We open this snack size episode by asking a simple but critical question. How do we estimate the cost of a renovation or new home when the design is still evolving? We explain that the conversation starts before someone even becomes a client. In our first discovery call, we ask three questions. What is the scope of the project, what is the timeline, and what is the budget. Most people say they do not know their budget because they do not know what things cost. We clarify that cost and budget are not the same. Budget is what you can spend. Cost is what something might require. Without knowing the budget, we would be designing in a vacuum and cannot guide decisions.
Sharing a real budget helps us design responsibly. We are not judging anyone’s number. We simply need a target. If a client says they can spend $500,000, we will design toward that amount. If the real number is lower, the client should say so early. Otherwise expectations drift, and the design can quickly outgrow what someone can afford.
From there we describe how cost checking works during design. Early conversations are based on experience and ballpark numbers. We promise clients that if they share a real budget, we will design something that is close to it. Sometimes we realize during the design process that the wish list does not fit the budget. When that happens we call a meeting, explain the gap, and pivot early before anyone gets too attached to ideas that cannot be built.
One way we can help clients understand tradeoffs is the grocery cart method. During schematic design we put everything in the cart. Then we ask contractors for early pricing. This is not a contract price. It is a ballpark number. Once we see the receipt, we can decide what to remove or change.
We also talk about bringing contractors into the process at the right time. Contractors need drawings and clear information to give meaningful estimates. If someone walks a builder through a house with no plans and asks for a price, the answer will be a huge range. If a builder quotes an exact price this early, that's a red flag. Good pricing depends on good information.
Another common misunderstanding is the difference between project cost and construction cost. Construction cost is only the building itself. Project cost includes everything else. That means architecture fees, site work, landscaping, furniture, moving costs, and other services. Many homeowners talk in project cost while industry professionals talk in construction cost, which can lead to large misunderstandings.
We close by emphasizing one key point. Work with professionals who tell you the truth about costs, even when it is uncomfortable. Honest conversations early in the process make better decisions possible and prevent painful surprises once construction begins. Once you've broken ground, as Sheri says, "You're married." And a divorce from your team is much harder.
(00:00) Intro
(00:36) Budget vs Cost Explained
(02:34) Why Architects Need a Real Budget Number
(04:19) Designing Within Budget Expectations
(05:54) The Grocery Cart Method for Early Design
(07:28) Ballpark Pricing From Contractors
(10:04) Why Renovations Are Harder to Estimate
(13:15) Why Accurate Drawings Matter for Pricing
(16:55) The Problem With Googling Renovation Costs
(18:14) Site Conditions That Change Pricing
(19:57) Project Cost vs Construction Cost
(22:19) Avoid Professionals Who Tell You Only What You Want to Hear
(23:41) Final Thoughts
Marilyn Moedinger (00:00):
Hi everyone, and welcome to a snack size episode of Home: The Second Story. I'm Marilyn Moedinger and I am from Runcible Studios in Lancaster, Pennsylvania and Boston, Massachusetts.
Sheri Scott (00:12):
I'm Sheri Scott from Springhouse Architects in Cincinnati, Ohio.
Today, we want to talk about: How do you figure out project costs when the design is still evolving? So, through the entire design process, we're trying to kind of take the temperature of where our costs are falling. We think that that's a really important part of our service for people. And starting from the very beginning, Marilyn, how do you tackle that?
Marilyn Moedinger (00:46):
So, in the very first call that we have with clients (even before they’re clients, so just the first discovery call), we ask people three questions. We ask them what the project is (like the scope), what their timeline is (when they want to get started and get it done), and what their budget is.
So, from day one, we're asking, what is your budget? What 9 out of 10 people say is, “Well, I don't know what things cost, so I don't know what my budget is.”
Sheri Scott (01:14):
They know what they want, probably, but they don't want to share (laughs).
Marilyn Moedinger (01:19):
They're mixing up two concepts. So, cost and budget are two different things. So, the first task is to differentiate those two things. So, for example, your budget is what you can spend. It doesn't matter what something costs. If you say, I have 50 bucks for dinner, then that's going to narrow down where you can go.
If you're a family of five, like you're going to say, well, that's going to narrow down where I can go. Like we're probably going to the taco truck, and it's going to be freaking fantastic. So, there's nothing wrong with that. But you do have to say, “This is what I can spend.” And we have to talk about that first.
If people are unwilling to talk about what their budget is, we're going to be designing in a total vacuum, because we're not going to be able to help guide them to making solid decisions. So, the first thing they have to tell us their budget.
Sheri Scott (02:09):
Yes, agreed. And that matters because like you said, designing in a vacuum, like I can design a house that is $750,000, I can design a house that is $7.5 million and $75 million. Like where are we? We just need some guidance. I don't care, I'm not going to judge you.
Marilyn Moedinger (02:34):
I don't care at all (chuckles).
Sheri Scott (02:36):
It may be a litmus test of if we're the right architect for you or not, but you want to know that too. There is no downside to sharing your true budget with us.
Marilyn Moedinger (02:47):
Yeah, I hear people say, “Well, if I share my budget, then they're going to spend it all.” And I'm like, “Well, yeah, I am going to spend it all.” So, if you don't want me to spend that amount, give me a lower amount. If you tell me $500,000, I'm going to spend $500,000 on your house. You can't be mad at me because I spent all the money.
Well, if you don't want to spend $500,000, tell me $400,000, I'll spend $400,000. We are not here, as Sheri said, to judge or whatever, but we do need people to be realistic. And then we can start saying, “Now, because of our experience and what you're talking about doing, here's how what your dollars that you want to spend and what we see construction costs doing aligning or not.”
Sheri Scott (03:33):
Yes. In our experience – I mean, the whole conversation is in our experience, this is what we've seen, can you do something different? Of course. There is a bottom, there is a bottom of how inexpensive it can be. But I've said this a hundred times on this podcast, and we've only done 40 podcasts. But it depends. It depends on your project, it depends on your personality, it depends on everything.
When we start the very first design, first phone call, what's your budget? We meet, meet for an hour, two hours, get all of your ideas, all of your thoughts, all of your things. I know your process is a little bit different because you usually visit an existing site, but for us, a new house, they come into the office.
And my promise to them is, if you share with me your real budget, and I say we can do this, it's my responsibility to get us close. Not a hundred percent in, but what I design for you is going to be close.
And sometimes, it has happened during the design- I'm like I told them we can do this, but I actually cannot get everything that they want into this design. And what do I do? I call an emergency meeting and say, “Come back in, we need to sit and talk about this.”
Sheri Scott (04:48):
I usually have sketches and ways to explain why they're not going to get what we thought they could get. And then we have a conversation about it and we figure out how to pivot and how to change direction early because if I have your true budget number, then we can make those decisions early before it hurts too much.
Marilyn Moedinger (05:28):
That’s right. And having that as early as possible is where we have the biggest levers to pull, like we can make the biggest difference. So, I, in my experience, I don't think I've ever met a client whose budget was larger than what they wanted to do. Everybody wants more than they can afford. Everybody at every level, at all the time. It's just human nature.
So, the way I describe it to our clients is I say, “Okay, you said your budget was $500k (I'm just saying a number). What you're talking about doing is about a million dollars worth of work.” So, you're kind of talking about double the amount of work.
Marilyn Moedinger (05:54):
And then sometimes people say, “Well, maybe we could go a little bit higher than $500k. Like maybe we could go to $600k or $650k if we thought it was really worth it, if we were getting this extra stuff that was really meaningful to us.”
So, what we usually do in that circumstance is I say, “Okay, let's go through schematic design and here's what it's going to feel like.” We're in the grocery store, we're putting everything in the cart, everything you might want. We're going to get to the checkout and we're going to see what it costs. And we're going to see that it was $100, and you were hoping to spend $50.
But now, we've got a receipt and now we can see we've got everything in the cart and now we can be intelligent about what we're removing from the cart. And we can say, “Alright, and that checkout process is we get early pricing from contractors.” So, we do not go past schematic design without getting early pricing from contractors.
And that, especially in renovations that are really complex, is really important because the contractors coming in early help identify things that are going to really drive the cost and they're very surprising things often.
Sheri Scott (07:28):
Could you describe that cost that you get? Because is it preliminary pricing? Like it's not a contract price.
Marilyn Moedinger (07:37):
No, it's not a contract price, no. But it's enough that I say, look, we're in the ballpark. We don't know where our seat is in the ballpark, we don't have our assigned seat yet in the ballpark, but we know which ballpark we're at and we know what team we're watching, but we don't know more than that.
So, it's a ballpark number. So, everyone's instinct is to immediately dial into it and be like, “Well, they said this was $500k. I think I can find it online for $400k.” And I'm like, “No, no, no, no, no, ballpark.”
Sheri Scott (08:06):
That's not where we are.
Marilyn Moedinger (08:07):
That's not where we are.
Sheri Scott (08:09):
I think that's important to note because I don't know how it is for you, but I usually only do that with one contractor that I think could be a really good fit for our client. A lot of clients come in and they think at every single stage they're going to get three different prices from three contractors and get them to compete, and that's just not the reality where we are.
Sheri Scott (08:31):
Contractors aren't that hungry yet. It will change and they'll get hungry. But right now, when everybody has plenty of work and there's plenty of work to go around, they balk at that because we don't pay them for that work. It's their marketing cost.
It's their cost to come in and talk to us and put the hours in to give us an idea of cost. So, we really appreciate that time that contractors give us. But sometimes, clients push back a little bit and say, “Oh, I thought I would get three bids.” Well, we're not there yet. So, we're still in preliminary design, schematic design, different words for the same thing. And where do you go from there, Marilyn?
Marilyn Moedinger (09:25):
Well, we actually do get three. So, in the Boston area, it's like I hear that and I hear a lot of people saying, “Well, don't choose the builder on cost, only get one bid.” But my clients are instantly like, “Well, but what if this isn't right?”
Marilyn Moedinger (09:51):
So, in the world of super custom, super complicated renovations, it is better to get multiples because one guy, like a new construction house is very easy to price. As a former estimator at a contractor, I feel like I can say that with years of experience having done that.
Sheri Scott (10:07):
Yes, because we know the site, we have a site plan, we have materials, everything, brand new materials.
Marilyn Moedinger (10:15):
Linear foot pricing, square foot pricing, like you know what this house will cost. When we used to estimate houses back when I was doing that, we would basically give the four minute estimate or maybe four second estimate and be like, our house is $1.5 million.
Sheri Scott (10:30):
Yeah, we do that.
Marilyn Moedinger (10:31):
And then we do the work, and then it'd come out as $1.493 (million) or whatever. It's so close because we know. But in the world of custom, high-end and mid range renovations, there are so many little variables and they need to walk the site, they need to meet the owners, and they need to factor in all these little weird things.
So, one contractor might say, “You know what, I see that that water service isn't going to be big enough. We will need to tap the line in the street, that's going to be $30k.” Let's say the other two builders missed that, well, we don't want to find that out later. So, we're getting those insights at that moment.
And we're really respectful of their time as well. So, at the end of that, when we have those three sort of quotes, then the goal is to choose a contractor based on that, and work with that contractor moving forward.
Marilyn Moedinger (11:39):
So, those three guys know that one of them will win the job. We're not just pricing things and then they might have to price it again, and then someday maybe it's a job. They're pricing a real job and because they're guys that I know or guys that I've worked with or whatever, they know I'm not bringing them stuff.
They might not win it every time, but I'm going to get another thing in front of them and we're going to try to keep distributing the work amongst all the guys for whom they're the best fit. So, I would say that's not necessarily a regional difference. Maybe it is, but I think it's about super weird renovations on really old houses.
Sheri Scott (12:06):
Yeah, I think that's part of it. And I think that we do that process a little bit later, like the next step.
Sheri Scott (12:15):
Like our first price reach out really is a litmus test to see are we in the right direction. And then when we get a little bit more locked in and we know exactly square footages and things like that, we do talk to, or we can – sometimes my clients, the first builder that I introduced them to to do that gut check, they really liked them and kind of form a bond early, and that's okay, because I have brought that builder to the table.
But more often, we'll talk to at least two, if not three builders at that stage. I think that you're talking about where we have all of the information, we know all of the windows. We know in new construction, we know square footage. We haven't picked out the hardwood floor, but we know where it is, and we know this client and how expensive it's going to be, so we can give them some guidelines.
Marilyn Moedinger (13:15):
And that's what we have in our bid set. So, we've got that all. We have like a six-page single spaced bullet point outline spec where we're giving an outline at that stage of like here's a level of finish. Here's what we're expecting, here's how the walls are constructed. Here are some things that we want to draw your attention to.
I mean, I want to also zoom out and say that all we're talking about here, about how to get accurate pricing at the beginning of a project, we've mentioned things like having an architect who knows what they're doing and drawing a set of drawings that is accurate enough to get reliable pricing.
So, garbage in means garbage out. So, if you show up with a napkin sketch, then (and I love a napkin sketch) – or even worse, I hear this all the time where people bring a contractor in and they walk them around their house and they say, “Oh, like, well, we want to do this over here and we're thinking about an addition over there, but maybe it's over there.”
And the contractor is like, “Well, this is going to cost between $300,000 and $900,000. Like I don't know what I'm talking about.” And that's how you can weed out not good contractors, too. Because if they're willing to give you a specific price, then they're not being honest with you.
Sheri Scott (14:30):
I was just going to say, I'd rather the range, because if they say this is going to be $425,000, there is no way, no way they know that.
Marilyn Moedinger (14:42):
There’s no way they know that, no. And so, rather than wasting the contractor's time, because the contractor, what's the first question they're going to ask? Do you have plans? Because they're going to show up, there's no drawings, the owner is going to be pointing and waving their hands around, the contractors like, “It's between $300,000 and 900,000,” and then the homeowner is completely unsatisfied by that answer.
It's a waste of time. So, bringing the builder in at the right moment is something that the builders want, too (laughs).
Sheri Scott (15:10):
Which goes back to our conversation about architects services and guiding people through the entire process. Because getting started on the wrong foot, whether it's with budget or with builder or who you hire for any stage.
Marilyn Moedinger (15:26):
It's about the pricing, too.
Sheri Scott (15:28):
Yeah, and bringing people in at the right time.
Marilyn Moedinger (15:30):
That's right. And also having the relationship. So, we have the relationships in our markets that when I call a builder, they know I'm bringing them something serious. It's going to be very different when a homeowner cold calls them and says, “Hey …” They're going to sound like a tire kicker.
And when they're coming through us with a builder that we had established relationships with, you're also going to get better pricing because they know that working with us means they're going to get good drawings, we're going to be there.
The contractors, the first thing they ask me when I call them and say, “Hey, do you want to take a look at this project?” And they say, “Are you going to be on it the whole way through?” That's the first thing they ask. I say yes. And they say, “Alright, we're in,” because they know what that means. It's predictable for them. And the more predictable it is, the better and more accurate pricing they can give.
Sheri Scott (16:22):
The more general scope of this is that we've said before, design goes right along with cost and price, where we start very general and big and broad. And every step, every stage of the process, we just narrow down and get closer and closer and closer until finally, you get to what we call a contract price, which what you sign on the dotted line, I agree it's going to cost this.
Marilyn Moedinger (16:55):
Well, and I think, some other things, some other pitfalls that I think happen to homeowners early in the process when they're trying to navigate cost and budget and all these things, is they'll google what does a project cost or what does it cost to renovate a kitchen? And then it comes back as, well, it'll cost $20,000 to $30,000.
Or they say, well, if I add up the cabinets and I add up the plumbing fixtures and I add everything up, I get $22,000, so it should cost $22,000 to renovate a kitchen. And they're not thinking about all of the other things that go into making a project happen.
Marilyn Moedinger (17:35):
And that's the danger with sort of googling things, and unless your project is exactly the same as that other person's project – and for me, working in historic homes and old homes and all this kind of stuff, it can vary house by house on the same block.
I just did a house in Charlestown that was down an alley that was pedestrian that was … so trucks couldn't get to it, cars couldn't get to it. And it was off a one-way alley that was off another one-way alley that none of which had access for big trucks. That project cost a lot more per square foot to do than the project that I'm doing in a suburban area where we can fit 10 trucks in the driveway.
Sheri Scott (18:14):
Right. It makes a difference.
Marilyn Moedinger (18:15):
People don't think about that but those things drive the price (up) 20, 30%. It can drive the price pretty seriously.
Sheri Scott (18:24):
The other thing we make sure that people understand similarly is that we are talking about construction price of the house, not architecture fees, not putting in the driveway …well, putting in the driveway the actual paving usually in ours is included. But how hard is it for construction people to get back there?
We have a project that is kind of in a suburban area, but to get back to the site, they have land kind of surrounded by suburban site, and they had to put in a new culvert to get the construction trucks there. So, in a first glance at this project, it wasn't as much as it ultimately ended up being.
Another thing that a lot of times is not in the first couple of line items is any kind of landscaping. And that can be anywhere. That can be $25,000 for a few bushes just so it looks like the house belongs there, or it can be literally a million dollars (laughs). It is insane.
Sheri Scott (19:33):
AV, like just there's so many things that we don't know in the beginning that cannot go in a hard line item. And I think another time, we can talk about allowances because that's a whole nother conversation. But just my advice is know what the price includes when you get any price at any point.
Marilyn Moedinger (19:57):
That's right. And that's why with my clients, we talk about project cost and construction costs. So, project cost is the big cost. That is absolutely everything. That's the cost of the homeowners having to move out and rent somewhere, that's the cost of the new furniture, the architect's fees, the driveway, the landscaping, everything that's related to the project.
Construction cost is actually one chunk of that. And so, one of the first things I'm always telling people is I'm saying … clients, homeowners speak in a project cost and industry people speak in construction costs.
Sheri Scott (20:35):
A hundred percent correct.
Marilyn Moedinger (20:36):
So, that is super dangerous. And that is right out of the gate. There's a fundamental misunderstanding that can be 2 to 5x of a misunderstanding. So, if someone says I have a million dollars- in my head and in every contractor's head, we're thinking a million dollars for the build.
What they're thinking is a million dollars for the architect, for the surveyor, for the driveway, for the landscaping, for the surveyor, for everything. And so, that's why in my project planning workbook, which I have on my website, it has a budgeting worksheet which starts with your top number.
What's your number? What is that project number? And here are the things you need to subtract and at the end; that is your construction number.
Sheri Scott (21:11):
That's interesting. I have a project cost calculator and we start with square footage cost because we do new construction. So, if you put in this calculator (it's a glorified spreadsheet) your square footage cost, and then there are a couple of questions like, do you have a difficult site? Do you have an easy site? Do you have an average site? What kind of landscaping do you want? Do you want high end? Do you just want curb appeal? Are you going to have a pool?
It goes through all of those things and adds them on, including the architecture fee, interior design fee, if that's separate. And it doesn't capture everything, but it just tries to convey what a project cost is. And it is way more than construction cost.
Marilyn Moedinger (21:59):
Way more. So, that feels like a little bit of a somber note to end on in terms of this conversation.
Sheri Scott (22:19):
It's real, though.
Marilyn Moedinger (22:20):
But it's real. And I think if I want to convey one thing through all this process, through this conversation, is to avoid people who are telling you what you want to hear. You need people who are going to tell you the truth about what you're up to, about the real cost of things, about the alignment between what you want and what your budget is.
And if that’s off, you cannot just resist the human nature temptation to find people who tell you what you want to hear because people will- contractors, architects will tell you just to win the job.
Sheri Scott (22:58):
From the beginning, because when you have dug ground, you're in it, you're married. You are in it and you can't turn back.
Marilyn Moedinger (23:09):
And it's very, very, very hard to switch architects or contractors, like very difficult once you're in it. So, selecting architects, selecting contractors we've talked about that in other episodes and we'll continue to talk about that.
But I think making sure you're working with people who are giving you the real story. I mean, both of us said we don't care what your budget is, we just want to make sure that you're getting real facts to make good decisions.
Sheri Scott (23:37):
Well, thank you, Marilyn. That was good. And I feel like we're maybe helping some people here.
Marilyn Moedinger (23:41):
I hope so. That's the idea.
Sheri Scott (23:43):
Thanks for joining us today on Home: The Second Story for a quick snack. Questions for us, topics you'd like us to cover or interested in being a guest? Reach out at admin@htsspodcast.com, and follow us on Instagram. See you next time.
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