Without a doubt, the most talked about variable in custom housing is price. Widely considered to be the “standard real estate method,” the term most people use to start this discussion is cost per square foot. Sales executives use it, friends and neighbors use it, and often times builders use it as well. What does cost per square foot really include, though? Is it an effective way to compare builders and home plans?

If you have decided to build a home, or have done so in the past, then you have likely heard of most if not all of these phrases (and perhaps did not even realize that they are so different). Cost per finished square foot, cost per heated square foot, cost per conditioned square foot, cost per square feet under roof, and cost per square foot are all used by different firms and in different ways.

Are you aware that a standard custom home can have anywhere from 500-1,000 square feet of unfinished mechanical and storage rooms? Most architectural plans will not account for that space in the “total living space” figure, and so a builder might not include that space in their “cost per SF” figure. What about landscaping features and driveways, are those included in “under-roof square foot” figures? From Property Owner’s Association fees, to county water tap fees, to lake docks and garage spaces, there is a multitude of cost items that are often left out entirely when discussing initial estimates to build a home.

An article in Professional Builder Magazine (Nov. 2014) discusses a topic and puts it, rather bluntly, in a way that many builders can relate with. “The fact is, price per square foot is the least accurate and, frankly, the most ridiculous way to determine the true value of a home”. Why is this so? We have seen that there are many variables that need to be discussed when speaking about unit pricing. Additionally, price and value are not the same concepts. Every make of automobile has a price, but what is the value that a particular automaker’s brand conveys? What is the quality of construction, and finish, of that specific car? Unity pricing only applies to identical and identifiable equal units. Before you select your next home builder, request that they thoroughly convey to you what exactly they are including in their cost estimates, and additionally, ask them what intangible value their process and product has that competitors might lack. Remember, building a home is an emotional journey. This journey can be exciting, or it can be miserable depending on how it is managed. Can the value of the experience that a builder will offer be factored into a cost per square foot estimate?

By: Chris Hamblen GM/COO

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