This is usually one of the first questions a person asks. It is understandable as everybody is looking for a starting point to determine the feasibility of building a new home, but it should be used with caution.
A Lexus and a Kia are about the same size, right? Why does the Lexus cost four times as much as the Kia? People don’t ask this question. They understand the Lexus has forty two airbags and plush leather seats. It will last longer and hold its value better. A new home isn’t much different but people often get fixated on the cost per square foot number. Make sure when you talk to a builder that you are clear whether you are looking for a Kia, a Lexus or something in between. A one size fits all cost per square foot estimate is impossible to provide.
Builders are in a tough position, if they ballpark an estimate too high, then it scares the potential client away. If they estimate too low the potential client will hold them to that number. If you want to build the exact same home plan that the builder has built in the past, they should be able to get you a very close cost to build. If it is not a floor plan they have built before, the cost per square foot estimate they give you will be nothing more than an educated guess. It could easily vary by 10% or more.
Does the cost per square foot include the cost of permits, water fees and sewer fees or does it just include the structure itself? Does it include landscaping? What is included can greatly affect the answer. The pretty built-in cabinets, large covered deck and high end appliances that one builder assumed in his guesstimate might have added $30,000 to his figure. That $30,000 just added $15 per square foot to the price of the home. It doesn’t mean that builder charges more than another builder, it just means they assumed higher end finishes. Make sure you are comparing apples to apples when you get these ballpark estimates.
Be realistic with the numbers that home builders give you. Don’t use this common thought process, “I talked to three builders and their estimates ranged from $130-160 per square foot, but I’m convinced it will cost $110 per square foot.” If you keep hearing the same amount per square foot, don’t hold out hope that you’re going to find the builder that is somehow considerably less expensive than others. Keep in mind that most builders should be fairly close in price. Their contactor fees and profit numbers might vary, but their cost of materials and labor should be very similar. Some builders have better connections or more buying power, but not to the extent that people think. One builder might pay $8.00 for a sheet of plywood while another pays $8.30. You’re not going to find the builder with a secret supplier where he can buy for $3.00 each. If you do then there is a problem. Keep in mind the numbers I’m using are for illustration purposes only.
The above scenarios are all assuming you are looking for an up-front price per square foot based on vague parameters and without a complete set of plans. Once we have completed architectural and engineering plans, we can obtain accurate bids from our subcontractors and suppliers and provide you with a detailed proposal and an accurate cost to build. We will also provide you with a detailed specifications list with this proposal.
I do think that cost per square foot is a necessary evil in the early stages of planning a new home. Just keep in mind the above points and I recommend you don’t get too consumed with the cost per square foot.
We are here to help you plan and design your new home within your budget. Click here to read about the three key factors when planning a new home. If you have questions about the costs for a project you are considering, we would be more than happy to discuss it with you. Please contact us anytime.