12/11/2022
When I recently mentioned to someone that the cost to build their home would be around $350/SF, their response surprised me and once again revealed the major confusion, misinformation, and variability in this discussion. The response I received was that they heard that they can get their home built for "$40 to $60 per square foot". When I pressed them on this number, they insisted that this information was correct.
Needless to say, I won't be building their home, but I am equally confident that their 1,200 square foot house will ultimately cost them far more than $72,000.
The question about cost per square foot is usually one of the first questions that arise when speaking to a new potential client. There is so much ambiguity to this question, though, that I can honestly quote just about any number! Think about that: I can quote $200/SF or $400/SF in these initial conversations and be honest in each case. How is that possible?
The best analogy I've come up with is this: "How much is a 4-Door car?" I think everybody understands that the answer to this question depends on several variables that must first be determined: What Make do you want? What Model? Do you want leather interior or cloth? Heated and cooled seats? Is there a sunroof? Etc. I can honestly answer the "4-Door question" with $20,000 or $100,000...or to better tie-in the analogy: $5,000/door or $25,000/door.
The misconception is that we builders all include the same assumptions and scope when quoting cost per square foot. But that is far from accurate. There is no industry standard for this... and there can't be, because every home and every homeowner is unique. Do you want granite counter tops or Formica? Do you want stucco and stone on the exterior or painted plywood siding? Do you want composition shingles or a metal roof?
On top of that, the costs for the thousands of different materials that make up the construction of a home are constantly changing. These are just a couple of the factors that make up the variability in cost per square foot.
What about scope? When a contractor quotes a cost per square foot, are they including the cost of the plans? Building permits and utility connection fees? Landscaping? Rear landscaping? Fencing? Appliances? Window coverings? How many different paint colors/sheens will they allow? These items alone can add $60/SF or more to the cost of building the house, but these items aren't always included in the "off-the-cuff" cost per square foot conversation.
I read a book on the topic years ago that addressed this very issue. It's called "The Owners Dilemma", and one statement the author made has stuck with me over the years: "It's not the cost at the beginning that matters, it's the cost at the end". This seems rather obvious, however, homeowner after homeowner have fallen victim to their own ignorance at best or salesmanship at worst.
Educate yourself. Knowing what isn't included is perhaps more important than knowing what is.
Nowadays, when asked what our price per square foot is, I tell people that it's whatever they want it to be. I can create an honest budget to build a home at just about any price point they want... well, maybe not $40/SF.
The cost per square foot conversation needs to be a long one. Our goal is to learn about or customers needs, and educate our customers on the reality of the total costs associated with their build. It's not the price at the beginning, it's the total cost at the end that matters.
