How Much Should I Charge For Custom Home?

D Ulrich

I have successfully built and sold several upper end spec homes in Washington State. I have recently been approached by someone who wants me to general a custom home. I'm interested, but I don't know how much to charge them?? I've heard 12, 15 & 20%. I have also heard some charge a % plus a monthly management fee and/or a fee for an on site super, even if that is me. Also, should I ask for an up front amount for the time & effort of getting things going prior to income that would be coming in once the project is rolling? Thank you!!

Stone Mountain

My brother is a custome home builder. When he does a house for a customer, he takes a fixed management fee based on the size of the house. The last one he built was a $1,000,000 house and his fee was $50,000.00 He paid for a super out of his pocket, but he also got a small % of all the contracts, and he did some of the work with his own guys. I have another client who does the same thing. He got tired of arguing with customers over every penny of extras and changes, so now he simply charges a managment fee. All contracts for the trades are with the homeowner, the homeowner pays all the bills directly to the trade when approved by the manager and all changes go through the manager. He gets 3 estimates for everything, and then lets the homowner decide. I am sure that he makes a little on the side, if you know what I mean, but he's not greedy about it. I just did a deck for him. The homeowner paid me in full 3 days after I was finished without argument.
In fact, he told us he got more than he expected. And I made my full markup.

My best suggestion is to do it that way. A management contract, with payments ar various milestones along the way.
That way, you don't have to finance it, and it's not your (financial) problem if a crew messes things up.

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john elliott

If I hired someone to build a house for me, I would be happy to pay them whatever their highly skilled time was worth. There is no way I would pay them a percentage of any of the costs, though, because there would be no incentive for the GC to save me money. Quite the reverse in fact.

John

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Ed the Roofer said "John too, in his crass and blunt demeanor.............."

GregS

This really depends more on the client. I've been involved with 2 customs over the last year where a GC was hired on a percentage basis just like Stone mentioned. Contracts are with home owners, GC manages everything.

In both those cases the home owners were more concerned over what went into the house and how it looked as opposed to how much it cost.

One home was at least $2.6M (Bridal Path area Toronto) and the other was $1.9M. They were a joy to work in since they didn't skimp on their trades and everything minded each others space.

john elliott

I'm sure it does. I'm not in the position of commissioning work from GC's but if I was, I would be looking for a payment method that benefited them when they were careful with my money rather than when they spent it freely. If the people referred to in the OP have plenty of money then I guess the percentage method would be OK

John

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Ed the Roofer said "John too, in his crass and blunt demeanor.............."

D Ulrich

Like "BuildingHomes" mentioned these clients seem to be more interested in a high quality finished product than a concern about the cost. Also, clearly I would have to establish and demonstrate trust with them. My plan would be to get, say, 3 bids on all major components from experienced trades people, discuss these with the client and decide who to go with (not automatically the cheapest). Plus provide them with the invoices. Stay in communication. I have gathered at least in this region (Washington state) that this is not uncommon, I'm just still not sure what to charge? Thank you for the comments.

Kgmz

What price range is this house going to be in?

The percentage will vary with the price of the house. No way I will pay 20% for a 5 million dollar house compared to a $400,000 house for a management fee.

Now what you are looking for is called a cost plus contract with a management fee.

But you still need to do a estimate of all prices and put it into the contract with allowances, etc. and this will be your starting point. You will still have to do change orders, etc. Also you will have to decide if the cost plus and allowances will be based on wholesale or retail prices, if based on retail your management fee will be lower since you are making money on the difference in the allowances.

Most people are not going to go into this without knowing what the finished price is going to be. They are not going to go into this blind and just pay as they go. And it is your job to see that prices stay within the budget and make sure that the quality is there. Now if for some unforeseen reason lumber, etc. prices jump up 20% for example, then you give the customer some options, They reduce something elsewhere or keep things as they are and sign a change order agreeing to the upcharge.

We generally only build high end homes and have done several customs through the years. We were building million dollar plus homes on the Issaquah plateau and the Redmond area in the late 80's. So I have experience dealing with these people. And they are not stupid and are tight with their money. They didn't get their money by being stupid and spending freely. They are willing to spend for quality, but they are going to check their prices.

A pic of a house we built in 1989 at the Lake of the Woods Development next to the Bear Creek Country Club. There is $50,000 of marble in this house at cost and 1989 prices.

d-rez

Do you know your weekly/monthly overhead? That should be the foundation for your fee calculations. -Chris

excellencee

You said you have built some hi-end specs. If it were a spec how would you price it?

masterk

Do a weekly invoice for what you need to make. This way if the customer changes a million things and the project time frame runs way over you are being paid for your time. Then if you can be the fourth bidder on any of the work, get your weekly mangement fee plus also make some money doing some sub work. I like killing 2 birds with one stone.