Calculating the Replacement Cost of New Home Builds

When determining the replacement cost of a new home, there are many factors to consider. Unlike older homes, new builds use current construction cost data to help owners make an informed calculation of the replacement cost of the new build. Homeowners of new builds and professionals in various industries can also use The Douglas Residential Cost Guide to calculate the replacement cost.

How to Calculate the Replacement Cost of New Builds

1. Estimate the Total Above Grade Finished Living Area

The first part of the calculation process is to accurately estimate the total, above grade level, finished living area. With a new build, this is relatively easy as typically the plans or architectural drawings are available to estimate the floor area. The total floor area is always estimated based on the exterior, and perimeter dimensions. With a new build, based on the plans/drawings, the extra features of the house can be observed and included in the estimate.

2. Calculate All Items

When you estimate the replacement costs, all items must be included. Some of these items could be but are not limited to:

  • Excavation
  • Foundation
  • Backfilling
  • Framing
  • Exterior finishes (wall covering, roof material)
  • Windows and doors
  • All interior finishes (flooring, wall coverings, ceiling finishes)
  • Electrical and plumbing
  • All fixtures, built-ins, fireplaces, unique features

The benefit of a new build is that you will have the actual cost from the construction, from all trades, suppliers, and other ancillary costs.

3. Include Additional Quotes

If you have done your market research prior to the build, you will have gotten at least two or three other quotes from contractors and suppliers. It is imperative that you include these other quotes in your replacement cost estimate as typically when you choose a builder you have negotiated the overall build cost and the contractor has discounted the cost as much as possible to get the project. This is called the “Actual Cost”.

4. Calculate Real Cost

When estimating replacement cost, the “real cost” is important as it also includes the overall median calculation from the build cost of the contractors who did not build the residence and it takes some of the discounts out of the equation.

When you have a loss, the insurance company does not have the luxury of time to be able to go into the marketplace and collect multiple quotes to rebuild your house and negotiate to get the lowest cost. The insurance company must work as quickly as possible to get you back into your residence and therefore does not always end up with the lowest cost. The insurance company is working more from the “real cost”, exclusive of discounts. Even when estimating the replacement cost of a new build, you must consider that the replacement cost, after a loss will be something higher than what the actual cost was.

Replacement Cost Calculator for New Home Builds

The Douglas Residential Cost Guide helps professionals and homeowners accurately calculate the replacement cost of their homes. With over 30 years of experience, we use the most up-to-date information in the process. This user-friendly resource helps homeowners calculate replacement costs for insurance purposes. Take the complexity out of calculating replacement costs with The Douglas Residential Cost Guide.