A recent client has prompted me to address again a subject I have tried to convey on my website regarding cost to build and designing toward a target cost.

The amount of disinformation regarding building costs being perpetuated by the housing industry and real estate market is beyond my belief, and if you will follow the logic of the information I am about to convey, you will understand not only how misleading the information is, but why it is perpetuated.

At least half or more of the initial calls I receive ask the age old question, “How much do you charge per square foot to build a house.”  Some will actually listen to my long answer. Most I can just imagine wish they hadn’t called me to ask the question, as all they wanted was a number. 

But any number quoted over the phone is basically meaningless. The only accurate short answer is, “it depends.” Most will readily agree that they understand that the level of finishes will impact the price. But it starts way before that stage.

Let’s start with the site. How much site prep will be involved? This could range from a few loads of  fill dirt, properly compacted to level out a building pad, to extensive clearing, excavation of up to 7 or more feet of expansive soils and importing enough “good” fill to replace what was dug up and possibly also hauled off. So the range of this important first step could range from next to nothing to over $10. per square foot.

Now we’ll get to the structure itself. As I briefly discussed in my FAQ section of my website, the basic shape of the house has a significant impact on the cost. The example given there shows that a 2500 square foot house, if shaped 50’x50’, has 200 linear feet of exterior wall system. This includes the foundation footing through the wall itself (studs, plates, insulation, sheathing, housewrap, exterior finish, drywall, paint, interior trim) to the soffit and fascia materials in the overhang. The same square footage, shaped 25’x100’ has 250 linear feet of these components, a 25% increase in cost of the exterior wall system, before you even think about the variables involved in the types of materials that could be used.

Then of course the height of the walls has its impact. Twelve foot walls have 50% more materiel in them than 8’ walls. The labor of raising them, and the rest of the work to be done at that height will cost more.

Then you have the issue of the level of complexity of the shape impacting the waste factor of materials as well as increasing the labor costs involved. The more “cut up” a house is, the more it will cost “per square foot” to build.

The number of interior walls used to divide the interior space naturally has its impact.

The steeper the pitch of a roof, the more materials will be needed to cover the same floor space, and the higher the labor cost will be to construct it.

One of the biggest factors in driving cost “per square foot” is the fact that this figure is most often quoted on the conditioned space, as opposed to the total “under roof” space.

The garage and porches or uncovered patios for that matter, do not appear magically for free, and the ratio of this space to the conditioned space often varies widely on custom homes. This single factor can have a tremendous impact on the actual cost to build the home. This is why most subdivision homes have tiny porches and garages that will just fit your vehicles.

I think I’ve made my point.

So, you are asking now, why does everyone else I talk to batt these square foot figures about if they are so meaningless?

There’s a couple of good reasons. One is that for a great portion of production builders, the figure actually represents an appraisal value rather than a true cost. It’s easy and simple to quote, and doesn’t require any real construction estimating skills. If they have much experience as a builder, they will balk at anything different than what they are used to building, since they know they may not come out too well. If they are behind that part of the learning curve, they might figure it out before they finish your project.

I noticed years ago that in trying to quote building prices based on “past experiences", sometimes  I didn’t come out too well, and other times I felt guilty for making so much on a project. I guess it all comes out in the wash, eh? But in all seriousness, wouldn’t you rather know that your figure being quoted is not based on some hopeful alignment of averages for the builder? Especially if you’re the one who is making up for lost revenues on another project.

 It seems to me that it is more fair to pay for what you get, instead of what someone else got. Or maybe you’ll be the lucky one and someone else will be picking up your tab.

This brings us to accurate cost estimating for an individual project. Very few builders will take the time to do this, even if they are capable. It’s tedious, time consuming, and you stand the good chance your prospect will go with someone who quotes them a ridiculous low figure over the phone without ever seeing the plan. It doesn’t make you feel any better that they stand a good chance of getting in a mess and adding to the lore of contractor horror stories.

For the past four years I’ve been using an integrated design/estimating software that has given me a tremendous advantage in determining costs accurately and efficiently. It allows me to tighten my profit margin down, because I can make it consistently. I can avoid the typical over runs on custom projects. (The last project was a cost plus in the $450,000. range and was within $1,500. of what I budgeted.)

I was going to delve into the designing to cost aspects of design-build, but it’s late so I’ll save that for next time.