You asked, we answered: Cost per square foot for building
Learn about how the magic cost per square foot ratio will affect everything, from the selections you make to the final home cost!
"What's the average cost per square foot for custom homes?" We get this question often. The question is understandable- it's a common metric the real estate industry uses to gauge the competitiveness of resale homes, and homebuyers have internalized that way of thinking.
To their credit, most of our clients know that custom homes are unique- after all, that's why they want one! But, unique means that we can't make hard comparisons. Even asking for a ballpark figure or price range on custom home will need to involve a discussion about details.
In fact, it's astonishing to see just how far apart costs for two seemingly "comparable" custom homes can be! Every custom builder will tell you that the answer to the square-foot question will depend on the architecture, the product selections, and the neighborhood. Two seemingly similar homes can have build costs hundreds of thousands of dollars apart.
We get it. "It depends" can be used to counter nearly any query. But it's frustrating, and it can also raise defenses! Is this the ante in a poker hand that includes bluffing and withholding of information?
We can't speak for other builders, but in our case, that assumption couldn't be further from the truth. We really, really strive for transparent pricing. Transparency serves our best interests AND yours. But, to get to that answer, we have to have the conversation above about those home details.
We also need to clearly define your market.
So: let's say that you're in a city where for-sale homes on Zillow.com or Realtor.com average $200 per square foot. You did this research and came to the table with that figure in mind. Although you might know that costs for a custom home will exceed the average, you'll set an initial budget at $200 and compare everything to that figure.
Goals and budgets are incredibly helpful when making any decision, and if you're building a new home, you'll need to gauge whether the price is competitive in your marketplace. But you can only do that if you know what marketplace you're really competing in.
(Hint: it's not the one defined by those $200 per square foot homes.)
Most metropolitan areas include several sub-markets, each of which will tend to include people of a similar income level. Each may also have its own deed restrictions. In addition, buyers in different sub-markets will have different expectations for products and finishes. That means it will cost more to paint a home in an expensive part of town because the painter has learned that meeting buyer expectations in this area will demand twice as much prep and more coats of paint. In fact, everyone on the job will have higher expectations for quality and will have to work to higher standards.
Some of these decisions aren't as visible as paint quality. For instance, the builder might specify that framing members be spaced more closely together to stiffen floors, that the plumber uses better quality piping, or that the mechanical contractor upgrades the ductwork. Expectations vary with the builder, the client, and the neighborhood.
Most of our clients get this once it's pointed out to them, and they re-set their price anchor. Whether they plan on eventually selling the home or whether they're building it as a legacy for their children, they want something that meets the standards for their real market. Average square-foot pricing? Instead, price a great result- you won't be disappointed.
Warm regards,
Tim Alexander
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