1. Methods used to calculate square footage differ
Some builders measure a home’s size from the outside of the wall framing. Other builders measure to the outside of the siding material, so an all-brick home may be hundreds of square feet bigger than the exact same home with lap siding! Was the second-story area of a 2-story high entry foyer included? It’s heated space and can be a beautiful area in your home, but it isn’t “walkable” square footage. How about the staircase and its openings—was it counted once or twice? Such differences in calculating total square footage can have a dramatic impact on the home’s reported square footage and thus its cost per square foot!
2. What square footage was included?
Was the basement included? All of it or just the portion of the basement that’s finished living space? How about attic spaces? What if the attic has a sloping ceiling and you can only stand up in a small portion of that attic? Finishing space in a basement or attic is typically much less expensive than finished footage on the main floor of a home. The foundation, walls and roof are already there. So, if the price per square foot of the home was calculated based on “finished” square footage, that figure is typically lower for homes with finished basements and/or attic space.
Do you include a home’s 3-season room, porches, deck or patio? What if those outdoor spaces are covered by the roof? If the garage is not included in the home’s reported square footage, then a bigger garage won’t affect the price per square foot because those square feet don’t count, right? So, why not build a 4-car garage? Obviously garages and decks aren’t free. Cost per square foot comparison is meaningless if the square footage of these.
3. What’s included in the price?
Builders usually base their cost per square foot number on their “standard” materials. Builder A includes a hardwood flooring, Builder B figures carpet. Builder C includes full sod and a generous landscaping allowance, Builder D’s price only includes grass seed in the front and side yards. Was a concrete driveway included? Don’t laugh! Such factors don’t affect the size of your home but can raise or lower the cost per square foot.
4. Land costs.
Did the cost per square foot quoted include the home site? A $25,000 lot represents $12.50 per square foot for a 2,000 square foot home. But if building that same home on a $60,000 lot, the home site equates to $30 per square foot, $17.50 per square foot higher! Even the neighborhood can impact your cost per square foot. If subdivision covenants require a full masonry (brick, stone or stucco) front elevation, the home will cost more than if it were built with vinyl siding on the front. And community amenities such as walking trails, pocket parks, clubhouses, pools, etc., all have a cost which is passed along to each homebuyer in the form of higher prices for the building lot.
5. The included materials/products used differs by builder.
Your price includes granite countertops! But granite ranges from about $40 per square foot to over $100 per square foot based on color and thickness. Are the included hardwood floors 3/4” or the cheaper 3/8” thickness? Five-inch wide wood flooring is considerably more expensive than the same brand/wood species/finish three-inch wide flooring. Obviously, seeing on a builder’s specifications sheet that granite countertops and hardwood floors are included is insufficient for comparing different builders’ cost per square foot. Quality name-brand windows could easily add $10,000 or more compared to off-brand windows for your home. And even within name brands, product prices vary widely. Quiet dishwashers—something you’ll truly appreciate—are a lot more money than their entry-level counterparts.
6. Quality workmanship isn’t cheap.
Different electricians, plumbers and heating contractors’ prices vary, too. Trim carpenters, drywallers, flooring installers and painters’ work are all evident the day you move in. Does their work reflect the pride you’ll have in your new home? The value of caring craftsmen shows up when you have annoying air leaks around your new windows, doors that close by themselves or poor water pressure in your master bathroom. In order to get a lower cost, a builder can opt to hire the low-bid plumber or drywaller on your home. Or, will you benefit from the builders that enjoy long-standing relationships with quality sub-contractors, even though it may cost more? Know also that labor rates vary significantly by regions. Your brother may have gotten a new home built in Texas for $90 a square foot, but in the northeast, it’s going to cost more to build an identical home.
7. Your choices have a huge impact on your cost per square foot.
Would you believe just your kitchen selections alone could increase your home’s overall cost by $10-20 per square foot or more? It’s true! Because of expensive cabinetry, countertops, faucets, tile floors, appliances and plumbing fixtures, etc., bathrooms and kitchens might be well over $500 per square foot, compared with perhaps $50 per square foot in a bedroom or family room. Most builders’ pricing includes “allowances” for common selections such as flooring and lighting fixtures—but allowances vary by builder. Also increasing cost without increasing square footage are: fireplaces, lighting, crown molding and specialty trim, window treatments, and even paint—many builders charge $100 or more each time you change paint colors. Then there’s “hidden” products such as high performance insulation behind the walls and in the attic that might add $3-$5 per square foot to the price of a home
8. Cost is driven by design.
Though design has a strong bearing on a home’s cost, design, functionality and a home’s livability don’t necessarily correlate to square footage. In fact, good design can often save you money when, for instance, you can eliminate long hallways and actually reduce the home’s size.
Outside, sophisticated rooflines and grand entryways cost more but don’t add to a home’s square footage, so such homes cost more per square foot. Inside, there’s almost too many variables to count that impact a home’s cost but don’t affect square footage. Take ceilings for an example. Many new homes feature 9-foot high or taller ceilings, tiered or vaulted ceilings and artful ceiling details. Such ceiling amenities increase the cost per square foot compared to homes with standard, 8-foot high flat ceilings.
Every corner in a home’s foundation costs more, so simple rectangular foundations reduce a home’s square footage cost compared to homes with numerous foundation jogs. Carpet typically comes in 12’-wide rolls, so designing a room 12’-8” wide is more expensive due to the added labor costs for cutting and seaming the carpet and increased material waste.
Then there’s the cost of the home plans. Pre-drawn plans might cost $1,000, about $.50 per square foot for a 2,000 square foot home. Custom-drawn plans typically range from $2-$10 or more per square foot.
9. The type of home you build impacts cost.
A one-story home with 2,000 square foot of finished living space has foundation under the entire 2,000 square feet and a roof covering the 2,000 square feet. A 2,000 square foot two-story home with 1,000 square feet on the main floor and 1,000 square feet upstairs will have a smaller, less expensive foundation and a smaller, less expensive roof. And, the wider/deeper one-story home will often require a larger, more expensive building lot. So even though finished square footage of the two homes is identical, two-story homes usually cost less per square foot.
10. The total size of the home.
Some costs are constant regardless of the size of home—permits, environmental and other government fees, inspections and utility hook-ups are unaffected by a home’s size. A smaller home will still have a kitchen sink, dishwasher, range, refrigerator, and microwave—just like a larger house. Generally, smaller homes have higher costs per square foot (assuming finish levels are comparable.)
Check out your builder.
We hear horror stories of builders who will quote a price based purely on square feet and then pound the buyer with extras after the job is started. Reputable builders will have a long list of references from happy homeowners. Contact those references! Similarly, there is great value in a builder’s longevity. You don’t last in homebuilding without treating customers right. What’s the cost per square foot of your new home warranty?
Every home builder can give you a detailed and accurate cost per square foot.
A “production” builder who builds the same portfolio of plans over and over again, develops entire neighborhoods and offers limited personalization can most quickly quote you a price per square foot. Their fixed standards, limited variables and economies of scale typically enable them to offer the lowest cost per square foot.
Semi-custom builders offer a wider variety of home designs, building sites and finishes for your home.
Such builders will typically modify their home plans to suit your needs, too. They may initially provide a price range, such as “$100 to $200 per square foot depending on what you want” – not very satisfying, but know as you make decisions, the ultimate price per square foot comes clearer into focus.
A custom home builder may never build the same home twice. She doesn’t have historical data for that specific home to look back on as a starting point. Knowing that custom home buyers often have specific products and amenities
DO YOU REALLY WANT THE CHEAPEST?
Even if you can get fairly comparable cost per square foot info from multiple builders—meaning they’re all bidding using the same set of plans, specifications, home site cost factors, product amenities, finishes, etc.—are you going to automatically take the lowest price per square foot? How do you suppose the builder with the lowest price per square foot was able to do it? Plus, you want your builder to make a profit on building your home. If she doesn’t, she won’t be in business to take care of any warranty issues with your home.
So…if you choose to, use preliminary cost per square foot numbers to determine if you’re “in the ballpark” budget-wise. Don’t assume they’ll be the basis of your purchase agreement. Exercise great caution when using cost per square foot in comparing builders and their homes. Even if you believe you’ve got an “apples for apples” comparison, the low cost per square foot builder might just be one of those bad apples!