Why there is no set price per foot that covers all homes.


Why there is no set price per foot that
covers all homes.
December 15, 2017
Many times I am asked “what is your cost per square foot to
build a home”?  I always respond there is
no set price per foot that covers all homes. 
While we will use square footage cost ranges, we prefer to price each
home design separately based on the plans and selected features.  In the last 12 months we have sold homes
which ranged from $245 per sq. foot of living area to over $520 per foot based
on Living Area square footage.  Both of
these homes were in the same community, however, they had vastly different size,
design features, and finish levels. 
There are numerous contributing factors that increase or decrease cost
per foot.  Here are some of them.
How is square footage
  While most SW Florida
builders calculate living area square footage to include the exterior walls,
second floor square footage is more open for discussion.  Some builders will calculate the areas
enclosed by the second floor walls which will include stairways, elevators, and
sometimes even open balcony areas.  We do
not include open balconies in our square footage and calculate the areas for
stairways and elevators one time, unless an area under a stairway is be
What square footage
is included:
  When the cost per
square foot is calculated, is the area associated with garages, entries, and
covered lanais included in the square footage. 
What about pool decks?  Each of
these areas has a cost to construct.  If
only air conditioned space is considered, a houses with large garages, covered
lanais and large pool areas will be higher per square foot due to the extra
costs associated with these areas. 
Second floor balconies often cost more per square foot than living area
to construct and yet are not considered in a per square footage cost that uses
only air conditioned space.
Total size of
Many items have similar costs
regardless of home size.  Permits, water
and sewer connections, standard pool packages, driveways, and landscape
packages are similar in cost for the same communities.  A larger home divides these fixed costs by a
larger number resulting in a less expensive overall cost per foot. 
Site requirements:  Different areas of SW Florida have far
different site requirements.  Inclusion of
worst case requirements will affect the cost per square foot.  For instance, most of the coastal area
requires the use of pilings.  These
houses also usually must be elevated at least four to six feet above existing
lot levels.  The use of pilings required
engineering and other structural work including pool pile caps can add $10-15 per
foot.  We have done all concrete four
story beach front homes where pilings were four to six feet apart on the
exterior walls.  This type construction
changes the price per square foot greatly. 
However, even off water sites have there own variations.  In transitional neighborhoods, if a lot had a
house on it before, there will be a credit for impact fees based on the size of
the original home.  So a lot which has
had a home on it before may have $20,000 or more in impact fee credits,
additional credits for water and sewer meters, and also was probably at least
partially filled with some mature landscaping. 
Other sites may require well and septic tanks which are far more costly
than connecting to established utilities.
Finish levels and
other specifications vary by builder:
Every builder has different levels of
finish and other specifications.  If a
builder likes to market themselves on cost per square foot, they are likely to
use less expensive finishes and other specifications to make the cost per foot
look attractive.  Other builders try to
base their finishes and specifications on a finished package.  This can be looked at similar to cars
pricing.  The car starts with a base
price and then various option packages can be included to reach the desired finish.  While the car has the same “size” its price
for this “size” increases greatly depending on the finishes.
Workmanship and
quality vary by builder:
  In the
Marco/Naples/Bonita Springs/Estero/Ft Myers area homes can be built (without
land costs) from $150,000 to well over $20,000,000.  The builder whose market is the smaller home
will obviously use the least expensive subs he can find.  The buyers of these houses are not expecting
the same workmanship and quality the high end builder is used to using.  While builders can “up their game” somewhat it
is important to compare “like kind” builders when comparing costs.  Otherwise the expected quality of
construction will not be the same on the finished home.
Personal Selections:  While usually done later in the process than
an initial comparison, personal selections can greatly impact cost per
foot.  Consider a homeowner who wants a
fabulous pool area.  They may add a
couple of fire and water features which can cost $10-15,000, enlarge the pool
with tanning ledges and water features which can easily add another $10-15,000
and finally want a large stone pool deck with screen enclosure with masonry
supports.  This can be another
$25,000.  So quickly $45-50,000 is
added.  If the house is 4,000 of living
area, this just changed the price per foot of living area by about $12 per sq.
foot.  This didn’t even get into interior
Design effects costs:  Builders who expect their models to be
compared on a square footage cost will design accordingly.  Typically there are closet pantries in
kitchens to take the space of cabinets and granite tops.  There maybe fewer windows and doors.   Ceiling heights and architectural details in
the ceilings maybe lacking.  The design
of kitchen and baths also greatly affect the final price.  Finally, while offsetting exterior walls may
result in interesting roof lines and architectural interest, they also add to
the construction costs.  Custom designed
plans and engineering also are more expensive than working from existing model
plans which don’t have to be changed.
Home site:  Last, if the price of the land is
included in the price per foot, variations must be expected for better
lots.  A lake lot in an area where most
lots have a home behind them is clearly superior.  In most cases it will have a 25-33% price
difference.  The same applies to golf
course views, better water views, and specific neighborhoods.  In any comparison make sure the home sites
are equal if they are being considered in the square footage price.  Otherwise the cheapest (and therefor least
desirable) lot will make a house with similar size and features look like a
better price per foot than a more desirable property.
Warranties and
  Each builder has a
different warranty package.  Research
these as part of the comparison.  If the
company is a small operation consider what happens if a warranty or other
dispute has a large cost.  Will they be able
to stand behind it even if they want to. 
What happens in the event of an injury or incapacitation of the
principal.  Can the company continue.   Is there staff to answer questions and
assist in change requests?  All of these
have a value in the construction of a home. 
There are numerous contributing factors that increase or
decrease cost per foot.  One of these is the
size of the home to begin with and the ratio of the living area to total area.  Many times the same house can vary in price
by well over $30 a foot with a few simple added features.  If a 4,000 sq. foot house has a negative pool
feature with fire bowls, a stone pool deck, a tanning ledge and masonry
supported screen enclosure the price can increase by $10 a foot.  If this happened to be a 3,000 sq. foot house
it would be $13 per foot or $8 a foot for a 5,000 sq. foot house.  This example just dealt with the pool area,
consider what can happen with cabinet upgrades and built- ins in other rooms,
sophisticated home automation systems, upgraded flooring, counter tops,
appliances, window and sliding door brands and designs, etc.  Other items that can affect the price per
foot relate to the lot itself.  Some lots
require additional site prep and landscaping.
A contractor can always design a home and specify the home
to minimize the cost per square foot. 
Sometimes it is difficult for a buyer to understand the difference in
these basic designs and lesser finish levels and a more expensive home. There
maybe times where a buyer doesn’t value the additional features a home or
builder offers as well.   Currently in Collier and Lee County there are
“custom” home builders building homes that don’t have tie beams.  While these homes meet structural codes,
there are numerous advantages, both in structure and finishing, which makes
almost all custom builders use a tie beam. 
Given these variables, how does a home buyer know which home
represents the best price and value?  The
answer to this question is very difficult for a non professional to find.  However, the best way is to establish your
own requirements for finish levels for builders to match.  Sometimes allowances can be used where
selections cannot be made.  Also keep in
mind that design matters.  Custom homes
are typically more expensive than stock or production models.  Architectural and engineering costs are used
once in a custom home and reused in production homes.  Also custom homes often have personal details
built into them which can increase costs. 
These can be larger lanais, garages, electrical items, windows, doors
and other items which increase costs while not affecting the living area square
footage at all.  A true comparison
establishes a value for custom features one house has that another may not.
Lastly, not all contractors are the same.  A cost per foot comparison doesn’t establish
a value for a better contractor who can deliver a better home with a minimal
amount of delays or surprises.  The
contractors warranty and reputation should be considered.  If it is a small company, what happens if
there is a death or injury to the principal and they are unable to fulfill
their daily duties.  What happens if an
error is made or major warranty  is
required, does the company have the resources and integrity to correct the
problem.  All of these items should be
considered in the price per foot comparison. 
In short, cost per square foot is simple one of the criteria you should
use in evaluating a builder.
Written By, Stephen Kaufman, CEO of DIVCO Custom Homes