate to what you want.

Past projects, they don't even know. A lot of 'em don't even know if they've made any money on the projects. They just keep going day by day, building the next project, build the next project, hoping to pay their bills well, whereas a more professional contractor has taken the time to analyze their past projects, even set up different quality levels, evaluated them by cost per square foot for both new construction and remodeling.

So when you talk with an architect, even before you hire them, you can ask 'em these same questions. And one of the things you can do with an architect is. Ask questions like this? Have you ever done any projects similar to mine? They probably have, if they're an experienced professional architect, and did you see that project all the way through to the end?

Asked to see the plans, asked to discuss the project cost if they have that information. If they don't ask, if they could talk with a contractor that did that project, who contracted for the construction of that project and get information from them. Here you're covering a couple bases.

One, you've opened up a conversation with a potential how they answer these questions and how interested they are in answering these questions is a really good qualifier if this is the kind of. Architect you wanna deal with. If they also have a strong relationship with a contractor, this is also another base we're covering.

The budget is the biggest number one thing on people's mind. Even if you don't care how much your project's gonna cost, people still wanna know so they can allocate the funds. So delusions. Is a big one, and the cost is the biggest. So start talking with your friends and your colleagues. Start talking with contractors.

'cause that is the big thing that's all over the internet and I use it myself as a builder and a contractor. It's a way to come up with some very rough budgets for projects. So I've written a blog post about this and you can go onto my website and read about it, but I'm gonna, I wanna talk about it a little bit.

' cause if you, as a homeowner or in this discovery stage, one of the first things you're probably gonna do is search on the internet. How much does it cost per square foot to build a home?

And if they can do it, then. Maybe we should hire 'em. No, probably not. And then there's people talking about $150 a square [00:20:00] foot. What does all this include? Nobody really knows. Then you do have some people out there, they start getting to a little bit more realities, such as $300 a square foot and even $500 and up.

So you can see that. I'm not sure it's gonna help you much when you start. Googling that it's gonna help. At least we'll get some kind of stuff. But here's what happens with homeowners. It's like a human nature thing. So it's not your fault, but you start reading. You don't know what you don't know, for the most part, people are saying $175 a square foot.

All right, I'm gonna budget $200 a square foot when I start thinking about cost for my project. You're still wrong. You don't know it, and you are gonna spend thousands, tens of thousands, maybe even more on a custom set of plans for your project. And if you don't take the right steps during that process, you're dead meat.

One of 'em is the National Association of Home Builders, the NAHB. They generate a, report, and what they do is they interview a host of large builders across the nation and generate a pretty accurate I should say, detailed report for how much production home builders are paying to build homes, production home builders.

But that's where I, that's what I'm saying. This is where people are starting to get distorted. There's a lot of websites out there that their number one goal is to get you to click on their website and they're going, if you type, if you search for that, how much does it cost per square foot to build a home?

They know what your interests are. They want you to click on their article. They want traction to their website and they're using this data to write articles about it. People that don't know what they're talking about now, not everybody. There are some really good people out there writing really good articles about cost per square foot, and you're gonna wanna look for those.

Or even take the lowest number and add a little bit to it 'cause you want to be safe. Don't do that. You're gonna want to talk with the right people, ask the right questions. Then do some research and come up with a realistic number. Some of the things that you have to consider that a lot of people don't when they start thinking about budget.

In fact, some of these people on the Facebook groups are notorious for this. When building a custom home. Or I guess a remodel, but mostly a custom home or a home. You have to factor in the land purchase, how much the lot costs. There's websites out there that say you should budget $10,000 or $20,000 for a lot purchase.

The other thing that you want to think about, and especially before you purchase the lot, is the site preparation, the complexity of the site. What if it's a very steep hillside site? What if it's hard to get to? What if it requires a long road of access to get to the lot? What about, tree removal?

What about the potential hazards on the site, such as flood zones or earthquake, geologic hazards? Has anybody looked at the soils analysis? So the site preparation. And complexity factors directly into the budget of the project. So when you're out looking for a lot and you, oh, I love this view, but there's big boulders sticking out and it's a 45 degree slope, you're probably screwing yourself unless you have plenty of money and don't care how much it's gonna cost.

Are there utilities to the site? What about the sewer? What about the septic system? What about giving electricity to the site? What about connection fees? One development up where I live, it cost, I think $18,000 to connect to the power. That's crazy. Was that factored into the budget?

Purchasing plans from, these online plan sources, and how adequate are they? Can you just buy 'em for $1,500 and just send 'em to the city for a permit? You can't, and that's one thing you need to understand when you buy plans online. First of all they're like cookie cutter plant sets, although there are some pretty cool ones out there.

You still have to hire a local engineer. You probably will wanna modify the design. You're gonna have more costs. People on Facebook groups are saying, ah, I spent a thousand dollars from home plans.com. They don't like to talk about the fact that it cost 'em five more thousand dollars or 10 more thousand dollars to make the plans what they wanted.

What about the permit fees? What about the approval process? The permit process can take time and money. And also, what about the HOA? What about complying with an HOA? That costs money. That takes time. Are you in an HOA is the lot that you want to purchase in an HOA homeowners association? This is really important.

Interior design services, part of the design fees. Are you planning to hire one? Do you know if you need to hire one? Do you think you can do it yourself? When you look at, again, going back to some of these Facebook groups, pictures of the projects they boast and they spend $185 on per square foot.

That's not the niche I'm used to. So you're probably not gonna hear a lot about me and this podcast and in my book about how to be your own contractor and how to build a project really cheap. There's other people out there doing that. My niche is to help people that want to build. A quality home, go into it informed and not get, blown away.

You can build a different level of quality and massage your budget by building a different set of plans on the same lot. So you have to think about the quality level that you want. If you've purchased homes before, or built homes before you, and you have experience. You're gonna wanna share this with your architect and designer contractor that, look, I've done this before.

I don't want to ever do this again. I want a eight out of a 10 at least. So don't even bring me mediocre products. Or you could take the approach of, I'm not sure exactly, but I'd like to see a high, medium load some of the biggest options such as the windows or the floor plan. Things like that. I'd like to be empowered to make those decisions.

The general contractor. Construction management and overhead fees. So again I'm gonna obsess on these Facebook groups 'cause I just think a lot of them are a joke. But again, some of them are great. Did you hire a general contractor to do your project? How about that question? I. No, I just did it all myself.

It took me three years to build it. Okay, great. Now I know that I don't wanna have anything to do with what you did or I do wanna do with what you did, and I wanna put up with, that timeline and save what I think saves money, and we'll talk about this topic much later, but people think that they're gonna save money by being their own general contractor between mistakes and lack of relationships with subs and suppliers.

All the more power to you. The book I've written is gonna help you a lot, and I can even offer consulting services on that as well. So that's a big part of it. Interior design services are, sorry, I went on a little tangent there. Tier design services are imperative to a quality outcome. You could try it yourself, I wouldn't assume it's gonna come out great unless you have experience. You don't have to spend a ton of money on interior design services. You can bring somebody in early on to pull together all of the material choices and specifications, or you could have them carry you all the way through the project doing drawings and details.

So the last one in this whole cost per square foot thing. Is contingencies, allowances, having a contingency or an allowance for cost overruns. This is a percentage number that you should always have in the back of your brain or on your spreadsheet that you need to have available so that when you do get surprises, you don't get totally blindsided.

That's what this is about. I dove into the cost per square foot thing. That's an important part of this because the next episode is gonna be about building a budget, which gets a lot more detailed, a lot more intricate, and I want you to think between now and then, what is your investment goal? Forget about the budget, forget about the pictures that are getting you really excited.

We love those and we're gonna need those. But think about your investment goal, how much you want to invest in this property, how much should you invest in this property? How much could you invest in this property? Then we'll be working on a budget, and then we're gonna compare the two. That's what I have for you today.

We're not gonna talk about, bitching and moaning about. What you're experiencing on your project, although I'm happy to help with that. It's really more about everything that you need to do before you break ground, before you, even before you, you even spend $1, especially in this discovery phase.

And that is it. My name is Bill Reid, and this is The Awakened Homeowner Show. Thanks for listening.