Construction Hard versus Soft Costs

One of the first things to do when creating a construction budget is to carefully define construction hard and soft costs.  Hard cost can be defined as those things that are needed structurally to construct the house.  These items cannot be skimped on but can be added to in order to create additional value or add strength to a house.

 

Construction Hard-cost Items

Hard cost construction items include:

  • Excavation, clearing property, and backfill
  • Foundation- includes footings, basement walls, steel, foundation drainage system, and waterproofing.  Rigid foam foundation insulation or special treatments on the foundation would be extra.
  • Concrete Flatwork- slab-on-grade, basement floor, driveway, patio, sidewalk.  Stamped concrete or acid stained concrete are extras.
  • Framing materials- lumber, nails, adhesives, subflooring, and other framing materials.
  • Windows- Low-e ratings, wood casements, triple glass considered extras.
  • Insulation- blown-in or batt insulation.
  • Basic plumbing and electrical wiring
  • Roofing materials- considerations include 15 lb felt vs 30 lb felt, 3-tab asphalt shingles, 25 year to 50 year warranty on shingles.  Anything beyond standard 30 yr shingle considered soft-cost.
  • Exterior finish- while this is essential to any house, this is considered in the soft-cost category because of the variety of options available.
  • Drywall- basic drywall is hard but more expensive texturing or special corners considered soft-costs.
  • Painting- basic painting is hard which is all walls and ceiling one color.
  • Millwork- basic cabinetry, doors, and moldings.  Extra wide base and upgraded doors considered soft-costs.
  • Landscaping- should have a basic allotment for final grading, seeding lawn, and a few shrubs.  Other fancy landscaping considered soft-costs.
  • Construction Cleanup- Each sub should be provided a clean place to work.  Cost of dumpsters and cleanup considered hard-cost.

 

Construction Soft-cost Items

Construction soft cost items can quickly overrun your budget if you don't keep them in check.  These are all the things that are great to have and that don't seem like a big upper on any single item but at the end of the construction project you can find you are thousands of dollars over budget.  Some soft cost items add a lot of value for the cost, especially if you plan to stay in you home for many years but most are a result of your great taste and appetite for something just a little nicer.  Soft-cost construction items include:

  • Exterior finish- you may have restrictions in your subdivision on this but options include stone, masonry, exterior insulation, stucco products.  These products add a lot of value to your house, especially when you consider the long-term durability and maintenance requirements, but they will also cost  you.  A good rule of thumb is to spend as much as the budget will allow for the exterior of the house.  Be sure to keep within reason compared to other homes in the area.  A full stone or brick house in a neighborhood of vinyl-sided houses is not going to provide the value that you may expect.
  • Plumbing fixtures- Plumbing fixtures add little value to an appraisal but getting the cheapest plumbing fixtures you can find is also a bad idea.  Research what brands are popular and will last the longest.  Stick will a consistent finish throughout your home.
  • Electrical fixtures-  The rule of thumb on electrical fixtures is to choose more expensive fixtures in the rooms that are used the most.
  • Cabinetry- this is the number one place folks go over-budget on their homes.  Be very careful in selecting cabinetry.  Consider the structure of the box rather than just the door design.  An expense but poorly constructed cabinet will fall apart in no time during normal usage.  Look for dove-tailed joints on drawers for example.
  • Millwork/Trim- standard is 3-1/2 inch base and 3 inch door casing.  Prices go up from there.  Solid doors are more expensive and desirable but if you live in a humid area they are more susceptible to swelling.  Be sure to do your homework.
  • Flooring- floor coverings are one item often replaced in homes.  Tile and hardwood floors come in many varieties and price points. You can't really go wrong if you pick something within budget. A few year down the road you can always give the place a facelift with something nicer if you desire.

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