What is the Price per Square Foot of a Home?
This is one of the most common questions I get from those in the market to build a home. On this page, I will attempt to explain the complexity of this question and how to better ask it when you have the opportunity.
The question is difficult to answer without getting some general information up front and clarifying exactly what you are looking for. Are you asking about the "sticks and bricks" cost of the home or are you asking the turn-key price of the home? The following sections will illustrate several of the factors involved in answering your questions.
First, I want to spend a moment on the phrase Square Foot (SF). If you were to take an architect, a builder, a subcontractor, a material supply representative, a real estate agent, and a new home buyer, each of them would probably have a different definition of Square Foot. My interpretation is the heated square feet in a home. For the most part, this is the most common definition. Unfortunately, you can have a home that has 2000 heated SF but contains a 500 SF garage, a 200 SF screened-in porch, and a 60 SF stoop, all of which are unheated. Now which SF are we talking about: the 2000 heated SF or the 2760 total SF? If this house was on the market for $200,000, then the price per heated SF would be $100 and $72.46 per total SF. This is a considerable difference when someone is trying to figure out the ballpark price of a home.
Lets talk about all of the general elements that go into the price of the home and, therefore, the price per SF of that home. Usually, these general items dont come up before the question is asked, which puts the person in an odd position to answer.
The land cost could be a substantial percentage of the price of the home. You need to establish up front if the land is included in the per SF price or not.
Water and Sewer
Whether it is a well and septic system or a water and sewer connection fee, this information can swing the price per SF dramatically depending on the particular situation the land is in.
Financing and Closing Costs
There are three types of closings which happen in the home building process: Land Closing, Construction Loan Closing, and the Home Loan Closing. Establishing who is responsible for the closing costs is extremely important. The type of financing is important as well because if someone uses the Construction-Perm loan process, it will save them one set of closing costs. This can result in a substantial difference in price.
Type of Home
The type of home also has an enormous influence on the price per SF. A stacked two-story-on-slab home has less foundation and less roofing than a ranch-on-basement home, and would, therefore, be priced less per SF.
If you are looking for a good ballpark price per SF of a home, clarify some of these general questions up front. This will help convey a better sense of what you are looking for. Keep in mind that these are only the major elements of a home. Details as hardwood floors and gold plated trim material also need to be considered. The initial conversation of price per SF will get you in the right ballpark. For more detail, you will need to sit down and go over a list of specifications for the particular home.
I hope this little explanation helps you in the future and I wish you the best of luck in your home endeavors.