The Cost of Building A House

Sep 25 2018 4 min read

If you have ever built or had a contractor build, your own house then it should not surprise you that the final cost is never what you thought it was going to be at the start of the project. Why is that?

You may choose to simply blame the contractor, but most times that is not the root of the problem. In many cases, the initial estimate from the contractor was not a low bid in hopes of getting the work nor the reason why costs escalated along the way. More likely, is that people tend to think it is reasonable to only calculate the overall cost based on a very simple mathematical approach of cost per square foot. In reality, it can become far more complex than this and your approach has to allow for many other factors and flexibility as you build. These items can include the level of design and the level of finishes along the way, as well as location and access to your building site. All of which can impact the final price to build and influence the square footage cost which was originally estimated. Let us not forget our tendency to change our minds along the way of the build, that happens often.

A price per square foot when building really has no relevance in assisting to determine the worth of the finished home. It merely gives an average median or range, but it cannot be used to compute a value. So why do we always refer to cost per square foot to build a home? Call it a habit, old-school thinking, or what you will, it is just not accurate.

Consider these variables, all of which can have a substantial impact on your dream home budget:


This may include development fees, lot levies, and school levies depending on if your lot has never previously been built on. You will also need to factor in water and sewer connections, electrical and natural gas hookups.


Quality work done right does not come cheap. You want to be sure that your contractor is not selecting only the lowest bids for carpentry, plumbing or drywall work in the home, poor craftsmanship will end up costing you substantially more in the long run.


Does your lot size allow adequate space for excessive dirt, building materials and the equipment required to be used during the build? Are there trees which will need to be removed, or does the land have a severe slope causing further issues and cost.


We can all agree that the overall size of your home will affect the final cost, consideration for the interior walls to be constructed and room dimensions are important elements.


Building materials offer countless options to the builder, high-end selections for granite countertops in the kitchen or bathrooms will add to the bill. Flooring completed in hardwood can also be costly and should include consideration of the wood thickness used. Be sure to ask if the specifications for your build includes these items, or will they become extra costs that you had not anticipated.


This is where we most often make some tweaks or changes as we get closer to completion of the build. Discuss in great detail what materials you prefer to be used for flooring, cabinets, and countertops keeping in mind the need for electrical and plumbing fixtures for various rooms. Your exterior home finish will also affect the final cost. What percentage of siding, stone or brick is the right look for you?


Although two home plans can result in the exact same overall square footage, the cost resulting from your layout must consider the number and shape of outside walls and roof design, is it simple or complicated? A popular detail which is costly is cathedral ceilings, they can increase the cost for the shell of the house by as much as 40% when all rooms are included in this design.

Aside from the above factors, it is important to not just look at the material and labour as they relate to the cost, but also the scheduling of time required. Larger homes include more volume to build and the final finish can result in the building project taking longer to complete, always remember that time is money.

Remember too that your build square footage it not only living area, although that is where we tend to focus more thought. Garages, basements, porches, and attics all need to be factored into the equation. When budgeting, your most expensive rooms in the house (on a per-square-foot basis) are typically the kitchen, master bathroom and family room due to the plumbing and electrical work, but also require the most costly finishing materials versus the other rooms in the house.

Does your dream home appear to be out of range of your budget now that you have considered these factors? We encourage you to build within your budget, there is nothing worse than the burden of debt you cannot afford. Quite simply, when the building plan is complicated it will cost more to build.

Regardless of the design, total square footage, materials or finishes selected always make sure that your insurance company is insuring your new home to the full replacement value. You have invested a considerable amount of time, money, labour and thought into your home, be certain it is protected with the right coverage and limits.


Article Written by Darcy Johnson

Erie Mutual Insurance Manager – Sales, Marketing & Business Development

Please contact us with any questions you may have about this or any other topic related to your insurance.

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