Purchasing Land

Part 1 of a 3 part video series discussing the 3 things to consider when building a custom home after choosing your custom house builder: site work, the design of the house and products. This 1st segment is covering the aspects of site work and things to be aware of when searching for the right property. Hope these videos help when budgeting for your new home!

Price Per Square Foot

What is your price-per-square-foot? 

This is the most common question that I get during my first customer vision meeting for new homes. The universal standard for many home buyers is determining the value of a home in terms of price per-square-foot. This method is calculated by taking the anticipated sales price and dividing it by the livable square footage. It is human nature to seek out this type of simplicity to determine if the house is a good buy. After all, we all want to feel like we gained the upper hand in a purchase and made out better than the seller.

Where did this technique come from? 

There isn’t anything I can find on Google that details the origin of this method, but I can probably point to creative marketing and large box builders. I see how it would be a benefit for a sales agent in a production neighborhood to point out that he or she is selling homes at a lower price per-square-foot than the competitor down the street. In this situation, they are selling similar floor plans, the same number of bathrooms, and identical flooring finishes. They each have a stone front elevation and three sides of siding. For price per square foot to work, you need to compare nearly identical homes. This is a great way to compare competition…in a production neighborhood!

Why does this method fail when building a custom home?

Firstly, not everything that contributes to the value of the house has a direct relation to the livable square footage of the home. For example: a two car garage vs. a three car garage, the number of bathrooms, the size of porches, etc. Add in personal taste and each home becomes tailor-made for each individual customer with varying cost. We operate on a total budget and price each item in your home individually. We can build several homes with similar square footage and prices could vary more than $100,000.

What drives such a drastic fluctuation? 

There are many items to contribute to this such as site work, number of bathrooms, type of insulation, finishes, etc. Simple exterior colors on a home can change the price of an average home by as much as $10,000. Darker colors tend to drive up cost. A colored metal roof is generally 20-25% higher than a milled galvalum finish. In this case, the roof color is a baked on oil-based finish, which adds to process and material costs. Our limestone is locally quarried in the Hill Country. Darker stones that vary more in color aren’t native to the Hill Country area. This sort of stone is quarried in Oklahoma, so now you are paying shipping in addition to the second seller’s costs.

More items that affect price, but do not show in the square footage:

• One story vs. two story

• Home exterior elevation designs

• Ceiling heights

• Quantity of cabinets and counter-tops

• Finish out materials (ex. crown, quality of paint, type of baseboard)

• Type of framing structure

• Mechanical specifications (ex. tankless water heater vs. fully tanked)

When is price per-square-foot properly used?

The bank will use this method for lending. Your loan officer will send an appraiser to review three homes in the area that are similar in square footage to your new custom home. These homes, also called comps, must have been in MLS and recently sold. The appraiser will make adjustments on each home and calculate an average number based on price per-square-foot. They will then return this number to the bank as a basis for the loan. Banks will typically loan 80-90% off appraised value while requiring 10-20% in down payment. This price per-square-foot number is gathered in case you default on your loan, i.e., the bank feels like they could turn around and sell your home for this amount. Contrary to popular belief, this number does not show the value or worth of your home.

In closing:

Building a home is a major investment and a big step in your life, therefore, one should be aware of all the costs associated with it down to the final dollar and cent. Understanding the big picture of home construction is vital; and our team of experts are more than happy to assist with any questions you have. We will see to it that you get exactly what you want and know where your money is going.

Happy New Year

Wishing you good times, good cheer, and a memorable new year.

All of us at West Ridge Construction want to thank you for your business, loyalty and support in 2017. We look forward to new opportunities & success in 2018!

2018 in Focus

One

We’re breaking ground on a new office designed to enhance the design and construction experience for both our customers and employees.

Two

We developed a flow chart (from architectural design to start of construction) helping customers visualize the process and get a jump start on product selections

Three

We continue to work with the Co-Construct App which allows the customer to control their budget daily with improved organization and communication.