What Drives a Home’s Price?

Pricing is difficult to determine because it depends on so many variables. And, making matters even more complicated, this initial estimate can change throughout the construction process, making it nearly impossible to price until roughly 90 days out.

Every now and then, we’ll receive a call to ask how much our new homes cost per SF. The answer is impossible to say because it depends on a range of variables. Some are obvious, others less so – and some are within the homeowner’s control, while others are not. 

The differences everyone grasps have to do with the house itself. In a custom home, the architectural design and the quality of finishes (siding, trim, fixtures, and so on) are driven by homeowner choices and will be unique to each project. But those aren’t the only variables.

There are things beyond the homeowner’s control that also have a big impact on price.

One factor is where the home will be built. There can be a huge spread between the costs of two identical homes if lot conditions and local regulations are different enough. Not all of these will apply to you, but it’s helpful to understand the analysis that goes into an accurate price estimate.

Some lot conditions are easy to see. For instance, it costs more to build on a slope than on a flat lot. A home on the side of a hill can have a walk-out basement, but needs more excavation and a more complicated foundation. A steep slope may also require an engineer’s survey…

You also have to consider what’s beneath the ground. Soils and other subsurface conditions can vary, even in different parts of the same town – i.e. foundation costs will vary based on whether you’re building on clay, rock, or sand, as well as proximity to the water table.

Nature isn’t the only culprit behind lot-related variables, however. Some of the highest costs are for regulations and services.

Take permits, for instance. The National Association of Homebuilders estimates that the cost of complying with government regulations has risen by about 30% in the past five years, and some jurisdictions require more permits than others. Actual permit fees are all over the map, even in our own area – Leawood is very different than Mission Hills and even Prairie Village when it comes to permit variables and costs. 

If your lot is in a community governed by an HOA, their covenants and architectural guidelines can impact the final home price. For instance, some may require that your home have a certain percentage of natural or manufactured stone siding, like they do in Mission Hills. Your home cost may vary depending upon those final mandatory selections.

The bottom line is that you can’t get an accurate price before understanding the variables imposed by home design, lot conditions, governments and HOAs. If someone gives you a SF cost over the phone without taking these into account, listen with a healthy dose of skepticism.