My Contractor Keeps Talking About 'Hard Costs'—What Does That Even Mean?

If you're diving into a new home build or renovation project and your contractor keeps throwing around the term "hard costs," you're not alone in wondering what exactly that means—and what it doesn't include.

Let’s break it down, because understanding this now can save you a ton of surprises (and stress) later.

Hard Costs vs. Soft Costs

Every home project budget can be divided into two major categories:
Hard Costs and Soft Costs.

These aren’t just accounting terms—they represent when the money is spent, what it’s spent on, and who's responsible for managing those costs.

What Are Hard Costs?

Hard costs are the tangible, physical construction costs involved in building your home or renovation. These are usually incurred during the construction phase and are typically easier to estimate once your plans are finalized.

Examples of Hard Costs:

• Site work and excavation

• Foundation and concrete

• Framing materials and labor

• Roofing

• Windows and doors

• Exterior siding

• Plumbing

• HVAC systems

• Electrical systems

• Insulation and drywall

• Interior finishes (flooring, cabinetry, tile, paint)

• Landscaping and fencing

• Driveways and walkways

Hard costs = what you see going into the home.

When your General Contractor (GC) gives you a construction estimate, it's almost always referring to hard costs only. That’s why the number can feel way off from your actual total spend.

So, What Are Soft Costs?

Soft costs are the behind-the-scenes expenses that happen before construction starts—and sometimes continue after it ends. They're not directly tied to physical building materials, but they’re crucial to getting your project off the ground (and over the finish line).

Examples of Soft Costs:

• Architect or designer fees

• Engineering fees (structural, civil, geotechnical)

• Surveying and site assessments

• Permit and rezoning fees

• Legal and accounting fees

• Insurance (builder’s risk, liability, etc.)

• Interior design services

• Project management or consulting fees

• Financing and loan interest

• Property taxes during construction

• Utility connection fees

• Inspections (structural, energy efficiency, etc.)

• Marketing or real estate fees (for investment properties)

Soft costs = what makes the construction possible.

Unlike hard costs, these can vary widely based on location, team, and project scope—and they’re often harder to predict early on.

Why the Difference Matters

The biggest misconception homeowners have is assuming that the contractor’s quote covers the whole project. In reality, it usually covers just the hard costs. That means if you haven’t budgeted for soft costs, you could be caught off guard by tens of thousands of dollars in unexpected expenses.

And here’s the kicker:
Your soft costs directly influence your hard costs.

• The more complex your design, the more expensive it is to build.

• The longer your permits take, the more holding costs you’ll have.

• A lack of clear plans can lead to delays, miscommunication, and rework—all of which increase construction costs.

Pro Tip: Plan the Whole Picture

When you’re budgeting for your project, think of it in two phases:

1. Pre-Construction Phase (Soft Costs)
   Everything you need to design, plan, approve, and prepare the site for building.

2. Construction Phase (Hard Costs)
   Everything it takes to physically build or renovate your space.

So when your designer asks, “What’s your budget?” — what exactly are they referring to?
Chances are, they’re talking about construction. But that’s only one part of the picture.

Knowing what’s included (and what’s not) helps you plan smarter, ask better questions, and avoid the “how are we already over budget?” panic halfway through.

And the next time your contractor or project manager talks about "hard costs," you'll know exactly what they mean—and more importantly, what they're not mentioning.

Need help getting started?

Inside your Home Hub, you’ll find a complete project budget template that breaks down each item so you can understand both the hard and soft costs of your project.

Fill in as much of the soft costs as you can and then when you get your contractors budget, fill in the hard costs.