Why there is no set price per foot that covers all homes - Divco Custom Homes

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

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 square 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 calculated: While most Southwest 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 utilized.

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 home: 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 SWFL 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/Fort 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 square foot. This didn’t even get into interior selections.

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 Company: 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 square 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 sqaure 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.