Construction Costs: Learn the Basics

When evaluating the costs of building a new home, many homeowners use square-foot pricing as a basis for comparison.

Let’s talk about square-foot pricing for a minute – what it is, and what it isn’t.

Square-foot pricing is a method to roughly compare construction costs for two similar houses, houses in different parts of the country and houses with different characteristics.

But square-foot pricing is not a reliable method for determining how much a particular design is going to cost to build.

Show me a house design, and with a few specific questions, I can place it within a rough range of cost. That’s a start, but for a 2,500-square-foot custom home, even a range of $20 per square foot is a lot of money. You most definitely don’t want your cost estimate on a $250,000 house to be off by $50,000!

With a little research, square-foot pricing can be a useful tool to get you “in the ballpark” — but that’s all. Find out what similar houses cost to build in your area (don’t forget to take out the cost of the land first) to place your ideas in a rough “square foot” price range.

House design size

Many things affect the cost of building a typical house, but there are three big ones: size, complexity and the level of finish. The effect of house size on construction cost is obvious; bigger houses cost more. But it’s not quite that simple.

Significantly more important than house size alone is the matter of where that size goes, as the “cost per square foot” of a house varies tremendously from room to room. It’s obvious that a kitchen, with appliances, cabinets, countertops, plumbing fixtures, tile flooring and other expensive finishes will cost more “per square foot” to build than a bedroom, which doesn’t have much more finish than carpeting and paint.

If you squeeze the size of a house down by taking space from low cost-per-square-foot rooms like bedrooms, you’ll find that you haven’t affected the overall cost of the house much at all. In fact, you’ll likely not do much more than simply raise the cost per square foot of the entire (now smaller) house — and maybe not change the overall cost at all.

So a smaller house — if the size difference is in inexpensive rooms — may not be a less expensive house.

House design complexity

The effect of the complexity of a house on the construction cost is frequently misunderstood, and it’s one of the sources of many an unpleasant surprise for house plan buyers.

Simply put, a complex house is more expensive to build than a simple house. But what makes a house complex? Mostly it’s a function of the shape of the house and the relationship of the amount of roof and the amount of foundation to the area of the house.

Consider two typical house designs: A rectangular two-story colonial house and a French country home with a first-floor master bedroom suite. Both houses are 3,000 square feet, and both have the same level of finish.

The colonial home is the picture of simplicity; both floors are exactly the same size and are stacked directly over one another. So while the entire house is 3,000 square feet, the foundation and the roof are each only 1,500 square feet (I’m ignoring the garage for this example). It’s efficient and easy to build.

The French county design is the same size but less efficient; with the master bedroom suite moved from the upper floor to the lower, the roof area and foundation area increase by about 500 square feet – but the overall size of the house stays the same at 3,000 square feet. More roof and foundation containing the same area, plus more lumber and concrete equals more cost.

Colonial homes have simple gabled roofs. In the simplest examples the roof is made entirely with just one truss configuration. That’s a huge sigh of relief for the truss fabricator and the framing crew — every truss is the same! And without any intersecting roofs or dormers, there’s no overlay framing and no flashing or valley metal to install.

But French country design is distinguished by its more “rambling” nature; an attractive home of this style spreads itself out a bit. French county roofs are typically hipped rather than gabled (hips are more expensive) and are often steeply pitched — more lumber is required, and the roofing labor is more expensive.

Every angle, intersecting roof, bay window, porch or level change adds complexity to a house. If you’re evaluating several house design ideas, look for complexities in the layout that may make one significantly more expensive to build than the other.

Finishes and fixtures

Let’s compare two houses again, only this time they’re both 3,000-square-foot colonials. One has a fiberglass tub in the master bath (about $500), and one has a $5,000 whirlpool tub. That one change adds $4,500 to the cost of the house, but more importantly, it changes the “square foot” cost of the house by almost $1.50 per square foot.

Careful — here’s where homeowners get “nickeled and dimed” to death. Perhaps you were quoted a base cost of $120 per square foot for your house. Add the tub, and it’s gone to $121.50. Add hardwood, granite, under-mounted sinks, brass hardware and other upgrades, and suddenly you’re at $140 per square foot and way out of your budget.

Finishes and fixtures (flooring, cabinets, countertops, trim, etc.) represent about 30 to 40 percent of the cost of a house. You may only increase the cost of each item a little, but because so many items fall into this category it’s very easy to lose control of the total cost.

If you want nicer finishes, but your budget is tight, do what my clients do: Put the nice stuff in the kitchen and master bath and the cheaper stuff everywhere else. More importantly, assemble a list of the finishes and fixtures you want at the beginning of the project and stick to it.

Budget creep

Budget creep is the gradual, sometimes unnoticeable increase in the cost of your project as new items are added or unusual site conditions are revealed. Budget creep happens slowly, one decision at a time, creeping up and devouring your building budget before you know it. It can afflict you during the planning of a house project, but more often it’s a disease of the construction phase.

A little planning, patience and foresight can help avoid it.

On any project, start with a clear idea of the level of finish and quality you expect. Don’t assume that your architect is in tune with your ideas about finishes; discuss your expectations in detail and whenever possible, see the actual finishes and fixtures. If you’re not the detail-oriented type, hire a professional interior designer.

Poor quality drawings cause additional unplanned work during construction, and always end up costing homeowners money and time. My firm’s been hired many times to correct drawings done elsewhere that contained glaring errors, omitted necessary structural steel or just plain didn’t work. Sloppy drawings are an open invitation to project creep.

Finally, always have realistic expectations about your project budget and communicate that budget to your architect. When everyone understands the project’s financial goals, the chances for success are greatly increased.

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Richard Taylor is a residential architect based in Dublin, Ohio, and is a contributor to Zillow Blog. Connect with him at http://www.rtastudio.com/index.htm.