The cost per square foot is often higher for a small home than that of a larger home. When building a larger home, the cost of expensive items (such as a furnace or kitchen) is spread over more square footage. Consequently, a larger home may have a lower square footage cost than a smaller home. Also, it usually costs less to build a two-story home when compared to a one-story home that has the same square footage. This is because a two-story home will have a smaller roof and foundation. Plumbing and ventilation are more compact in two-story homes.

Small details in the design of your home can make a big difference in the price. To save on costs, begin estimating construction expenses before you select your final blueprints.

Here are important factors to consider:


• Size of Home
  When building a home, it's best to work with even numbers. Have your home size rounded up or down to increments of two feet. This reduces wasted materials. Also, it's most economical to build a home which is no deeper than 32 feet. If the depth exceeds 32 feet, then your roof trusses may need to be specially designed and will be more expensive.


•  Shape of Home
  Homes that have a rectangular or box shape cost less to build. Having more angles and corners in the shape of your home can increase the amount of labor and materials needed to build a home. Dome shaped homes also make efficient use of materials and tend to cost less than other shapes.


•  Site Preparation
  Preparing a site for construction can have a big impact on the cost of a home. Building on a flat lot will usually cost less. If you have to haul in lots of dirt, do a lot of grading, clear trees, or blast through large rocks, then site preparations can become more expensive.


•  Cost Overruns
  Usually the finished cost of a home is more then the original bid price. Cost overruns occur from overspending the allowances, making changes, and encountering unforeseen problems. Proper planning can greatly reduce cost overruns. In general, it is a good idea to allow an additional 10% to cover unexpected costs.


•  Inflation and Market Conditions
  Usually the cost of building a home increases around 3% to 6% per year. If it will be several years before you begin construction, remember to include inflation into the cost estimate for your home. When using other homes to compare prices, try to use homes that have been built within the last six months.

A ToolBase TechNote
If you are considering having a custom home built, the following information will help you get an idea of the cost of building exclusive of land. However, you will first need at least a preliminary plan of the proposed house. You should also carefully consider how much you can, or want to, spend. Consulting with a mortgage lender or financial planner is advised as a first step.

There are many variables to consider in developing a rough estimate of construction cost due to the wide range in materials and options that might be used. For example, marble and hardwood floors are more expensive than vinyl and carpet (which themselves can have a wide variance in quality and price). Also, most labor and material costs vary from one area of the country to another. However, you should be able to get a pretty good idea of what to expect before seeking bids from builders.

GETTING A ROUGH ESTIMATE
A good approach is to look at prices of new homes for sale in your area that are similar to what you are considering, and then calculate square foot costs after subtracting out the cost of land. However, bear in mind that custom homes inherently cost somewhat more than "production" homes. An excellent source for new home prices that will eliminate actual site visits or phone calls is the NAHB's homebuilder.com website which lists thousands of homes for sale throughout the country, with floor plans, specifications, prices, etc. Developed lots are also listed which can help give you some idea of the land portion of the price.

A more detailed approach is to consult construction estimating guides such as those by R.S. Means, F.W. Dodge, and HomeTech (see Resources). These books typically provide approximate square foot costs for several types of construction and levels of quality. They also provide cost information for most materials and labor that go into house construction, along with "geographic multipliers" that are used to adjust prices depending on locality. Bear in mind that these guides give an approximate cost for typical constructions and components, which can vary significantly.
Finally, talk with several custom builders in the geographical area in which you plan to build to get a rough idea of what it may cost to build your house. Builders can give you a range of costs with the associated quality/features. If you are serious about building and feel comfortable with a particular builder, consider having the builder work up some more detailed plans and an estimate of costs as part of a design-build process. It may be to your advantage to start with a plan that the builder has used before and "customize" it to suit your objectives.

GETTING A BID
Once you have determined a plan with the features you want and can afford, you can submit the plans and specifications to several builders for bids. You can then compare prices, remembering that price alone should not determine your choice of builder.

It would not be unusual to get bids that vary quite a bit due to:


• Differences in design details and materials, unless plans and specifications are very specific (getting a true "apples-to-apples" comparison is difficult).


•  Builders may have more or less experience with certain house styles, types of lots, materials, etc.


•  Costs for building permits and inspections, insurance, construction loan costs, utility hook-up fees, etc., may or may not be included.


•  Quality and/or speed of work depending on number of on-going projects, availability and skill of workers, etc.


•  Varying overhead and administrative costs, and profit margin.