Don’t Get Hung Up on the Cost Per Square Foot to Build a House
Honesty time: cost per square foot is a terrible means of accurately measuring costs associated with building a new home. So, what is it good for?
Cost per square foot … as a homebuyer in the planning stages, it’s a tempting calculation to ask your homebuilder for.
Yes, on paper, you get a nice, tidy wrap-up of your future home’s itemized-costs in a single, digestible figure.
Too bad it’s not that simple. (It never is.)
Let’s be clear: cost per square foot is a terrible means of accurately measuring the costs associated with building a new home.
And any misunderstanding you might have about how it’s calculated and used can lead to some expensive decision making.
Of course, cost per square foot has it’s place, but we need to have an honest discussion about its shortcomings as a predictor of cost.
COST PER SQUARE FOOT EXPLAINED
‘True cost per square foot’ cannot be properly calculated until your builder has identified absolutely every cost associated with your build, including plans, building materials, labor cost, bids from subcontractors, lot prep, interior finishes, etc.
For this reason, ‘true cost per square foot’ usually won’t be available until after the official estimate is drafted.
So, once your estimate’s complete, what goes into calculating your final cost per square foot?
CALCULATING COST PER SQUARE FOOT
It’d be hard (and probably more confusing) to cover all the ways builders figure cost per square foot.
At Sawyer Custom Homes, we follow the industry standard for calculating square foot price:
Total Cost of the Home = Livable Square Feet* of the Home
*Livable square feet does not include porches, garages, driveways, or unfinished space (like attics) in the home, but the cost of these items IS included in total cost.
Just to reiterate: without every critical piece of information, cost per square foot stops being useful altogether; especially when you consider builders can have different ways of looking at these costs.
HOW CAN COST PER SQUARE FOOT BE MISLEADING?
If you’re trying to use cost per square foot as a means of comparing estimates between builders, you might be comparing apples to oranges.
You might think you’re getting a better deal, but you’re actually not. Clarity is crucial when deciphering cost per square foot.
We can build a 2,000 square foot home with a 100 square foot porch and a standard garage. Or, we can build a 2,000 square foot home with 800 square foot of porch and a THREE car garage. And even though they’re both 2,000 square footage homes, the second one’s cost will be much higher on a square foot basis.
This also applies to finishes:
We can build a 2,000 square foot home with standard finishes and another 2,000 square foot home with high-end finishes and there may be a $40 per square foot difference between the two.
Ask your builder how they calculate the cost per square foot before using that information to make any decisions. Remember, cost per square foot is only useful when you know everything included in the builder’s cost. Be sure to consider all the costs associated with how you want your house finished, not just built.
WHEN IS COST PER SQUARE FOOT ACTUALLY USEFUL?
When is it useful? Almost never.
Granted, we understand predicting cost is important to anyone in the planning stages of building a new home, so metrics like cost per square foot are tempting to lean on.
But it’s an unreliable crutch.
Namely because, in the home building industry, there is no official standard for what constitutes a ‘square foot’.
Instead, we suggest that if you absolutely must use cost per square foot in your decision-making process, then use it as a loose gauge for ballparking final cost.
And if you’d like to use cost per square foot estimates to compare homebuilders, you need to be absolutely certain you have an exact apples-to-apples comparison between the two builders.
You don’t want to make big financial decisions by comparing ‘apples-to-oranges’ or using inconsistent information.
The fact is, not all homebuilders use Cost Per Square foot internally. It’s a number generated for your benefit, not ours.
You do need to clarify how your homebuilder calculates the cost per square foot. Once you have that, you’ll still want to have an in-depth conversation about the construction cost.
Every homebuilder is a little different, but we always sit down with our customers and detail the costs associated with their project or build – upfront. We give a firm price that won’t change unless they want it to.
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