Bowling Green Home & Lifestyle — 2022
What Is the Cost Per Square Foot for a Custom Home?
Price per square foot is a useful metric for resale homes — but for custom construction, it can lead to serious misunderstandings. Here's what you should know.
When we meet with potential clients, most will eventually ask about our homes' average cost per square foot. The question is understandable — price per square foot is a metric the real estate industry uses to gauge the competitiveness of resale homes, and homebuyers have internalized that way of thinking.
To their credit, most of our clients already know that because custom homes are unique, we can't make direct comparisons. But the question will often be rephrased as a request for a ballpark figure or price range. And therein lies the conundrum: to arrive at an accurate range, we must discuss the details — in detail.
How Far Apart Can Costs Really Be?
Once that discussion begins, most people don't realize just how far apart the costs of two seemingly comparable custom homes can be. Two homes with similar square footage, built in the same town, can have final construction costs hundreds of thousands of dollars apart. Architecture, build quality, product selections, lot conditions, and local regulations all play a role.
The Mental Anchor Problem
Another way homeowners try to make comparisons is by looking at the average cost of existing homes for sale. If Zillow or Realtor.com shows an average of $200 per square foot for homes similar to what they want to build, that number becomes a mental anchor — a reference point everything else gets compared to.
A mental anchor can be a useful tool when making decisions. But in this case, it can lead to disappointment if the anchor is unrealistically low. The average price of a resale home includes homes built decades ago, homes in need of updates, and homes with very different finishes than what a custom client typically wants.
Setting the Right Expectations
The more useful question isn't 'What's the average cost per square foot?' It's 'What does a home with my specific program, my specific selections, and on my specific lot cost to build?' That question can only be answered after a thorough discussion of your goals, your site, and your expectations.
A builder who gives you a confident per-square-foot number over the phone without knowing those details is not giving you useful information. They're giving you a number that will feel good today and create problems later.
The right approach is to have the conversation early — before you've committed to a lot or a design — so the variables can be identified and a realistic budget can be built from the ground up.