At the current time, the market for builders shifted two years ago from from spec homes, to the consumer with extra cash in hand, who doesn’t rely on mortgages alone for their funds. Last month custom building was up 11% . While this is not a huge number, this new custom build client can often afford to outspend a typical buyer, and seeks to construct a custom home despite a plethora of less expensive real estate on the market.
By choosing a custom home, they are allowed more control over its design, and desirous that their house reflects their needs personal style, not a builders or the previous owners.
For even the best intending clients with money make costly mistakes early on in the building process. The purpose of this article is to help people get the steps in order, and to weigh all considerations upfront. Which helps keep you laser focused when going through the process.
I recently sat down to speak to Jim Pesavento from Concord Builders and Rich Cannavino of Cannavino Construction, two builders in the Western Suburbs of Chicago that are still building frequently. If you are considering building a custom home, Jim & Rich recommend bearing the following tips in mind:
Step #1. Know Your Likes/Dislikes, AND Consider Your Budget, the School District, and Taxes
The more you have mapped out ahead of time, the better you will be long term in your investment. Slow down. Consider all the pros and cons of an area BEFORE you begin building a house. Make a point to consider the style of home you’re interested in, overall cost, space plan/layout, taxes, and the school district. You want a top school district.
Each style of home has its own advantages and disadvantages. Knowing the existing styles will help you plan out what you’re looking for and help you in locating the appropriate lot size.
This will also help you plan out what building materials will be used in the construction and the approximate square footage of your house; all factors that go towards determining the cost of a home. The present approximate cost for building ranges from about $100 per square foot for a standard strictly spec home, upwards to 175-250 per square foot for a more refined home.
If you already know the style of home you want, get pictures that you like of that style (check a plans magazine, a book, or the internet) and show them to a custom home builder. They can usually help determine the costs associated with that style and its details. The area’s school district and taxes will also factor into the cost of constructing in an area, as well as the overall cost of living in an area.
Find out all this information BEFORE you begin construction, and you’ll be able to make the most out of your area and your house.
Step #2. Find a Lot That Meets Your Ideal Municipality and Building Codes
If you don’t do this, you can potentially spend thousands of dollars drawing up a plan with an architect that is acceptable for the architect’s area, but unacceptable for your lot’s municipality.
The lot’s municipality determines much of what you can build, how wide you can build on your lot, how much square footage, how high your roofline can be, and the use of the lot. It also has to do with strictness of various codes. You need to determine this before you get started on constructing a set of plans.
Custom home builders are usually very aware of lot’s particulars, as they require empty lots to construct homes. Talk to a builder before buying any property. They can help determine the potential dangers of a property, such as if it’s on low ground and could suffer flood damage or have an environmental issue that you won’t find out about until after you buy it (if its in an area with a certain soil, you will need to treat for termites and have extra precautions not to have bad soil under the house, etc). Builders and engineers are good at spotting the pros and cons of each lot choice.
Most custom home builders have great reference lists for reasonably priced architects, as well as a list of realtor’s they’ve worked with and could recommend.
Step #3. Interview the Builder BEFORE Hiring an Architect
Builders have far more insight on value engineering a house than an architect does. And while architects can design something on paper all day long, they don’t have the same understanding of the cost difference style types and different features (Ex. Cost different between an arched window and a square window). This helps consumers determine cost and establish the appropriate budget for their custom home before you take steps to hire a designer, reducing any risk of revision down during construction, and ultimately saving them money.
Builders can also provide additional insight into potential plans and features, and offering advice on how to properly execute an idea (This feature will generate lots of noise, so make sure you insulate that room properly for temperature AND sound). Architects are less likely to be aware of things like this. Fortunately, most builders can refer you to architects they recommend based off their prior working experience.
Step #4. Hire an Architect That Works on a Flat Fee by the phase, NOT by the Hour
Work with an architect who will tell you exactly what the scope will be for the cost, per phase, and what the fee will be for any revisions. Usually, an architect will give you an hourly fee for revisions, or will give you another flat fee for work on several different revisions. Be sure to get a set of plans that will be permit ready (see #2) for builders to work off of.
By getting a flat fee, consumers won’t have to worry about paying an architect hourly to create something they don’t want and can’t afford. Talk to different builders first, and start constructing an architect referral list from there. Make sure these architects work by flat fees, so there are no out-of-control costs for a set of plans. Be bold and ask or tell them that this is how you prefer to work.
Step #5. Only Work with a Builder Who Can Quickly Provide a cost ballpark of upgrades
Work with a builder who can give you a ball park on everything and don’t work with a builder who does cost plus for small changes in the field! Work with a builder that will show you his profit upfront as a flat fee. As how much change orders will cost. Extra costs because you want something added or changed should not always require much effort from the builder or a extra 10-20% markup. That is what cost plus is.
Make sure to have an idea of the style and square footage you’d like, and provide the builder with a copy of the plans to bid off on.
Find a builder with experience: one that doesn’t constantly “get back to you” with answers to upgrade cost questions. This means that either the builder has a lack of experience with various costs or that the builder is going back to inquire with his subs and then adding onto the costs , totaling it so he can be accurate in his numbers. An experienced builder knows what the approximate costs are already if you want a steam shower or body spa plumbing vs regular shower plumbing. Especially if he has good relations and has worked with the same subs for years.
Cost Plus is what typically cost the client the ability to design their homes to their wishes later or decorate. You need to keep your building costs down. Not by being cheap on finishes and quality, but by having transparent costs while building. You will not achieve this if you work with builder who quotes you cheap prices upfront, only to nickel and dime you on every single change throughout the length of building the house. Nor will you be happy in the end with what you have ended up paying.
Step #6. Hire Local
Local builders, architects, and engineers tend to have tight networks and strong working relationships. This helps the overall building process go smoothly. In the event where problems do arise, having this relationship helps to expedite the resolution of any issues.
Also, hiring local help always has a trickle-down effect, helping to boost the local economy.
Step #7. Interior Features are a MAJOR Cost Component to Building a House
There will always be labor costs in building, and materials/brands (interiors) that determine the costs. While builders’ budgets are pin-point accurate on installation, their interior budgets vary. Get a second opinion and double check the builder’s “list” of allowances with your designer.
It’s important to note that in the current market, a consumer often pays for upgrades in plumbing fixtures, cabinetry, tile, and carpeting , out of pocket. Because the comparable’s in most neighborhoods will not appraise out as high as their house would with all the upgrades. The house has to appraise out or anything over that appraisal will have to be paid in cash at closing. This is a major extra consideration in addition to typical building costs that consumers have to bear in mind when assembling their dream home. It’s normal for a higher end house to go to closing with 75-200+K in cash . The sky is the limit and of course, depends on the clients and their likes and needs. And that expense doesn’t matter to people with money….. they don’t fret over neighborhood “comparables” if they know they will be living in the house for the next 15-20 years. They want to enjoy their home, and want a special experience of living in that house with the upgraded features that creative designers & quality builders can bring to the equation.
Thank you to both Jim and Rich for their tips!