HOW MUCH DOES IT COST PER SQUARE FOOT?
This is probably one of the most common and opinionated questions in the real estate and construction industry. Why you ask? The answer cannot be told with a dollar figure. Come on Chris, this can’t be true? Sorry but it is true. Unless there is a clear definition as to what is included in a particular item’s cost per square foot, it can’t be compared to another items’ cost per square foot properly. Fact is this becomes a very complex conversation, and it’s best not to use the comparison. The goal of this write up is to educate what “Cost per Foot” means and how to use it. This concept can best be understood through examples.
Example 1 – If I say I have wood flooring in my home and it costs $7.00 per square foot, you might think you can have wood flooring in your home for $7.00 per square foot. True and not true. Is the $7.00 per square foot the cost of the material? Or the cost of the labor to install? Is delivery included? tax? All of the above? When I told you I have wood flooring in my house, you didn’t hear any of the details on what is included or not included in the item, making it a useless comparison. Also, in this example, the species of wood is not mentioned. Oak and Mahogany are both wood species but one costs 3 times more than the other. This particular example is part of a conversation I call “APPLES TO APPLES” which will be added to the bottom of this section of this web site as time permits.
Example 2 – Customer 1 hires CAD Construction for a home renovation. The work includes adding a 20′ x 15′ addition to the back of the existing house and remodeling the kitchen. Let’s pretend this project costs $150,000.00 to complete. The size of the addition is 20′ x 15′ = 300 square feet. Customer 2 hires CAD Construction for the same size addition. They also want to remodel their kitchen, remodel their master bathroom, and replace the roof. Let’s pretend this project costs $200,000.00 to complete. Both customers have added 300 square foot additions to their homes. Customer 1’s cost per square foot is $150,000 divided by 300 square feet which equals $500.00 per square foot. Customer 2’s cost per square foot is $200.000 divided by 300 square feet for or $666.00 per square foot. Both customers have added the same amount of space to their existing homes, but hearing $500 or $666 per square foot doesn’t tell you what work they did. A better way to compare these projects would be to figure out the size of the kitchens and master bathroom and use that area in the calculations. Customer 1 has a 300 sq. ft. addition and the existing kitchen is 10′ x 15′. Customer 1’s square footage should be 300 + 10′ x 15′ = 450 square feet total. Customer 1’s cost of $150,000 divided by the 450 sq. feet of living space totals $333.00 per sq. ft. Customer 2’s existing kitchen is 20′ x 13′ wide (260 square feet) and the master bathroom is 15′ x 10′ (150 square) so the revised total living space is 300 + 260 + 150 = 710 square feet. If customer 2 spent $200,000 on their renovation, their revised cost per square foot would now be $200,000 divided by 710 or $281.00 per sq. ft. Note: Customer 2’s project included a roof replacement that is not included in the cost per square foot examples. The calculations have been on “Living Space”. In this example we have costs per square foot of $500.00, $666.00, $333.00 and $281.00. My question to you is who has the nicer house? You can’t tell from this information as you don’t know anything about the selections and fixtures included in each of the customers’ homes.
Example 3 – Size of project changes the cost per foot. Some things in the construction industry have a minimum cost associated with them. An electrician may charge $160 for a service call to install an outlet, but if you are getting 10 outlets as part of an addition project, the cost to the builder might be $50-60 each per outlet. The electrician would not come to your home to install one outlet for $60.00. The goal of this example is to highlight that sometimes smaller items cost more per square foot to build then larger items due to minimum costs. Another example is machine time, such as an excavator. If your project requires a machine to dig the foundation, the machine is typically hired by the day. If you use the machine for 3 hours or for 8 hours, the bill is the same and you are charged for a full day’s use. This example applies in the cost of building new homes as well. Homes include expensive parts such as kitchens and bathrooms and less expensive parts such as family rooms and living rooms. A 5,000 square foot house would cost less per square foot to build then a 3,000 square foot house if they were both to include the same finishes and fixtures inside.
Note from CAD: No rules are enforced on how “cost per square foot” is calculated or used in the industry.
Example 4 – New Construction
In the sale of new construction of residential homes, condos and townhouses, many realtors, investors, and buyers talk about the cost per square foot sale price You may have even heard generalizations of a particular town selling at a certain cost per foot price range. For example: in 2008 the township of Westfield was selling new home construction for +/- $300.00 per square foot. So, if the house size was 3,000 sq./ft. the house was selling for +/- $900,000.00.
Note from CAD: This price does not tell you anything about the property size.
A builder might say they can build for $150.00 per square foot. Another Builder might tell you they build for $250.00 per square foot. The difference is likely due to the quality of the products used inside the home. Typically speaking, when builders are talking about the cost per square foot they are speaking of “Total Cost”. In development there are 4 different cost that make up the total cost of a project.
- “Hard Cost” includes the structure of the project, such as lumber, windows, electric, plumbing, flooring, cabinets and appliances.
- “Soft Cost” includes all the things you can’t touch in the final product but are required to make the project happen. Examples include the Architect, Engineering, permit cost, sewer fees, temp utility costs etc.
- “Site Cost” include what you get outside of the building Hard Costs on the property or site. Examples include patios, sidewalks, driveway, landscaping, drainage, and site restoration.
- “Land” is what the house sits on. Land can be a single lot, or part of a sub-division. Lot size is a big part of buying a new home. Land is included on both new construction and resale. But you can’t tell much about the LAND from the cost per square foot conversation, can you?
Example 5 – Real Estate. In example number 4, we covered new home construction. The cost per square foot does not tell you how the square footage is calculated. Typically, square footage in real estate should mean the square footage of the living space. In new construction it would mean the square footage of the 1st and 2nd floors.
If the basement was finished with the home, the basement square footage should be included in the calculation. A sales person could trick you and include the square footage of the garage in the calculation to make the sale look more attractive.
If the house is 3,000 sq./ft. and selling for $400,000.00 the cost per sq./ft. is $133.33. If a typical garage is 20’ x 20’ = 400 sq./ft. and this was used in the calculation, then the house is really 2,600 square feet of living space and the cost per square foot is $153.85.. Comparing the cost per square foot without defining the terminology of each unit’s contents results in an uneven comparison.
Summary – I hope you have found this conversation informative. I want you to remember “not to use” the “cost per square foot” comparisons lightly while shopping for an addition, renovation, resale or new home construction project. If you are in the middle of a particular comparison conversation and get confused, please feel free to reach out to me by phone and say hello. I’d be happy to assist you.
Chris Daunno CAD Construction LLC 732-713-8827
or is it APPLES TO ORANGES?
What’s the difference? They are both fruit, Right?
Time after time I hear stories of customers buying construction services and not being fully aware of what they have purchased. Later, they complain that the contractor did this or didn’t do that. For any purchase you make, construction or otherwise, a written “SCOPE OF WORK” will help get you better results and a better job done right the first time. The purpose of the Scope of Work is to allow you receive an apples to apples quote on your project.
SCOPE OF WORK – Is a list of details and or categories for the project that includes all the items that are included and excluded. Its intention is to remove the grey areas and to allow a better understanding between the customer and the contractor. Without a written scope of work, there are no rules to follow and the customer may receive different results from what they originally expected. With a clean scope of work and apples to apples comparisons, prices should be similar from one company to another within a 5 – 10% margin. Below are some examples regarding wood flooring to show some differences.
Wood flooring in today’s residential construction industry is a common product. So, if your contract says it includes wood flooring, you’re in good shape! Or not? 3/4″ thick Red oak comes in different categories depending on the quality of the wood.
You can buy “#1 red oak”, which is pretty clean but includes some knot holes.
You can buy “#2 red oak”, which has a lot of knot holes and is more beat up looking.
And you can buy “Select & Better” red oak, which is the cleanest best quality with little to no knot holes. Select & Better is the best of the three and cost more then #1 and #2.
If your contract says it includes wood flooring, and does not say what type, brand, thickness or details, how do you know what’s included? The simple answer is “you don’t”.
Other options include non-oak wood, such as mahogany, maple, birch, fir, walnut. All wood floors, but they will likely require a change order for additional costs.
On the same note, lower grade wood flooring exists (typically sold by big box stores). These products include particle board with a thin slice of wood over the top called a veneer typically can’t be refinished and won’t last very long.
Engineered wood flooring (such as plywood with ¼” wood over the top, glued together) is also available. This flooring was originally invented for use on concrete floors such as basement projects. Again, a huge range of options and different price levels exist.
Example of proper Scope of work for wood flooring.
- Furnish and install #1 Red Oak wood flooring,
- Materials are 3/4″ thick x 5-1/2″ wide in random lengths.
- Materials are to be installed by nail and glue to the subflooring.
- Material manufactured by Mulligan Flooring products or equal.
Feel free to contact us if you have any questions on how a scope of work or apples to apples comparisons are done for your project. We would be glad to help. Chris Daunno, Owner: CAD Construction LLC