Cost to Build a House: Why price per square foot is a bait-and-switch

    "How much is that per square foot?" If you ask that question, you're playing right into the hands of the builder who is about to give you the old bait and switch.

    There's a dirty little secret about price per square foot that the building industry would rather I didn't share with you: price per square foot is a game home builders use to reel you in.

    In fact, I used to play it too—until I realized I was doing my customers a disservice. I'm pretty sure I've lost some deals by not playing that game, and I sincerely hope those people I lost got a great deal somewhere.

    The Problem

    Stop-300x200Here's the problem with the price per square foot game. With a custom home, there's no way to quote a price per square foot until I know every detail about the home. It'd be dishonest.

    Think about it: the home you're building on your land is your home, not your builder's home. If your builder gives you a price per square foot before you've shared any of your wants, needs, and dreams, how can that home they're selling you be what you want it to be? Wouldn't he just be quoting you a price per square foot for a house HE wants to build?

    Or worse: the builder knows that the reason you're asking is so you can compare, or shop around, so he has every incentive to low-ball you so he can reel you in.

    Here's how the game works:

    • 1. The builder advertises, or tells you, a really low (and attractive) price per square foot. Not having any real way to compare, you make an appointment and sit down with a builder based on that low price per square foot. 
    • 2. As you get into the details of the actual house you want (as opposed to the house with that really low price per square foot), you start to get really excited as the builder encourages you to keep the details, the wish list, coming.
    • 3. You spend many hours working with the builder, going back and forth on design and detail changes, until you get to that dream house you've wanted to build so badly. At this point, you are 100% emotionally invested in that design and that builder.
    • 4. From here, one of two things happens: 
      • The builder does his estimating and comes back with a price for the house. You do the arithmetic, and the price per square foot went from the $85 / square foot he reeled you in with to a more realistic $115 / square foot that it's going to take to build the house. You're so far down the path now you can't imaging starting over.
      • Or
      • The builder comes back with a cost estimate and an offer to build the house as "cost-plus", meaning you pay the cost to build plus a fee. You'll find out about halfway through the build that the builder's estimate was 30% low, but it's too late by then.

    Either way, you've invested a whole lot of time, and probably a significant amount of money, just to find out that the cost to build your forever home is very different than the story the builder told you to get you in the door (and quite frankly, the story you were all too willing to hear).

    Commodity pricing isn't for homes

    A builder couldn't begin to honestly give you a number until he or she knows exactly what you want. We don't buy our cars by the pound or our clothes by the thread. Why use a commodity price like price per square foot for something as dear to us as our forever home? Commodity pricing works for corn and potatoes—but for your home?

    Download Guide to Build Your Forever Home

    How do you avoid the price per square foot trap?

    Seek out a builder who listens first, before giving you an unfounded price per square foot quote or shoving a ten-page list of included features in your face. Who cares what the builder thinks should go into your home? Shouldn't that be your choice? Structural items aside, what goes into your house should ultimately be your decision.

    Be wary of the builder who has a ready answer for "how much are your homes per square foot"? Whatever the number is, there's no way it can be based on the vision you have in your mind. How can it be?

    Look for a builder who is committed to your needs and wants and to staying within your budget.

    Stock plans and generic lists of included features usually don't cut it for families who want to make sure they're maximizing their budget.

    What to ask 

    Ask about various financing options, and don't forget everyone's financial situation is going to look different. Can your prospective builder help you work through various options? What about helping with financing challenges? How willing does he or she seem to be to listen and help you come up with creative financing solutions?

    There's so much more that goes into the value of a house than the price per square foot. You are much, much more than a commodity, and so is your dream home.

    You can find more articles on what actually goes into the cost to build a house here.

    For more on the process of crafting that perfect house plan for you and your family, download our free guide, 3 Steps to the Perfect Floor Plan:

    Download 3 Steps to the Perfect Floor Plan

    3 minute read