The “Price Per Square Foot” Myth

As you build or remodel, beware of the “price per square foot” myth.  This myth can get you in a whole lot of budgetary hot water.  The construction and real estate industry throw the “price per square foot” term around a lot, but you need to really understand what it means BEFORE you start your project.

The term “price per square foot” simply means that you take the cost of a house and divide it by the total square footage in the house.  Typically, people use the number of square feet that are actual heated space in the house and exclude the square footage of unheated areas like a garage or attic. 

For example, let’s say you look at a house that has 2,000 square feet of heated space.  If the price of that house is $200,000, then the “price per square foot” is $100 (i.e., $200,000 divided by 2,000 square feet equals $100 per square foot).  It might be easy, then, to assume that you can pick any house plan that has 2,000 square feet of heated space and build it for $200,000.  That can be very, very wrong.  All square footage is not created equally. 

First of all, the builder has to build a whole house – not just the heated spaces.  So things like covered porches, garages, an unfinished bonus room, attic or basement space, and other unheated areas will drive the overall cost of the house up even if you keep the heated square footage at 2,000.  All parts of the house have to be built even if they’re not heated.

If you choose not finish out a room in the house – like a bonus room over the garage – you’re not going to just chop that part of the house off.  The builder still has to build the foundation, the walls, the roof, and install the insulation in there.  So, if your 2,000 square foot house has a bunch of areas on the plan that say “unfinished” or if there are a lot of attic and storage areas, then your “price per square foot” is going to be higher.

Exterior living spaces can be a big factor in the price per square foot myth.  Spaces like covered porches can sometimes be as expensive to build as heated space depending on the finishes you choose to use.  Exterior living spaces are great attributes of a home and can add great value – just make sure you understand the dollars involved in building those spaces.

Finally, the lot you choose for your home can also affect the overall cost of the home and impact your price per square foot.  For example, if you choose to build on a steep hill, your price will probably be higher than if you build on a level lot.  Bad soil or rocky conditions under the topsoil of the lot can also affect your cost.  It is best to consult with your builder and discuss the possible variables before buying a piece of property.

The bottom line is to be careful when tossing around “price per square foot” numbers.  Make sure that you understand all the numbers before starting your project.

Tyke and Judith Johnson, owners of Brentwood Builders, have built custom homes in the Brentwood, Franklin and Greater Nashville areas since 1994.  For more information call them at 615-776-4143, e-mail brentwoodbuilders@comcast.net or visit their website at www.brentwoodbuildersllc.com.