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Myths and Math:
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| Estimating Log Home Costs
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| By Jim Cooper
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Unless research is
your passion, nothing is more exasperating than trying to
conjure up a realistic estimate of the finished cost of your log
home. Unrealistic estimates are easy enough to come by. For
example, you can multiply the cost of your log home kit by some
mythical factor. ("But Mr. Banker, they said it wouldn't
cost more than 2 1/2 times the kit price.")
You might also try square-foot multipliers. ("But Mr.
Banker, the builder said it would run about $50 a square foot.
He never mentioned that cost was for the house being on a slab
with sheet vinyl on the floors and tissue-paper paneling on the
walls.")
Several years ago, I attended an estimating seminar for
conventional homebuilders. The speaker started by asking the
audience, "What's the most dangerous way to estimate the
cost of constructing a house?" The almost unanimous
response was, "By the square foot." His second
question was, "What's the first question a potential
customer usually asks?" Answer: "What do your houses
cost per square foot?" Square-foot estimates are like
walking into an auto showroom and asking for a new car price per
pound.
What about kit multipliers, then? These diabolical little
numbers are always getting log homebuyers into trouble. They're
so convenient. And so potentially misleading! Thumb through back
issues of log home magazines and note the number of times that
featured log homeowners mention cost overruns. Many times, those
overruns resulted from the false security provided by kit
multipliers.
What makes multipliers so dangerous? They assume that the final
cost of the house bears a direct relationship to the cost of the
kit alone or to its size and that the cost of finish work is
proportionally the same for all log houses. The trouble comes
because there is greater potential variation in the cost of
finish work not directly related to the price of the kit than
there is in the cost of erecting the kit.
To see exactly what's happening, let's consider a fireplace and
how it affects square-foot costs and kit multipliers. Our
fireplace, which is not part of the kit, can e constructed for
$4,000. In a 2,000 square-foot house, the fireplace will ac
count for $2 per square foot of the finished log house cost. In
a 1,000 square-foot house, the same fireplace appears to
contribute $4 per square foot. The problem is that the mason
doesn't charge for his fireplace according to the size of the
house.
Suppose our builder tells us that houses cost about $60 per
square foot. If he is basing that figure on houses that
contained a fireplace and averaged about 2,000 square feet, and
we wanted a 1,000 square-foot house with a fireplace, our
estimate (based on his square-foot figure would be $2,000 low.
Consider all of the factors in a house that have an indirect or
no relations to the square-foot area of the house: kitchens,
baths, appliances, fireplaces, stairs. These are all potentially
big-ticket items, and yet square-foot estimates treat them as if
their cost varied directly with the size of the house.
Kit multipliers produce faulty results for the same reason. They
assume that all of the costs in a house are directly
proportional to the cost of the log package. In fact, most are
not.
Consider a log kit costing $40,000 that includes a $2,000 spiral
staircase. The manufacturer says a turn-key (completely
finished) house will cost about three times the kit price. So
the kit with the spiral stairs should cost about $120,000. Using
the same multiplier, the same kit without the spiral staircase
should turn-key at $114,000 ($38,000 times 3). Comparing
estimates reveals that the final cost of the staircase is three
times its cost as part of the kit. In other words, the higher
estimate includes $6,000 for a $2,000 staircase! It does not
take $4,000 to install a pre-manufactured spiral staircase.
So kit multipliers and square-foot costs are unreliable
estimators. Should they be ignored completely? Actually, these
figures can serve as valuable crosschecks if you understand
their limitations.
Suppose a builder tells you he will turn your $40,000 log home
package into a finished house on a time-and-materials basis (he
invoices you for labor and materials cost plus a small markup).
He estimates it will cost about $55,000 in addition to the kit
cost. Your log house will be 2,000 square feet, and other
builders in your area say that turn-key houses that size start
at about $65 per square foot.
Hear those warning bells? Using square-foot costs as a rough
guideline, your log home should run about $130,000 ($65 times
2,000). Yet your builder tells you he can do the job for $95,000
($40,000 plus $55,000). Either you are getting a fantastic price
or your builder is grossly underestimating the job--in which
case you can expect him on your doorstep demanding more money
before the job is through. Since he has contracted on a
time-and-materials basis, you will be liable for his poor
estimating.
So how should you estimate the final cost of your home? A sure
way is to talk to someone in the area who has built a similar
home recently. If possible, obtain figures from the home owner
rather than from your log home sales representative, unless that
person also constructed and finished the house.
This is not an attack on the integrity of log home sales people;
rather, it is simply that unless the sales rep has been involved
in the home's actual completion, he or she often does not have
an accurate idea of the final cost. Many log home put chasers
leave finish items out of the building contract with the idea
that the will purchase the materials and therefore the labor
themselves. Only when they balance their checkbook can you get
an accurate picture of the cost of their house.
Without kit multipliers or square-foot estimators, how can you
arrive at an accurate estimate of the cost of your 1oghome kit?
If you are using a contractor or builder to provide a turn-key
log home, let them do the legwork. Have them give you a contract
price--a firm figure to which they have signed their name. Their
contract should state exactly what work they are including in
that contract price and what work is specifically omitted.
My own building contract contains 18 pages of specifications
detailing both construction methods and materials used. It
breaks the house down into components, starting with site
preparation and proceeding through final landscaping.
If you plan to act as general contractor for your home's
construction, roll up your sleeves and turn on your calculator.
Start by obtaining a checklist of the components of a turn-key
house. (A detailed list can be found in my book Log Home Project
Planner) .) Attack the list item by item, attaching a cost
figure to each component. If the component is materials only,
obtain a cost figure from a local supplier. If the item is labor
only or labor and materials, obtain a cost figure from the
appropriate vendor or subcontractor.
Be sure to allow for waste whenever appropriate. Allow yourself
a margin of error, too. If your list is very specific, your
margin of error can be small. If you are obtaining estimates for
broad categories of construction, allow a greater margin.
The most reliable figures in your estimate will be actual
materials price quotes and subcontract figures-numbers to which
people have signed their names. In addition to providing you
with more accurate cost data, these are the kind of figures that
your banker will want.
Finally, be sure to include a category for "soft"
costs. These can be items such as building permits and fees,
construction loan interest; builder's risk insurance, portable
toilet rental, storage van rental, surveyor fees and anything
else not directly assignable to the construction of the house.
With each item on your list accounted for, add your numbers. If
the total fits your projected budget, congratulations. You're
not only well on the way toward that dream home, but you've also
considerably reduced your financial risk and bought yourself
some old-fashioned peace of mind. |
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