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How Does Square Foot Pricing Work?

Unlike commodities where you can describe how much something costs for a given unit, home building seems like a complete mystery. Ask twenty different homebuilders how much it costs to build a square foot of house and you will probably get twenty different answers. Why is the cost to build a house so mysterious?  If you are wondering about the square foot pricing mystery, you no longer must be curious. Here is how square foot pricing works.

No Established Standard

 If you ask the attendant at your local grocery store how much a cantaloupe costs, he might tell you it is 88 cents per pound. If you walk to the next attendant and ask the same question, you will probably hear that the cantaloupe costs 88 cents per pound. That’s because all grocery attendants in the store have agreed on the meaning of three things:  a cantaloupe, it’s price, and the pound. Homebuilding is different. These is no established standard for what constitutes a square foot. Does it include only the finished areas or will an unfinished basement or crawl space count?  How about decks or patios? Should you include an attached garage?  Because there is no established standard, the square foot pricing mystery remains.

The Solution

 When you ask two builders how much a house will cost to build, they will probably come up with an estimate that is fairly close to each other. Because of the lack of standards, if you ask about price per square foot, though, they might be wildly off. What is the lesson?  If you are building a new house, you should deemphasize square foot price and ask about overall costs. If you absolutely must know about square foot cost, make sure you and your builder both understand what “square foot” means.

Now that you understand the square foot pricing mystery, you can put it to work for you.