What Does Square-foot Pricing Really Mean?

Home build and renovation estimates can be something of a mystery for many clients—particularly as the final estimate can be much larger than the original quote. An initial estimate of $300 per square foot may come back to you later at $425 per square feet. For a project of 300 square feet, that’s a sizable cost difference. If you aren’t familiar with the estimation process of a design-build project, the final quote can be quite a shock.

At Giraffe Design-Build, it is of the utmost importance to make every aspect of the build project as delightful for our clients as possible. We understand their need for certainty, and we make every effort to communicate proper spending expectations at every stage of the project.

Let’s look at the factors that go into a design-build quote, and explore why a quote can change so dramatically.

Go deeper: How to Get Started on Home Construction Financing

New Home Build vs. Renovation

One of the largest factors that drives the initial quote is the type of project you are considering: a renovation or a new home build. A new build tends to have lower square-foot costs than a home renovation. Typically, a new build in Ann Arbor is roughly $400 to $500 per square foot. For a renovation, it can start at $450 per square foot.

Of course, there will always be outliers. We’ve designed and built homes for as low as $225 per square foot, and we know of one home in Ann Arbor that was built a few years ago for $1200 per square foot!

Renovation is a trickier equation than new builds. Costs are higher because you’re working in someone’s home and you need to devote a lot of time to managing the quality of their life within the renovation process—such as dust protection, cleanup, and the interpersonal relationship with the homeowner. You’re also working within an existing structure, which introduces unknowns and potential structural problems. In Ann Arbor, you usually have a small lot with an existing building. Often, the builder has to bring large equipment through tight openings, and there are very few places to set up equipment.

Because a renovation is smaller than a new build, it eliminates the economy of scale. Renovations still have several intense processes, just as home builds do—you still have to update the plumbing and electrical, you still have to do the HVAC and trim. But in a renovation, you don’t have the luxury of spreading the costs out across a larger project.

All these factors soon add up, making a renovation project more expensive per square foot than a home build project.

Related content: Should You Build or Renovate Your Ann Arbor Home?

Why Does the Quote Change?

While price is part of an ongoing discussion throughout the life of the project, there are three big milestones in pricing estimates. At each milestone, the pricing is refined more specifically to your particular project:

• Initial pricing at the point you decide to work with Giraffe Design-Build. This is a very rough estimate, based on the most basic details, and is rather generic. The purpose of this estimate is to establish a ballpark figure that will serve as a guideline moving forward.
• Design pricing, once the schematic design is complete. Design pricing incorporates the elements that will be unique to your home—the floor plan, the look of your space, the materials and finishes to incorporate.
• Final pricing, as we move into construction drawings. At this point, the price is usually higher than the homeowner wants and we find innovative solutions to bring the project within budget.

Our basic philosophy is to look at historical precedent and provide a likely price for your project, but the devil is in the details. At each stage of pricing, we receive new information to go on, and that affects the outcome of the budget. Until we have a final design, we won’t know the actual square-foot costs.

Even with the best-laid plans, a design-build project can incur additional costs after the final pricing. Every project presents surprises of one sort or another, which often require solutions that add to the cost of the project. There may be unseen water damage or electrical issues in the walls, and the problems don’t come to light until demolition has begun. As a general rule, we suggest that you allow for a 15 percent slippage.

Many clients forget about design costs and are startled by a larger-than-expected total cost. Industry standard design fees are ten percent of the build costs, which means that a $200,000 build has a total project cost of $220,000. 

Pricing Rules of Thumb

At Giraffe Design-Build, we want you to be as prepared as possible for the final costs of a home build or remodel project. No one appreciates sticker shock, and the more you know ahead of time, the better your chances of containing your project budget.

Here are some rules of thumb to consider as you set your budget and begin discussions with a design-build firm.

Know the total square footage

Costs of a new addition are inclusive of more than the addition itself. There is a transition area where the new structure is tied to the old. To make that happen, we modify a square footage of existing structure as well.

Be transparent

Your home project will be much more successful, and less stressful for you, if you’re transparent about your budget from the beginning. It can be very challenging to design a home you will love if the design is constrained by an opaque budget.

When all the books are open from the start, the final costs will be much more likely to fall in line with the original quote.

Know what you want

If you want an accurate sense of a budget early on, it’s incredibly helpful to come to the table with a comprehensive understanding of what kind of materials and features you want. For example, do you prefer:

• Wood windows with aluminum plating or vinyl windows?
• Metal roof or asphalt shingles?
• Wood siding, brick, or vinyl?
• Granite or tile counters?

The more specific you can be about the products you want, the more accurate your estimate will be.

Reduce your costs

You can mitigate the pang of extra costs by making strategic decisions about the myriad design elements that influence the project’s costs. For example, carpet is only $6.00 per square foot, while hardwood flooring is about $18 per square foot. Tile counters start as low as $10 per square foot, while granite is about $100 per square foot.

Our Commitment to Your Budget

Marrying your design requirements with the budget proposal is both an art and a science. While it’s easy to design a home for a client that knocks their socks off, it requires great discipline to design something that brings delight, aesthetically and financially.

It’s never a perfect process, even after 30 years. But you have our commitment to make every effort at providing the most accurate pricing estimates possible, and to keep you fully informed of any changes to costs throughout the life of your design-build project.

We invite you to start the conversation with us about your home build or remodel dreams. Contact us to today.