If you’re thinking about building a custom home, there’s no doubt that the question has crossed your mind. How much does it cost per square foot to build a house? It’s a lot like answering the question; What’s the cost of a vacation? Or how much is a new car? Building a custom home often follows the same logical analysis. These questions and assessments contain so many variables that it is impossible for anyone to answer them accurately without first asking several dozen additional questions and gathering much more information in order to establish scope and expectations.
If you ask ten different people to describe what a “custom home” means to them you’re likely to get ten very different answers and you may even get very different answers from ten different custom home builders. Unlike production homes where features and finishes are purchased in bulk to achieve a similar cost per square foot for an entire neighborhood, custom homes are designed to be unique to the style and budget of specific individuals. This is exactly why they are called custom homes and not production or tract homes. We often talk about cost per square foot in the construction industry simply because pricing needs a base reference point but that reference point needs to be understood in depth by the client looking to design and build a new custom home. As custom home builders, we specialize in homes that range from approximately $250 to $750 per square foot regardless of the amount of square feet being built so we would like to suggest that this is the wrong question to ask if you’re thinking about building a custom home. The question is always well intentioned, but nevertheless, it is a frustrating question to try to answer, probably because there isn’t a straightforward answer and it’s wildly subjective to perception.
If you were shopping for a car, would you ask a dealer; What is the cost per cubic inch of interior space? Probably not, right? We all know that the brand, model, and features of any given vehicle will dramatically affect the cost of a car—while the amount of interior cubic space has very little to do with the relevance of the overall price. Yet the most common question we get as general contractors pertains to the cost per square foot, so we will attempt to answer it as best we can.
Our custom homes ranged between $250 per square foot and $750 per square foot. You might be wondering, But what exactly does that include? and Why is there such a wide range in cost per square foot? So first, let’s review a few terms, industry standards, and assumptions so that we’re on the same page here from the start with our degrees of perception within the building and development industry.
“Square footage” refers to the amount of heated and cooled or conditioned space below the roof, not including garages, porches, or decks. This would include the kitchen, bathrooms, bedrooms, hallways, laundry room, dining room, and so on, but it would not include the crawl space or attic space.
Our “cost” per square foot would typically include soft and hard costs but would not typically include the landscaping, pool, decor, window coverings, demolition of existing structure, or furniture within this “cost per square foot” analysis even though these line items could very well be contracted with the build.
Soft costs are architectural, engineering, design, permit, insurance, and professional fees often referred to as general conditions. Not included are any loan origination fees or construction interest payments that you would make during the construction period as a client or the builders risk policy which is typically carried by the client through the build process and required by the lender.
Hard costs are all tangible assets used to build the project: all labor and materials, subcontractors, supervision of labor, and builders profit, overhead, and contingency. So everything from tree removal and excavation, masonry work, mechanical work, lumber, drywall, and even the final cleaning service.
The most simple way to think about what is included in a total build cost is to imagine a finished home on the day of the final walk-through (before you move in)—minus the land—and that is what we include in our scope of work and in our pricing when we talk about total costs with cost per square foot only being what is within the conditioned space. Do you see why the question is very misleading and how some builders may leverage this question to pull a bait-and-switch?
As a general rule—and with all finishes being the same—the smaller the home, the higher the price per square foot. The reason for this is that although some costs vary with the size of a home (drywall, flooring, paint, etc.) other costs are static (drilling a domestic well, installing a driveway, or supervising a project) and it takes roughly as long to build a 2,500 square foot home as a 5,000 square foot home. Consider the following: If the cost to drill a domestic well is $15,000, that would equal $3 per square foot on a 5,000 square foot home and $6 per square foot on a 2,500 square foot home. You would need the same well no matter the size of the home, but the cost per square foot is double on the smaller home.
Another challenge for using the cost per square foot as a means of comparison or conversation is that there can be a drastic variation in cost between two homes of the exact same size and layout, simply because of the different materials or levels of finishes used. For almost every item in a custom home, there are low, medium, and high price points. For example, if a home has thirty windows, you could price basic white vinyl windows at $300.00 per window and your window budget would be $9,000.00. For the exact same house, you could price top-of-the-line wood-clad aluminum casement windows at $1,000 per window and your window budget would rise to $30,000.00. Same house, same number of windows… but a $21,000 difference between window packages or one line item of the hundreds of line items taken into consideration when building a custom home. If we were building a 3,500 square foot home, this difference in pricing would affect the price per square foot by $6 per square foot.
Consider another example: If you were to price kitchen appliances in a 3,500 square foot home, you could install GE Profile appliances for around $10,000.00 or Viking and or Wolf appliances for closer to $40,000.00. In this case there would be a $30,000.00 difference in overall cost—$8.57 per square foot—simply due to the appliance package.
Hopefully now you can begin to see why using a cost per square foot analysis to select a builder can be a very misleading metric when considering building a custom home. In these two examples, there is a difference of nearly $15 per square foot for the same 3,500 square foot home with the only exceptions being the windows and the appliances. These scenarios which express themselves in almost every decision throughout the construction process are why we highly recommend going through the design-build process rather than engaging in the competitive-bid-process where you will most likely be subjected to bait-and-switch sales tactics which use allowances to artificially deflate construction costs in order to make contractual costs appear much less that they actually are only to bombard you as the client building with allowance reconciliations in the form of change orders.
Asking how much a builder costs per square foot is the wrong question to ask and basing your decision to use a builder simply on how they respond to you with the cheapest cost per square foot to build is the wrong path for experience and product. The right question and proper approach is; What is my estimated total cost for a like finished project and what is included or excluded by you as the builder? If budget is the key driver for you as a client, then the builder can modify the square footage and the level of the finishes to stick to your budgeted target. This is why we always recommend getting a general price for a product with like finishes and then proceeding through the design-build process with a not to exceed limit set early on in the design phase. You wouldn’t buy a car based on its price per interior cubic inch, and you shouldn’t select a custom home builder based on the cost per square foot approach. There really isn’t any uniform method of defining what is included in any given square foot price. Local contractors might be able to quote average home building costs and figures, but before you put too much faith in average numbers, keep in mind that the only house that you really care about is the one that you are about to build. The best approach to determining how much your new home will cost might be to simply work backward. Start by determining how much you can afford to spend, then be realistic about the size of the house you need, and finally, decide what and where you can afford to build.
This cost per square foot summary is the main reason why we embody the design–build philosophy. We can design anything, and we can build anything. The only question is what do you want to pay for? What ultimately matters most is designing a home that can be built to meet your needs and wants within your budget and schedule. If you’re looking to build a custom home in the Tampa Bay or St, Petersburg, Florida areas contact us today and we’ll walk you through the process.