Why ‘Cost Per Square Foot’ is a Flawed Question – and What to Ask Instead

When planning a custom home build, many homeowners start by asking, “What’s your cost per square foot?” While common, this question is often misleading and rarely gives an accurate picture of what your project will actually cost.

In this post, we’ll explain why the cost per square foot approach falls short, what a preliminary estimate covers, and what to ask your builder instead to get a more reliable custom home estimate.

The Implications of Asking for a ‘Cost Per Square Foot’ Price

At Silver Maple, we’ve been building custom homes for over 20 years. One of the most common questions we get from potential clients is: “What’s your cost per square foot?” It’s a fair question, but not the most helpful one.

The problem with relying on a cost per square foot is that it oversimplifies something complex. It assumes every square foot of a home costs the same to build, regardless of whether that space contains a laundry room or a kitchen. Early in the design process, before selections have been made, a cost per square foot figure is little more than a placeholder.

A more accurate and helpful tool in the early planning stages is a preliminary estimate. This type of custom home estimate is built on personal conversations, early design inputs, and decades of building experience. It won’t be final, but it will be detailed and informed. And that makes all the difference.

This blog explains why you should be cautious of cost per square foot numbers and bids, why focusing on receiving a preliminary estimate is more beneficial, and ensures you have a clear understanding of the differences.

Before you begin, make sure you’re asking the right questions. We’ve created a simple guide to help you have more informed conversations with any builder you’re considering. Read until the end for your free downloadable copy of “10 Questions to Ask About a Preliminary Estimate.”

What’s Wrong With Cost Per Square Foot Metrics?

Understanding your budget and what it costs to build a home is a good place to start, but beginning by asking a construction company or builder, “What is your average cost per square foot?” and then comparing the answers is a shortcut to a very long road! While cost per square foot figures may provide a ballpark for the price of a new home or renovation, they will not provide a comprehensive budget picture.

The Definitions  

No two builders define what is included in “cost” or “square foot” in the same way.

Cost

One builder or construction company may include markup, permitting expenses, and management fees in their definition of cost, and another may not. One set of costs may include the expense of installing the driveway, all site work, and connections to utilities, while another may not. Even then, does “site work” include returning the site to grade? Does it include a layer of topsoil? Seeding the lawn? Does it include driveway drainage?

Square Foot

Square footage may be defined as everything within the building envelope, including covered porches and basements, or it may only include the heated, finished interior spaces (also called conditioned square footage).

Builders aren’t trying to be evasive when they avoid offering a price per square foot; they’re being cautious. They know that a misleading and overly generalized number today will lead to inaccurate comparisons and frustration later. Without a clear and consistent definition of “cost” and “square foot”, comparing cost per square foot across companies is like comparing apples to flip-flops!

The Variables 

There is no definitive measure of the overall cost of a custom-built home, and relying solely on cost per square foot ignores important elements, including complexity, context, customization, and the cost variables they introduce. Crucial factors commonly excluded from square foot pricing include:

Scope + Complexity

  • A simple rectangular home is more affordable to build than a home with bump-outs, vaulted ceilings, or multiple roof lines.
  • Spaces like kitchens, bathrooms, and laundry rooms are priced higher per square foot due to the additional costs associated with plumbing, specialized finishes and appliances, electrical work, and cabinetry.

Site Conditions

  • Flat, cleared lots are less expensive compared to those with steep, wooded, or variable terrain.
  • Access, excavation needs, and utility connections can add a vast sum to a build, but may not be accurately reflected in a cost per square foot number.

Finishes + Selections

The “cost per square foot” question is often asked before drawings are complete and selections have been made; however, final finishes can dramatically impact the final cost of a home. Without these details, a cost per square foot figure is simply a guess.

Renovation vs. New Construction

Older homes often come with surprises, such as outdated wiring, water damage, or inconsistent framing, which can impact both the scope and cost. If the house was previously renovated, that adds another layer of unpredictability. All of this must be factored into the estimation process.

Location

Where you build isn’t just about views or zip code, it directly affects your final cost. Remote job sites may require travel fees, overnight lodging for crews, or special equipment to access the property. High-demand areas can mean longer wait times for permits and higher subcontractor rates due to limited availability. 

While “cost per square foot” might feel like a convenient shorthand, it’s too broad to be accurate in a custom home estimate or remodel project. It doesn’t reflect the true scope, complexity, or craftsmanship involved, especially in luxury, architect-driven homes.

Let’s discuss another standard cost metric: a bid.

What is a Bid?

In construction, a bid is a fixed-price proposal submitted by a contractor in response to a set of design plans and specifications, commonly referred to as a pricing set. The pricing set is very detailed and is shared with a selection of qualified builders or is publicized and “put out to bid”. Interested contractors submit a bid in accordance with the bidding instructions. Contractors commit to delivering the defined project for that exact price.

The Problem with Bids

At first glance, a bid sounds like a good idea, and it works very well for commercial construction projects. For new homes or renovations, a bid has its shortcomings.

  • Bids require the project to be fully developed, which means many hours and dollars have already been invested in designing the project, all in advance of any clear understanding of cost.
  • The contract is usually awarded to the lowest bidder, which may not be the most qualified construction company, and may result in a lower-quality finished product.
  • Less scrupulous builders might take advantage of the fact that the bid price is the final price. This total does not account for any construction wins or shortcuts that may occur during the build process. 
  • Bids can also lack a robust method for managing change orders that impact the final cost.

So now what? We’ve explained why asking for a bid or a cost per square foot may not be the right question. What is?

Why a Preliminary Estimate is More Reliable Than Cost Per Square Foot Estimates and Bids

Accurate estimation requires construction expertise and knowledge of the local area, including permitting requirements, material costs, labor rates, available subcontractors, and the varying quality of their work. It also involves experience reading construction plans, including identifying what is missing from the drawings, specifications, or scope of work.

Here are 7 factors that improve the quality and accuracy of a preliminary estimate: 

Collaboration + Communication

A preliminary estimate is most accurate when it is created in collaboration with the homeowner and design team, allowing options to be discussed, questions to be answered, and clarity of purpose to be well communicated.

Based on Drawings

For a custom home estimate, reviewing the plans is a necessary early step. Depending on your build partner and budget goals, the plans may not need to be fully developed. Schematic drawings can provide a great starting point for you, your architect, and builder to discuss constructability suggestions that can affect the bottom line (for example, a volume of uninterrupted glazing or glass that will require a structural monument wall versus more traditional framing supporting an elevation of oversized windows and glass doors).

Includes a Scope of Work

“Scope of work” refers to a detailed document that describes the entire build. It should include a timeline for the project, all the tasks required to complete the work, who is responsible for each element, and what is included and excluded from the work. It should also outline how progress will be measured and evaluated.

Is Transparent + Itemized

A solid preliminary estimate should resemble any other financial document, spreadsheet, or budget, and will likely be organized by construction cost codes. It should be easy to follow, and your team should be able to answer any questions you have. Each row should include the class of expense (labor, material, subcontractor, etc.), the cost codes and description (i.e., “061001 Framing”), the relevant scope of work narrative, and the total. Markup, management fees, and contingencies will either be broadcast throughout or noted in a separate section.

Includes Allowances

Missing information is managed by assigning “allowances”. An allowance is precisely what it sounds like – it is a designated dollar amount or range based on likely selections or budget constraints. For example, the exact lighting fixtures for the finished space may not yet be selected. Based on conversations with you and your architect or design professional, the builder will assign a placeholder amount for this line item in the estimate. It is then the homeowner’s responsibility to respect, or knowingly exceed, that allowance, thereby affecting the final cost of the build.

Provides a Robust Change Order Process

Even the best-planned build will experience unexpected conditions. Some of these may cost more, while others will result in unanticipated savings. Any preliminary estimate should have a detailed method for communicating these changes, delineating the consequences in terms of cost and time (savings or losses), and provide the homeowner with a straightforward way to approve or reject the change.

Is the Basis for a Contract

A thoughtfully constructed preliminary estimate serves as the foundation for the contract between the builder and homeowner. The value in getting this right at the outset can not be overstated.

Building a home or embarking on a renovation project is a significant investment that will have its share of ups and downs. Expected costs should be clear from the beginning. A well-crafted preliminary estimate is the best way to ensure the project gets off to a good start.

At Silver Maple, our team of expert project managers, estimators, and builders, with decades of experience, takes a transparent and accountable approach to construction costs by building a detailed preliminary estimate based on actual drawings, design choices, materials, and homeowner priorities.

Questions to Ask About a Preliminary Estimate

Here are a few ideas to start the conversation about custom home estimates. For the complete list of questions, download your free copy of “10 Questions to Ask About a Preliminary Estimate.”

What is included in your estimate?

Does it cover site work, permits, utilities, design fees, and management?

What is excluded from your estimate?

What’s not in the number, and what costs might come later?

What is the estimate based on?

Generic quotes have generic accuracy.

How do you handle unknowns or changes mid-project?

Look for transparency and structure in how change orders are managed.

Do you include project management or markup in the total cost?

These fees can vary widely, but generally range from 5% to 15% of the total project cost.

Final Thoughts

When it comes to building a custom home, the right questions matter more than the quickest answers. While cost per square foot can offer a general frame of reference, it’s no substitute for a comprehensive, tailored preliminary estimate built around your actual vision, property, and design. At Silver Maple, we believe in creating custom home estimates that are transparent, collaborative, and grounded in real-world expertise. 

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