The Costs That Don't Show Up in a Construction Bid

Cost & Estimating
Written By Adam Marquart

When you get a construction cost estimate, the number at the bottom isn't what you need to have in the bank. It's what the contractor is going to charge you to build the house.That's not the same thing.The difference has a name. Most homeowners have never heard it.

Hard Costs and Soft Costs

Hard costs are what a contractor builds: foundation, framing, mechanical rough-ins, finishes — everything that becomes the house. That's what a builder's bid covers. That's what a construction cost estimate covers.Soft costs are what it takes to get permission and financing to build it. They're your costs, not the contractor's. None of them show up in a builder's bid because no builder is responsible for them. All of them show up in your bank account, most of them before anyone breaks ground,

The List

Here's what typically falls into soft costs on a residential build:

Building permits. Municipalities calculate permit fees differently — some use a flat rate, others charge a percentage of construction value. On a $400,000 home, permit fees can run $3,000 to $8,000 or more depending on where you're building.

Utility connection fees. Water, sewer, gas — each utility may charge a tap or connection fee to bring service to the property. In some markets these are nominal. In others, especially in areas with new infrastructure or growth controls, they can run $10,000 to $20,000 combined. Find out before you commit to a lot.

Structural engineering review. Most municipalities require a licensed engineer to review and stamp structural drawings before a permit is issued. This is an owner cost. The contractor isn't the one paying for it.

Survey and site plan. If a current survey isn't on file — or if the lot conditions require an updated one — you'll need it before you can pull a permit. Add a site plan if your municipality requires one for submittal.

Geotechnical report. On acreage or in areas with variable soil conditions, a geotech report may be required before the foundation can be designed or permitted. Less common on a standard subdivision lot. More common on raw land.

Construction loan origination fees. If you're financing the build, the lender charges an origination fee — typically 1–2% of the loan amount. On a $400,000 construction loan, that's $4,000–$8,000 before the first draw is made.

Appraisal. Construction lenders require an appraisal of the completed home value before they'll fund the loan. That cost is yours, paid upfront.

Title insurance. Required by most lenders. Another cost that lands before construction starts.None of these line items appear in a contractor's bid. Every one of them hits your account.

The Builder Experience Tell

An experienced builder will walk you through soft costs in your first or second conversation. Not because they're responsible for them — they aren't — but because they've watched clients get caught short mid-project and they don't want that problem on their job.The builder who doesn't bring it up isn't necessarily hiding anything. It may just not be on their radar, which is itself useful information about how many projects they've run. Ask directly: "What should I be budgeting beyond your bid?" The answer, and how quickly it comes, tells you something.

The Planning Number

Budget soft costs at 10–15% of hard construction cost on top of your estimate. On a $400,000 build, that's $40,000–$60,000. Most of it is due before a contractor touches anything.When the RED cost estimator launches, it will cover construction scope — what the contractor builds. It's built to be accurate for what it covers. What it won't cover is this list. I'll say that clearly on the estimate output, but now you have the full picture before you get there.Both numbers need to be in your budget before you commit to either. The estimate tells you what it costs to build the home. This is what it costs to be allowed to build it.

Sources

Adam Marquart
Next

How to Read a Construction Bid