One question we inevitably hear during EVERY New Construction Buyer meeting revolves around Cost Per Square Foot. Even though we’ve become numb to these questions, we try to indirectly offer some perspective on where the builder stands compared to others.

cpf-mortenBuyers often rely on this flawed metric to give them comfort as they try to evaluate the cost of building a custom home early on in the process.

Not to rain on their parade, but there’s a reason most builders don’t like and sometime refuse to quote CPF: it’s not accurate.  It’s not an apples to apples comparison when comparing two (or more) builders. For instance, one 3000 sf home might be 200,000 more expensive than another depending on the layout, garage location, allowances amongst a multitude of other reasons.

Now to the Why…Well, let’s examine the anatomy of a home:

  1. Cost of a home is derived from it’s features more so than it’s size: All homes need a kitchen, bathroom and bedrooms. That’s pretty obvious.  As you examine each item, you can see that a square foot in the kitchen or a bathroom is much more expensive that a square foot in a bedroom or great room because of the added items: cabinets, countertops, appliances, sinks, toilets, etc. Bedrooms are only comprised of drywall, carpet (possibly hardwood), some electric, and light fixtures for the most part.  So, the larger a home, the more you can spread out an expensive kitchen.

  2. Extraordinary costs might drive up the cost per square foot: When you’re building on a hillside or a walkout basement, there’s more cost.  It might come in the form of retaining walls, sub-walls, piering or other forms, but it can add cost quickly and doesn’t exactly create a value oriented addition.  Other than keeping the house in place, of course!

  3. Basement and 2nd floor square footage is naturally cheaper than 1st floor square footage: Cost of a home is driven by the overall size of it’s first floor footprint.  That means, the larger the 1st floor, the more expensive.  This is why first floor master homes (including ranches) are the most expensive homes to build.  Typically, second floor space is less expensive and basement square footage (if you’re not on a slab) is the cheapest square footage to add.

  4. Modern means more – More often than not, a modern home with extra glass windows, fancy stairways, unique materials and interesting designs can add cost.  Many buyers salivate at this type of architecture, but it does come at a cost. Such is the price you pay for style!

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Now, as you explore your builder options, keep in mind that there are plenty of other options to review building cost and to compare builders to one another.  Below are just a few that we recommend our clients look into (with our assistance of course).

  1. Compare Allowances: A home is the sum of all it’s parts. Rather, of it’s allowances.  These are the areas that you get to put your touch in and around the home.  By comparing sample allowances, you’ll get to see how your builder stacks up with others.

  2. Review Builder’s Specifications for similar homes – Although spec sheets might be technical, it’s always a good idea to understand what you’re looking at and ask questions.  This document can be the key to understanding your future home.

  3. Rely on your AGENT (if they have builder experience)

So, here’s the brightside: Cost per square foot might be used VERY early in the process to determine whether your budget is adequate.  It can help offer ballpark building numbers to gauge where you may stand on building a house before you have a plan to bid out.

So next time you’re pricing a house, don’t put too many eggs in the Cost Per Square Foot basket because it could get you in trouble. Like anything though, if it’s used in the proper context and the expectations are understood, it doesn’t hurt to pop a few numbers into a calculator to ball park a building cost.