The Truth About Price Per Square Foot

“What is your price per square foot?” This is the first question most often asked of a home builder and is, also, one of the most difficult to answer. Because the answer is more complicated, we want to help you better understand what is truly involved. It would be incredibly unfortunate for a client to hire a home builder under misunderstood conditions.

So- What does the price per square foot mean?  There are 2 parts to this equation.  The price takes into account the total cost of all labor, materials, and management for the project.  The square footage accounts for the total living area (emphasis on the living). The total living area includes all the areas that will receive heating and cooling.  Therefore, a garage that does not receive heating and cooling, will not be included.  Likewise, porches and driveways do not receive heating and cooling and are also excluded from the square footage. 

Here’s an example to illustrate the calculation: Let’s say the house you want to build has 3,000 square feet of total living area, a 2-car garage, and a 40-foot-long driveway.  The builder has quoted you $600,000 for the project.  Therefore, the price per square foot would be $200 ($600,000 divided by 3,000 SF = $200/SF). 

Now, consider building the same 3,000-square-foot house with a 4-car garage and an 80-foot-long driveway.  Even though the total living area has not changed, the builder will be unable to build the home for $200 per square foot because he has to pay extra for the additional garage and driveway labor and materials. Because the total cost increased, the price per square foot will also increase. The same would be true if the square footage remained the same, but you decided to have all of the walls painted by a renowned artist or selected all appliances from Italy. When the total cost rises, the price per square foot must follow.

Hopefully, these examples make clear that the price per square foot is most impacted by the decisions of the client NOT the home builder. All custom home builders provide the exact same service.  They hire the labor and purchase the materials to build exactly what you want.  The same tile setter would be hired to install $1/square foot tile or $50/square foot tile.  The same plumber would be hired to install standard Home Depot plumbing fixtures or the most expensive Kohler fixtures.  When you see a “famous” home builder on Instagram posting photos of a gorgeous mansion in a celebrity neighborhood, they provide the exact same service as a home builder who builds a modest ranch house in the middle of nowhere.  The price per square foot may be wildly different between the two, but both builders did the same thing- they managed the building of a custom home. 

What distinguishes a builder is NOT their price per square foot; but their approachability and integrity. If you are considering building a custom home, you should absolutely get multiple bids on your house from builders in your area. You will find that they quote you roughly the same price per square foot. However, you should take the time to get to know each builder and determine whether or not you trust them. Determine whether or not you would be willing to communicate with them for the next year or so as they build your home. Then make the decision to hire the overall best home builder for YOU.