When you’re building a custom home in Maryland and bidding the project, it is always tempting to go with a lower offer, especially when it is thousands of dollars difference between two builders. But as tempting as this may seem, it is important to consider whether or not the price is too good to be true when comparing custom home budgets. Unfortunately, there may be some hidden surprises when you’re comparing one bid to another. Many times, these surprises aren’t revealed until you’re well underway with the construction process. In this article, we will review how price can be a misleading tool when deciding on a builder.
1. Apples to Apples
You will see the concept of ‘Apples to Apples’ repeated throughout our content because, far too many times, we’ve seen homeowners make decisions based on pricing or specifications that were not apples to apples. To ensure you are comparing apples to apples, for a custom home budget, you must start with a detailed set of specifications.
Here is one example:
Jim and Linda were determined to build a house with a budget of $3.5M (in 2024). They met with an architect who drew up their dream home with all of the designs they desired. Although a preliminary budget was discussed with the architect, the specifications were vague and the architect advised them that detailed specifications would need to be developed and reviewed later with the builder.
We met with Jim and Linda and reviewed their drawings. We felt the design was beautiful but probably over-designed for their budget. We estimated that the home would cost approximately $4.2M to build. Meanwhile, they received a bid from another builder for $3.25M. Of course, this was very attractive to them, and wanted to know why there was such a price difference – a legitimate question. We offered to review and compare the specifications with them. Our bid included a larger budget for site work, and based on the topography of the neighborhood, we knew it was going to be significant. The other builder had a bare minimum figure in the budget for site work. Our bid also included an allowance for commercial-grade appliances such as Thermador or Wolf based on our knowledge of the homeowner’s preferences, whereas the other builder used a budget that may have been a mid-level GE appliance package. These are just two of the examples of apples to oranges and this was prevalent throughout the bid comparison, causing an obvious discrepancy in price, value, and overall quality. However, the client still felt they could get that house for that price, so they approached the other builder to discuss the discrepancies. The builder indicated that he could provide all of the higher-end selections for the same price. So, we shook hands with the client and parted ways, amicably. However, while persistence can be a good thing, it does not override the theory that ‘you get what you pay for.’ This couple ultimately signed a contract with the other builder for the price they had in mind. Unfortunately, that was not the end of the story. About eight months into their project, and after a significant portion of their loan had been drawn and disbursed, the house was only about halfway finished. Why? Because the labor, materials and selections were far more than that builder budgeted. By this time, the couple realized that there was no way the house could be completed for the remaining loan balance. The selected builder informed them that he could not continue the project, without additional funds. But, the bank would not release any more funds until the previous phases had been completed. So, the entire project, halfway done, came to a complete stand-still. What a mess!
2. Too Good to be True
The saying “It’s Too Good to be True” is worth its weight in gold when considering your custom home budget. If one builder’s price is more than 5-8% different than another’s – it may be too good to be true, or there is something wrong. The reality is that if all things are equal (and this is a BIG if), each builder’s pricing structure should be relatively close. As we discuss in this article, you can avoid a lot of issues, by contracting an architect or builder to prepare a complete set of detailed design specifications.
When detailed specifications aren’t provided, some builders will try to cut corners on price, just to get the business and make it up later. They may provide vague specifications or offer to ‘do it for a better price.’ In most of these cases, the builder cannot finish the project, goes out of business, or the homeowner ends up struggling to find the cash to make up the difference. This reality often hits somewhere in the middle of the construction process when you have few options – either during selections, halfway through the construction process, etc. When your builder tells you that everything is included in their price, be cautious.
3. You Play A Role Too
You can’t build a 6,000 square foot home with all the bells and whistles for the same price as a 6,000 square foot home without all the bells and whistles. We call it the shopping cart effect. It can be easy to want the best for your home, but if you’re budget-conscious, you’ll want to use discernment. At Mueller Homes, we provide a design concierge team to keep you on track with the selections process, while helping you understand the costs of each selection choice. However, if you choose to bougey up the kitchen, lighting, or primary suite, there will be an impact on your budget. So, we suggest having a contingency fund so that you can choose wisely where to spend a little more than budgeted, on the areas of your home that you will enjoy the most.
At Mueller Homes, we stand behind our reputation as an outstanding luxury custom home builder and that means providing our clients with realistic custom home budgets. We belong to industry associations like the NAHB and the Maryland Building Industry Assn or MBIA, which uphold industry standards and best practices. We believe that an educated consumer will make the best decision. Our goal is to arm you with the information and knowledge needed to make wise decisions that provide an experience that you fondly reflect on for years to come. We’ll continue to provide you with insight and experience we’ve gathered from decades of experience. Stay tuned and follow us for more inspiration and ideas about building a luxury custom home.
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