When a builder talks about price per square foot, I always want to ask them to build me a home that’s only one square foot. I’ll give you 125 bucks, you give me a three-bedroom, two-bathroom home.
Sounds absurd, right? That’s how it sounds when builders quote a price based solely on a square foot. It’s a chicken-and-egg sort of problem.
Why is one square foot worth $125? Is each square foot worth the same amount? Why is one square foot worth more than another? My dad always said that if you drop the Hope Diamond into the bathtub, that will make cost per square foot go up. It doesn’t make any sense, and that’s because builders who price per square foot aren’t really sure on what it’s costing them to build a house.
When we talk price with a customer, they have already told me their list of wants, list of needs, the look that they’d like, and their budget. That combination of wants and needs requires specific materials and work, and the price that the customer pays is based on what it actually costs to build a house. Then if you want to break that down into cost per square foot, you can. But it won’t really make any sense.
So if it doesn’t make any sense to price per square foot even when you know exactly what the house costs, what sense does it make to quote a cost per square foot when you don’t even know what each square foot is going to contain?
Pricing per square foot is backwards, and it almost always leads to a bad deal for you. A builder who’s pricing the home that way is basically pricing it at a range where he’s comfortable that he can make a good profit. What gets sacrificed in that equation is your budget.
If you happen to talk to a builder who prices per square foot, try asking him if he’ll build you a one-square-foot house for that price.