When you begin the process of building a custom home, the excitement is palpable! However, it’s important to note that there are a number of outside factors that influence the cost of a home, beyond you or your builder’s control. It’s noteworthy to be aware of the cost considerations when building a custom home so that you are prepared for any unexpected occurrences and most importantly the challenges that arise when comparing one builder’s price to another. Here are a few reasons why cost considerations when building a custom home can be elusive and what you need to consider.
The market, inflation, supplies and even foreign trade relations can have an impact on costs. In the early 2000s, for example, domestic production of raw materials could not keep up with the booming real estate and construction industry. Production for materials such as drywall, concrete and other raw materials was inflated 2-3 times higher than normal. Overseas manufacturers supplemented domestic production, but for a much higher cost. For those that had to have their home built, the costs were not negotiable – these projects had to be completed. However, these inflated market costs dramatically impacted buyer affordability. So, it’s always a good idea to have these factors in mind as you begin the process.
Structural design and architectural complexities have a great influence on costs too. Far too many homeowners begin the design process without builder and architect collaboration. This may result in a beautiful design that is far too costly for your budget and therefore may require multiple redesigns.
Site work and topography can also have a major impact on costs. So, the lot you choose can impact the cost of your overall budget greatly. A lot with a long driveway, well vs. public water, or a lot that has substantial forest removal may add thousands of dollars to your budget, and could reduce the amount you have to spend on the actual construction of the home.
Large scale disasters often can have an effect on the laws of supply and demand too! For example, after a hurricane or other natural disaster, demand will often surge for materials and prices may be much higher. Can you wait out these increases in supplies and materials or will your project need to move forward regardless?
However, the area where we’ve seen the most cost variation, is in the area of “allowances.” This is such a critical component of the ‘cost’ process, that we dedicate a thorough discussion of estimates and allowances in our book. We have seen this as an area of discrepancy and unfortunately abuse, in the industry. One builder may provide allowances for a meager trim package while another builder, more familiar with your desired tastes and expectations, may specify a trim package that is far more elaborate.
Don’t be fooled by a “lower sticker price” without being educated and aware of the implications. The bottom line is that, as we’ve stated in our book, if you are truly comparing apples to apples, one builder’s cost and price structure should not be more than 5-8% from another’s. If it is, then there is likely a big discrepancy in the allowances, which will obviously impact your finished home.
If you want to be fully educated, be sure to read the entire chapter in our FREE ebook: “Designing & Building Your Custom Dream Home: How to Create an Experience You’ll Love to Remember.”
Ready to get started? Contact Mueller Homes today, and let’s talk!