How to Choose the Right Custom Builder for You

How to Choose the Right Custom Builder for You

You’re taking the first steps toward building your own custom home. You’ve probably been thinking about your dream home for quite a while. You may have already chosen the perfect lot or sketched out ideas for a floor plan. Wherever you are in this research phase, we are thrilled that you’ve found us. We make it our mission to provide as many helpful resources to people like you who are embarking upon this exciting custom home building journey.

In this post, we hope to make an incredibly important decision a little less daunting for you. Selecting the right custom home builder is the most impactful decision you will make along the road to your dream home. Choose well, and you will have a true partner and advocate. With the right builder, you will avoid the all-too-familiar construction horror story and instead end up with a high-quality dream home as well as an enjoyable, smooth, and creatively fulfilling experience for you and your family. The best time to choose your builder is either before you begin the design phase with an architect or very soon after engaging an architect. Bringing a builder on board early in the design phase will ensure that your home’s design and your desired budget stay aligned throughout the process. A good custom builder will do much more than that during this architectural design phase. They will also:

First, you should know that in the state of Texas, anyone can be a builder. There are no licenses or certifications required by law here like there are in most other states. Because of this very low barrier to entry, hundreds of home builders in and around Houston, some better than others. It’s always best to start your search by talking to friends, family, neighbours, and real estate professionals you trust for any positive custom builder referrals. Chances are, someone you know has heard things about a custom builder or two. Worst case scenario, these conversations may not uncover a stellar builder, but they might help you create a list of builders to AVOID. This is equally valuable.

If conversations with your trusted circle don’t uncover any superstars, turn to the world wide web with caution. Be specific in your Google searches. For example, instead of searching for “Houston home builders”, search for “award-winning custom home builders in Memorial” or wherever you hope to build your custom home. Jot down a long list of about a dozen or so builders that you find, being sure NOT to include those with negative reviews or ratings.

How Do Professional Builders Make Money

This probably won’t come as a surprise to you. Contractors are in business to make money. They have employees, tools, vehicles, insurance, and advertising to pay for, and on top of that, they must support their families. So, how do professional builders make money, and what are the typical margins?

The new car you bought probably had a 50-100% markup over the cost to make it. Most of the products you purchase have a similar markup over cost. But for some reason, we don’t like to pay those margins for a new home.

Base House

So, let’s look at the different ways a professional home builder makes money. First, they make money on the basic cost to build the project. If we are talking about building a home, we call this base house cost. This is the cost for building the basic home before the customer adds all of their personal touches. A typical builder gross margin for this is 15%. This is a fair deal when you think about the risk, cost, and time involved in most projects.

Standard Options

The second way contractors make money is on the items you decide to change during the typical pre-planning stage. A few examples would be adding a recessed can light or an additional hose bib. These require nothing special to price out and install as long as you choose them before pulling a permit. The markup on these typically ranges from 30-50%. For example, if a recessed can light costs the builder $50 for the electrician to supply and install, the cost to you will typically be somewhere between $65 and $75.

Custom Changes

The next type of option that builders make money on is non-standard or special options. These are custom options that involve drawing a plan, estimating quantities, bidding, and sometimes include hard to find expensive products. These changes can be very time-consuming and difficult to estimate accurately, and they can involve products that may be hard to get and are easily damaged or stolen. In addition, these special custom options typically come with a 75-100% markup.

Late Changes

The last type of change is the one no contractor wants to deal with. These are the late change orders that come after construction has begun. These involve plan changes, bidding, permit changes, tear outs, on-site management, product order changes, and delays. The true cost of this type of change can be analyzed by breaking down the overhead costs from delays, the additional management time to implement, communicate and supervise the change, and the additional labour and material to do the actual work. The late change should be avoided at all costs as you won’t be happy with the price you pay in both time and money.

Overall Builder’s Fee

So, what is a fair price to pay your contractor to take on the responsibility of completing your new home on time, per your budget and specifications, and in a quality fashion? An overall gross margin for the professional home builder of 15-20% is typically a fair price. If this seems high to you, you may want to explore options where you take on some of the responsibility for the project’s success. If you build your own home, you can do some of the actual labour yourself to save even more money.

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How Much Does A Builder Make On A Custom Home?  

Gross Profit Benchmark: 21% to 23%. For custom home builders, gross profit is defined as selling less direct construction costs (commonly referred to as ‘sticks and bricks). For homes built on a cost-plus basis, It is recommended that more than sticks and bricks be included in the costs charged to the customer. However, only direct construction costs are used for benchmarking purposes to calculate your gross profit. Custom builders who use outside salespeople to sell their specific homes and/or carry construction loans to their customers need to make a gross profit of close to 25% to cover these additional costs. Over the years, I’ve seen custom builders working on the same market report gross profits ranging from one-digit to more than 30%. Characteristics that distinguish high gross profits: they are not afraid to ask for a margin, and they have systems in place to control job cost variances.

Typically, the mark up on these ranges from 30-50 per cent. So if the light can charge the builder $60 for the electrician to supply and install, the cost to the builder will normally be between $75 and $85. Builders and home contractors also make money on what is known as non-standard options or special options.

These are custom options that involve drawing up a plan, estimating quantities, bidding, and sometimes difficult-to-find expensive products. These changes can be time-consuming and can be difficult to accurately estimate, and may involve products that may be difficult to obtain and are easily damaged or stolen. Typically, these special custom options come with a mark of 75-100 per cent.

In addition, builders and home contractors are making money out of the late changes in home construction. This last type of change is the one that no contractor wants to deal with. These are the late orders of change that come after construction has begun.

These include plan changes, bidding, permit changes, tear-offs, on-site management, product order changes, and delays. Note that the true cost of this type of change can be determined by reducing the overhead costs of delays, additional management time to implement, communicate and supervise the change, and additional labour and material for the actual work.

Operating Expenses Benchmark: 11 to 13 per cent. To achieve 10 per cent of net operating profit, a custom-built company producing gross margins of between 21 per cent and 23 per cent must keep its operating expenses between 11 per cent and 13 per cent. Total operating expenses will be increased for custom builders who build and sell specific homes, sell their homes to salespeople other than the owner, or provide construction loans to their customers.

10 Benefits of Hiring a Custom Home Builder

A custom home is the natural expression of your taste. And since you will be investing a substantial amount of your savings, you will want to hire experts. Custom home builders make it possible for you to lend a personal touch to this intimate space—the advantages of hiring them to go beyond just aesthetics. Not only do you get your house to look and feel just like you’ve always wanted, but you also save time and money.

There are at least ten benefits you can reap when you choose custom builders:

They are connected with expert subcontractors.

A builder works with a vast and reliable supply chain. In addition, they usually enjoy professional relationships with realtors, agents, and clients. The combined knowledge brings an assurance of quality to your home.

Moreover, different subcontractors take care of different aspects of a project, for instance, some buying building material, others sourcing the best fixtures. That’s why working with them is a smart move since trying to do everything by yourself is overwhelming.

They make bulk purchases with discounts.

Custom builders usually purchase items from vendors they are familiar with or have worked with before. Since they regularly purchase similar materials in large volumes, they can get substantial discounts.

This is often passed on to their customers in the form of reduced service charges or concessions. In contrast, if you try buying the same things in small amounts, you’ll end up spending a lot more. Hence, custom builders help you save money.

You can implement your preferred floor plan.

Homeowners enjoy the liberty of fine-tuning the floor plan of their homes. Any reliable builder will get the blueprint approved before moving ahead with the construction. You can modify space usage or make room for additions later. If you don’t need a garage, ask your builder to not construct one.

Need a landscaped front yard? Or a rooftop pool? A furnished basement, perhaps? It all comes down to your needs. Just take a look at the illustration and see if the dimensions or layout appeal to you.

Settle down at a location of your choice

One of the biggest attractions of hiring a custom builder is the liberty to choose where you hang up your boots. A good location comes at a premium but pays off in the long run. If you already have a plot, the builder can help you get a proper site assessment.

If you don’t have one, they can help you buy it in a suitable location. Owning a home in the right district with good colleges, hospitals or workplaces is a dream for many.

Custom builders manage your resources better

Admit it! They know what they are doing. Time, for instance, is the biggest resource here. As a homeowner, there are only so many hours you can devote to the project. Custom builders have a knack for maximizing your time and making the most out of it. They can properly take care of all the different aspects of your home building venture with a single focus. Their tried and tested processes ensure minimum wastage of time, materials, or labour.

Unleash your creative flair with custom designs

Fancy an exposed brick wall in the living room? Or a walk-in shower? The beauty of a custom-built home is it draws out your inner designer. Choose your fixtures and ceramics. Play with paint and patterns, contrasts, and combinations until you are content. The house is your canvas, and nothing should shine brighter than your personality.

There is a special joy in hand-picked appliances, a satisfaction in custom-ordered floor lamps, and it’s all possible in a custom home.

Lower maintenance charges

Don’t let the upfront charges fool you. They turn incredibly affordable in a few months. When you have installed the latest indoor climate control or specially-selected fixtures for the master bedroom, there is an assurance of performance. Warrantees and professional maintenance protect them for the first few years.

You don’t have to rush for upgrades anytime soon, and your energy bills stay within limits. All this reduces the financial burden on you to a considerable extent and keeps you stress-free.

Only pay for what you want.

Getting a house tailor-built allows you to steer clear of useless trends. You actually pay for luxuries you want to enjoy. These are not generic houses thrust upon the owner. There is no compulsion to get a floor-to-ceiling window, a large walk-in closet, and a full-blown wine cellar simply because it’s in vogue.

Since your builder works only after you’ve approved of the home design, you’ll save some cash by avoiding any whimsical, useless, expensive additions.

Your builder follows a smooth, streamlined process.

As a home builder for the first time, you are bound to get caught up in the intricacies of homebuilding. But your custom builder knows better. They have a neat procedure in place, and this works every time. In addition, they are well versed in the home building process and can anticipate challenges.

They have unique, effective solutions to sticky problems that can easily make you look deranged for a month. Reputable builders have the right connections. Custom builders effortlessly sort out the complications from incorporating building codes and certifications to getting your papers in place. So, hire a custom builder and enjoy a seamless experience.

There is room for home improvement.

When you build a house around your needs, you can make room for alterations down the line. Then, when kids arrive, or you decide to moonlight as a painter, this personalized home can be tweaked to suit your changing needs with minimum fuss. Future-proofing, as it’s fondly called. It gives you complete control of indoor and outdoor spaces, to be used when you like them.

Hiring custom builders are increasingly getting popular. With trust and quality as our hallmarks, we walk every step of the way with you to fulfil your dream of a home that stands out and stands tall. So get in touch with us for all your construction needs.

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