Solving The Price Puzzle

Custom home pricing is a complex subject. Here are some ways to think about it.

Have you ever called a car dealership to ask how much cars cost per pound? You say that’s a ridiculous question? We agree. In fact, we expect the dealership’s sales staff would wonder what you had been smoking.

The serious answer is that it depends. Are you asking about a Toyota Camry or a Tesla Roadster? (That’s $8 versus $47 per pound if you’re curious.)

Then why do so many people think that a custom builder should be able to quote a standard cost-per-square foot over the phone or by email? The answer is that it’s a popular metric with the real estate industry. You’ll find cost per square foot on every Zillow listing, and it’s one of the numbers cookie-cutter tract builders use to compete with other cookie-cutter tract builders.

Unfortunately, this flawed metric has created an assumption among some people that similarly-sized homes should have roughly equivalent value. That’s simply not true.

Equivalent value may be a fair assumption with tract homes, which really are manufactured products. Their builders (especially the large, multi-state builders) have management structures similar to those used in factories, and they constantly strive to optimize production time and cost. That makes sense: the effort required to save $1000 per home pays off when you’re building 20,000 homes per year.

Of course, being efficient and not wasting time or money are values you should expect of any company you do business with. At the same time, however, tract and custom homes are different animals. The custom home is one of the world’s last great hand-crafted products; rather than being designed and built for a general demographic, everything about it has the goal of satisfying your individual wants and needs.

The great thing about a custom home is that you can get any floor plan, architectural features or products you want. That means cost is determined largely by your choices. No responsible custom builder quotes a per-square-foot price without an in-depth conversation about these choices, because doing so would risk misleading the client.

Yes, some tract builders offer limited choices in cabinets, countertop, fixtures and carpets. But you have to stick with their pre-selected options, and you have to put those options into one of their standard floor plans. Some of these builders have tried letting customers choose non-standard products, but then backed off when it raised havoc with their ordering system, their accounting department and their construction schedules.

Custom builders aren’t constrained by the need to save pennies. Instead, our overriding purpose is to help customers design and build a unique dream home. Unusual or complicated products or designs will affect the price, but we work with customers to give them as much of what they want as possible within a budget and schedule they are happy with.

That’s because our business model is based on customer service.

Here’s another way to think about it. If you spend time in the dress racks at Target you can probably find a comfortable, good-looking outfit with decent quality. But if you want something unique, something that accentuates your beauty and makes you feel great about yourself, then you’re more likely to go to a boutique store like Anthropologie, whose staff will happily work with you to style a one-of-a-kind, high-quality wardrobe that includes the dress and the accessories.

We’ll go out on a limb here and assume that the Anthropologie dress will have a higher cost per square inch of fabric. We’ll also assume that you consider it worth the price.

Neither choice is right or wrong. It’s just a question of what’s important to you.

Warm Regards,

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