How to Avoid the Dangers of “Cost Per Square Foot” Pricing



Anyone thinking of building a new custom home always wants to know... what is the cost to build a new house?


That is a fair question.


But... did you know the most dangerous question you can possibly ask is...


"What is the cost per square foot to build a house?"


On the surface this may seem like a fairly straightforward question. However, in practice it’s anything but. There are many factors that go into how a home builder calculates this cost per square foot.


If this number is not calculated accurately it is easy to accidentally create an inaccurate budget. This is where you hear nightmare stories of home building stories where home owners run out of money, end up significantly over budget, or even go broke.



Let's look at an example:


Let's say you want to build a 3,500 square foot home. You'd like a a fully developed basement, and a two-car garage. You chat with two different home builders. Here's what the information you get.



Custom Home Builder #1: Tells you the home will cost $350 per square foot to build




Custom Home Builder #2: Tells you the home will cost $250 per square foot to build



Your initial reaction? Home Builder #2 is less expensive.... right?


Well... it's not that simple. There are two important follow up questions you need to be asking:



Mount Royal Private Residence - Design by Phase One Design
Mount Royal Private Residence - Design by Phase One Design