We’ve tackled this subject matter previously, but it’s an important topic that warrants another look. I was pleasantly surprised when a client told us that one of our competitors told her it was $x/sf to build a custom home. This didn’t make sense to our client as they had no plans to look at, much less a discussion of fit and finish. The client was correct in that this pricing structure doesn’t make any sense.
I love this example of why this is a silly question. If you think a square foot price seems reasonable, try something similar and go to your favorite car dealer and ask how much they charge per pound of car. You’ll probably get some crazy looks. There are too many factors that go into each unique project to be able to give a blanket square foot price. Those factors can be summarized into three basic categories: complexity, level of finish, and size and components.
The more features and complexity a project has, the more labor it will require and thus cost more. Visualize a ranch home on a slab that is a perfect rectangle with a low pitch roof versus a two-story home on a basement with 40 corners, steep roofs, and angled walls. Even if they both had the same square footage, the latter is obviously more complex, labor intensive, and therefore costly to build.
I’ve long given the explanation that I could build the “same” home, with completely different specifications and one will cost twice as much as the other. For example, sheet vinyl flooring is less expensive than tile and 1×10 baseboards with applied base cap molding is more expensive than 3 ¼ “speed base”. Individually, some of these costs may not seem like a big deal when considering the overall cost of building a home, but all these decisions add up very quickly and the level of finish will have a significant impact on the overall cost.
Size has an interesting effect on pricing a project. Obviously, the larger the project, the more expensive the project will be. However, when considering labor, a small project may cost more for the labor than a larger project. That’s because many trades charge by the day, or at least have a minimum charge. It may cost $1,000 to have a framer come frame for 5 hours, but that same framer would spend another 4 hours framing for the same price, if the job warranted it. Multiply that across multiple required trades and the labor costs can seem inflated on a small project. In general, materials will cost more for a larger project, but even then, there are exceptions. For example, it will require buying the same amount of plywood to sheath a 6’ long wall as it would an 8’ wall. Sometimes an extra 2’ may not add up to much extra cost at all. Then there is the fact that while a 5,000sf project will cost more than a “similar” 1,500sf project, the price per square foot for the larger project will most likely be less than the square foot cost of the smaller project. This is partly due to efficiencies in scale and partly because the more expensive areas, such as kitchens and bathrooms, will most likely make up a larger percentage of the project on a smaller project. Is this confusing? Does it seem like some of my arguments contradict each other? Good. That’s the point. Pricing a construction project can be complicated and confusing, which is why using a generic square foot price makes zero sense. It serves no useful purpose other than for a contractor to brag they have the lowest square foot price. There is probably a reason for that low price though. Nothing against Hyudnai, but don’t go buy a Hyundai and expect Mercedes quality, performance, and service. Do ask how much they charge per pound though; I’d like to know the answer!