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In our Alliance Builders model home we often have prospective custom home buyers ask: What is your construction cost per square foot? I struggle to give a fair answer because there are so many variables involved.

The first problem is defining square footage, because there are several different methods of measuring.

• Is it measured to the inside or outside of the exterior walls?
• Is it just the total of the room sizes?
• Does it include porches, unfinished areas, mechanical rooms or unheated areas?
• Are stairs counted on all of the levels?
• Is the garage included?

The second problem is defining what is included in the cost, because the cost per sq. ft. could or could not include:

• The lot or land
• Actual building labor and material costs
• Plan drawing and engineering
• Building permits and fees
• Getting water, sewer, gas and electric to the home
• Construction loan financing
• Builder’s liability and hazard insurance
• Garage
• Landscaping and site preparation
• Driveway
• Real estate commissions and marketing expenses

The third problem is comparing the differences in the quality of the materials included in the home because there is a big difference in the cost of things like:

• Tile roof compared to composite roofing
• Commercial style appliances compared to standard builder grade appliances
• Custom cabinets and compared to production cabinets
• Solid surface counters compared to laminate counters
• Insulation and energy saving construction

If home buyers are going to use cost per sq. ft. to compare value they need to make sure that the method of measurement, construction costs, materials and finishes are clearly defined. Cost per sq. ft. is not really a reliable method of comparing value. Things like location, livability of the floor plan, curb appeal, low maintenance and utilities costs are better methods of determining value.

Don’t be deterred by a smaller home that appears to have a higher cost per sq. ft. Smaller homes generally will have a higher cost per sq. ft. because the costs for things like utility connections, heating and cooling systems, driveway, landscaping, appliances and plumbing fixtures are about the same for a small home as they are for a large home. Some smaller floor plans can be much more livable and offer better overall value than other larger homes.

Comparing new home cost per sq. ft. is like asking how much a car costs per pound? Does a Bentley cost more per pound than a Subaru?

Posted By Brad Ausmus