knowledge

Know Your Costs: Hard and Soft Costs Involved in Building

When preparing a budget for your new home build, it’s important to note some key differences in home building costs. A common approach is to first divide them into hard and soft costs. Generally speaking, the hard costs of construction are expenses that pertain directly to the physical construction of a building. Soft costs are any expenses that are not directly related to physical building.

Hard Costs

Hard costs, which are sometimes called “brick-and-mortar costs”, are associated with the physical construction of a building’s structure, the construction site, and the landscape – things like labour and materials. Since the nuts and bolts of a home are easy to define because of their physical nature, hard costs are usually the first to come to mind when budgeting. The budget for your hard costs will encompass everything from the start of the excavation to the fine details in the finishing touches. Some initial hard costs include demolishing an existing structure, excavating, grading, filling the construction site, and pouring the foundation of the home.

In addition to the home development itself, you can expect to see utilities, concrete, equipment, paving, HVAC systems, and more under your hard cost line items. With landscaping, you will need to account for expenses such as grass, fertilizer, mulch, trees, flowers, and shrubs. All finishes, including cabinetry, lighting, moldings, flooring, paint, and more, will also be included in this category.

Hard costs are estimated prior to starting your build by a reputable home construction company. They are experienced in knowing the type and quantity of materials you will need before the ground has even been broken.

Soft Costs

Soft costs are the expenses that aren’t immediately obvious because they are not directly related to labour or the building materials. Due to their intangible nature, they are often overlooked by homeowners, so it’s wise to check what is (and isn’t) included in your pricing.

Soft costs are also seen in every stage of home building, from the planning stage to beyond construction. In the planning stages, you will likely see costs associated with architectural services, interior design, engineering fees, construction insurance, building permits, and others. During the home building process, there are administration, project management, and utility permit fees that will need to be accounted for as well.

Unlike hard costs, which stop after a home build is complete, soft costs can continue after construction. These can include building and property maintenance, insurance, security, and other ongoing fees related to the upkeep of an asset.

Knowing What’s Included

Knowing what’s included, and what’s not, in your home price will ensure your budget stays on track. Reputable builders are transparent with their pricing and will provide the full costs of your home, from the start of construction to the time you receive your keys. They will also provide a breakdown of hard costs and soft costs so you are well aware of how your money is budgeted for construction.

When you are well versed in the costs involved in building a home, your dream home will come with no unwanted surprises – just delight!