New Home Investment
Building your new home is one of the biggest – if not the biggest – investments you’ll ever make, and when you have the ability to build a home with every option customized for you, things can add up. There are a lot of pros of building new construction. Two major benefits of building your home are control over costs and never having to worry about a pre-owned home. With the information in this post along with our Pricing Guide, you will have the tools you need to be well informed about how new homes are priced and be able to build your dream home within (or even under) your budget. You will learn how to save money on a new construction home.
You’ve decided that you want to build your dream home. You need to know how to budget but you don’t know what costs go into building a new home. Within this post and our Pricing Guide, we will answer the following; what costs go into the price of a new construction home, how to save money on a new construction home, and how to build a new home on a budget.
What costs go into the price of a new construction home?
To help you understand how new home construction is priced, we have created a Pricing Guide to deep dive into the five pricing variables that are taken into consideration when a builder sets the sales price of new construction homes. We can’t approach new home construction pricing based on how resale homes are priced. For instance, Resale Home list prices are established based on comparable home sales, and new construction home sales prices are based on the following five pricing variables.
- Material Cost
- Labor Costs
- Administrative Costs
- Homesite Costs
- Reasonable Builder Profit
New homeowners can greatly affect the variables. Floor plan type and the homesite selected are factors that dramatically increase or decrease the sales price of the home. For a full breakdown of the 5 variable costs and how they each affect the price of a new construction home, please click here to download the Pricing Guide.
How to Save money on a new construction home
If you are learning about how new homes are priced you may run across the term “Price Per Square Foot.” This is a calculation of the value of each square foot of the area of a house. Similar new construction homes are based on this calculation. The base price of new construction homes divided by the square footage is how you calculate the price per square foot. This calculation should not include the homesite.
As you research price per square foot, you may find that some styles of homes or “floor plans” are more expensive and others seem to be less expensive per square foot. Many times the type of floor plan selected makes a big difference in the ability of the builder to build the home efficiently. For instance, a 2 story home is more efficient to build than a ranch-style home, so the 2 story home may be less per square foot. If you are budget-conscious, choosing the most efficient floor plan would potentially save you money. For a very detailed explanation of build cost by floor plan please see our Pricing Guide, page 8.
Remember, there are 5 variables that will affect the sales price of a new home including homesite and buyer-specific options. These variables can drastically change the outcome of the sales price of a new construction home. This leads us to the final topic…
How to build a new home on a budget
Now you understand what variable costs go into the price of a new construction home, the term price per square foot, and build cost by floorplan. Let’s talk about another term used by home builders, “Base Price”. Base price is a fixed dollar amount for a floor plan based on a list of included features in a home that are considered standard. Every builder will differ on what they include in their Included Features List. Compare the Included Features Lists of the builders you are considering with the base prices of the homes and the price per square foot. Together, these will help you make an educated comparison of new construction home pricing.
Finally, staying on budget is important. As you plan to build your new home, you have the freedom to choose your homesite and any Buyer Specific Options you love. Remember, These “Buyer Specific Options” can affect the price of your home and can affect your budget. There are several options that our new homeowners regularly include such as:
- Walkout or Daylight Basements
- Covered Deck
- Sprinkler System
- Finished Basement
Buyer Specific Options are additional options that new homeowners would like to put in their new home. Buyer Specific Options could increase the price from the original Base Price. Typical new homeowners spend about 10% of the Base Price + Homesite Costs on Buyer Specific Options. For a full breakdown of what Buyer Specific Options are and typical selections, see our Pricing Guide page 10.
Wrapping it all up
Congratulations, you are now ready to begin the journey of building your new home within your budget! As we have outlined above and in greater detail in our Pricing Guide, there are five variable costs that go into the sales price of new construction homes. We have discussed the terms Price Per Square Foot, Build Cost by Floor Plan, Base Price, and Buyer Specific Options. Armed with this information, you are ready to begin connecting with builders and building your dream home. Enjoy this exciting journey, we can’t wait to meet you!
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This post was written by Comerio Homes