The Custom Home Building Process in Northern VA
New Home Process: A Step By Step Guide
Please see separate section for the home remodeling process
Abbreviated Overview of the Custom Home Building Process
To the uninitiated the process of building a custom home can be a daunting and mysterious process. Most people venturing into the acquisition of a new home are embarking on the largest personal financial commitment that they have made to date. All of this added together can give people reasonable cause to want to understand what they are getting into before they commit themselves. The average home in our area has over 40,000 individual parts and involves the skills of between 85 and 120 suppliers and subcontractors and demands over 3,000 on site worker hours to make the home a reality. One of our early mentors in this business, Wayne, once said, “The construction business is a very complex choreography of a zillion very simple tasks.” With this in mind the best way to understand the process is to break it down into its individual parts. We look at the construction process as being made up of 10 main elements that are tied together in various ways. These elements are as follows:
We are going to briefly touch on each of these 10 elements and explain how they tie together. There is no way to thoroughly explain this process in the time and space allotted. Hopefully this will give you an overview and cultivate additional questions you have about the process. In our discourse you will also find footnotes to find different “tips” that we offer to further explain each element.
The budget drives everything and everyone has a budget. The budget may be dictated by the bank or by your personal comfort level. Another item, which can effect your budget, is the reasonable fair market value for the home you are contemplating. Be prepared to discuss your budget constraints frankly with your designer and builder early on so that the guidelines for the rest of the process can be established. I hope that when you finish this review that you will understand that this exercise is for naught if the team does not have a budget guideline to go by. You should establish a budget ceiling and then use your professional team to find out how much lot and home you can fit in to those limits. Some homebuyers try to be coy on this and not reveal their budget. Their only concern is to know how much per square foot a builder charges for the homes that he builds. To this I would suggest an alternate scenario to consider. Picture a custom builder as if he was an automobile manufacturer who builds everything from a bottom line Chevy to a top of the line Mercedes. A true custom homebuilder should have the ability to build this range of size and quality. Would you ask a “custom” automobile manufacturer how much they charge per pound for a car? Probably not. The question would be nearly impossible to answer. The actual price for the car (price per pound) depends on what is included in the car and its relative quality. The same is true for a home.
The budget is composed of 5 basic elements – Land, Land Development, Home Plans, Specifications, and Financing.
The land is the single largest line item in any construction budget. In our area it usually ends up being somewhere between 1/2 and 1/4 of the overall price of the home. If this line item is handled incorrectly, then the remaining elements of the budget will be seriously impacted. The single biggest mistake that customers make is to go out and purchase a lot without considering the other elements of the budget. If a person pays too much for the lot in relationship to the rest of the budget or if they pick an apparently cheap lot that has large land development costs, there may not be enough money remaining in the budget to meet the minimum standards for the home that were envisioned. This is not an anomaly and happens far too often when people purchase property without consulting a construction professional to put together the entire budget first. It is our recommendation that a customer meet with a design and building professional (or even better a design/builder like Foley Development Group) before embarking on a land search. You need to put together a budget concept to see approximately what the home and required finishing will cost so that it can be determined what is left in the budget to purchase the property. At FDG, we encourage customers to have us walk their potential lot(s) so that we can give an evaluation of how the lot and its price might fit into their overall budget and construction plan.
Land Development is probably the least understood area of the entire process.
If you can imagine placing a hook on top of the home and picking it up from the lot – all the work that remains on the site with the home removed is “land development.” This includes excavation, clearing trees, septic fields, sewer, water, bringing in and connecting utilities, driveway, driveway piers, landscaping (lawn, seeding, bushes and trees), engineering, and permits. On a typical 1 to 2-acre lot in northern Virginia it generally runs between $60,000 and $150,000. As you can see this could easily be the second largest line item in the overall budget right behind the cost of the lot. We feel that it is unconscionable for a builder to ask an owner to go into the custom home process without having a very good idea as to what the overall land development costs are going to be.
Home plans can be obtained in many different ways. You can engage an architect or a design/builder to create your plans. Either one can make modifications on some existing plans that they own or start with a blank piece of paper and create a totally unique design. Plans can also be obtained from plan books that are available in most bookstores. Plans can also be created by combining many different ideas from many different sources into a unique plan that fits your needs. Many times the custom home plan process is actually a combination of the above. One word of caution. You need to be very careful that you are dealing with an honorable design team so that the very strict house plan copyright laws are not violated in your design process. If a copyright is violated the penalties can be very severe for the designer, the homeowner, and the builder. Before the first pencil meets paper, the designer and owner must come to a general agreement as to what the overall size of the home should be, the general specifications and what the overall budget is for the structure and finishing items. Over 50% of the people that come to our office that have already purchased their lot and have a completed set of plans end up never building their dream home, because the overall cost for the plan vastly exceeds their budget. We have many customers that have invested between $10,000 and $150,000 and up to two years of their time putting a set of plans together only to find out from us in one-half hour meeting that they are so far over their budget that the plans have to be thrown away. Unfortunately this happens all to often, but with the aide of an experienced design team, you can guard against doing this.
I should point out that architects generally make their living by drawing and not building. A design/builder, however, realizes that their income is based on actually building the home so it is in the design/builder (as well as the owners) best interests to make sure that the entire design process ends up with a plan and specifications that falls within the owners budget. Trust us – you don’t want to put your heart and soul in to spending many thousands of dollars and many months of time designing your dream home only to find out that it will never be built. If you want to use an architect, put a clause in their contract that if the home design does not come in near the agreed upon budget, then they will not get paid.
Specifications/Selections (“The Shiny Stuff”)
Many of the technical selection items, such as what kind of lumber to use, how the drywall will be glued and screwed, etc., that are necessary to put the home together can be made by your building contractor or designer. Most homeowners are not knowledgeable enough to make these decisions, so it is wise to pick an experienced and trustworthy builder. They can advise you in this area and explain to you the relative quality of the various ways to put a home together and its’ associated costs. The fun part of the selection process is what we call the “shiny stuff.” That includes the plumbing fixtures, light fixtures, cabinets, counter tops and so forth. Once again, if the budget has been carefully monitored up to the point of making the selections, then there should be enough money left in the budget to put the finishing touches on the home that were envisioned.
There are two stages in specifications – the budget stage and the final stage. We believe the correct way to handle the specification process is as follows:
The designer/builder can block out the various finishing areas and you can address those one by one. A reasonable quantity, quality, and price needs to be allotted to each of the areas to make sure you preserve enough money in the budget so that when you come to the finishing you can put into your home the “shiny stuff” you had envisioned. You can help this stage by creating a simple file with ideas taken from your previous home, magazines, visits to stores, etc.. File the photos by category (kitchen, plumbing, trim, etc.) In our initial budget process, we would have a 15-minute discussion as to what level of quality of appliances you think you are looking for and then we offer suggestions that fit into that category. We have been doing this for decades and can guide a customer to a quick “ball-park” selection which will lead to a reliable line item in the budget to take care of appliances. We will then put prices on each of these appliances for you and show you a total that we will suggest be included as a line item (allowance) in the budget to cover appliances.
Once the entire budget is put together, you can re-visit each of the selection areas in a casual and informed fashion to refine the selection in plenty of time so that the product can be ordered and delivered within the construction schedule.
Financing is the last item in the budget process, but should be thought of first. Many times the amount the bank will finance drives the overall budget. In most cases, the finance part of the overall project is a small percentage of the cost and is really not a very big line item in the overall budget. Custom home financing in Northern Virginia is generally handled as follows. With the cooperation of the builder, the owner will obtain the loan to acquire the building lot, build the home and provide for permanent financing once the home is complete. This is typically referred to as a “land acquisition/construction/permanent loan.” This is a very specialized area of financing and we strongly recommend that you interview lenders that specialize in this area of financing. We can provide you with a list of good lending institutions that will treat you fairly and will gladly have an initial no-obligation meeting with you to further explain the process.
The next area to review is the Construction Team and their duties. Referring to the chart at Appendix A, you can see the team is composed of the Owner, Designer, Builder, and eventually the Subcontractors and the Suppliers.
The owner is the most important part of the Team and their duties should be intuitively obvious. These duties include communicating to the designer/builder of what they are envisioning in their new home and how much they are willing to spend. Duties also include making selections on a timely basis, funding the project, and cooperating with the rest of the team during the process.
The Designer has the obligation of putting the dreams of the customer (not those of the designer) on paper in a professional manner so that it can be understood by the other professionals that will be charged with actually building the home – all within the agreed upon budget and in a reasonable time frame. From “scratch” plans can easily run $20,000 – $80,000 with an architect. A design/builder can modify an existing set of plans for little or no charge. When working with other design/build firms, we encourage people to find out who actually does the design. At FDG, Wayne Foley designs 80% of the homes we build, working directly with the client. This allows us to complete designes from scratch in weeks instead of months at a small fraction of the cost of an architect or third party service provider. If you have to go through third parties the cost and time involved can get out of hand.
The builder should have the total responsibility for the selection of the subcontractors and suppliers, who will work for the builder to meet the client’s goal. The builder should also work with the client as early as possible and establishing the budget that will guide the entire process. The builder should also work with the owner in the selection process to make sure the items chosen are within budget and on site on when the tradesmen need them to keep the flow of the project moving.
Subcontractors and Suppliers
Subcontractors and suppliers should also be a part of the Builder’s Construction Team and not someone that happens to be “low bid” on your home. Many times these trades are looked at as subordinate to the overall process and this attitude can lead to lack of cooperation, an unstable schedule, and poor quality. At FDG, we have selected some of the finest tradesman in the Washington area and use them almost exclusively for each of our operations. For instance, we have chosen the best drywall contractor available and we have negotiated a fair price for each sheet of drywall to be installed according to our schedule in a workmanship like manner that will meet FDGs high standard of finishing. We know we can have drywall installed cheaper, but we also know that we cannot get the same quality if we “low bid” each job, hop from subcontractor to subcontractor, and try to deny the drywall man a reasonable profit for the high quality work we expect of him. By making the subcontractors and suppliers a part of the Team, we are able to get the best prices for top quality work and keep the jobs on schedule.
Not many of our clients engage these types of professionals, because we provide a lot of this through the services in-house. A decorator or interior designer can be helpful in making selections and in helping define the “look” you want the home to have. As with an architect, you have to make absolutely certain that they understand your budget parameters and the importance of making selections on time. We would encourage you to spend as much time researching your interior designer as you would your builder.
Every job has a schedule. Even if a customer says they are not in a rush, we eventually find that they do in fact have a schedule when they evaluate the cost of money and how it effects a job that drags on forever. How long a home will take to build depends on the difficulty of the land development, the complexity of the structure of the home, its size, and the level of finishing that will go into the final home. As a rule of thumb, on a reasonable lot with a reasonable design you should figure a minimum of 8 months to finish a custom home that is at or under 5,000 finished square feet on the top 2 floors. For every thousand square feet of finished square feet above 5,000 finished square feet, you should add a few weeks to the construction schedule. At FDG, we include a delivery date based on these perameters.
Many customers are not aware of what is in the warranty they are getting until the end of the project. We think that it is irresponsible for any builder not to discuss the warranty at the initial stages of negotiations and to include the warranty in the contract documents. A warranty, however, is only a piece of paper and is only as good as the builder who is behind it. Many of the warranty heartaches that we hear about in the industry are the direct function of the owner choosing an inexperienced contractor who has a poor track record of building a true quality home and an even worse track record of honoring their commitments to fix the legitimate complaints of their customers. At FDG, we live and work in the same community and have warranty policy unmatched in the industry. We call it the “1-2-5 Warranty Program.” All normal items are covered for 1 year as is normally done by most builders. We then warrant the mechanical systems, (plumbing, electrical, heating & air conditioning) for 2 years. We then warrant the foundation for 5 years. In addition to that we have a record going back 4, 5, 6 and even 10 years later to fix items at little or no cost to the owner. This is the honorable thing to do and just makes good business sense. In choosing your contractor, you should focus carefully on the builders reputation of honoring their commitments to the owners once they have been paid and the owners have occupied the home and even after the Warranty expires.
Change Orders are unfortunately looked on by many as the “dirty words” of the construction business. This should not be the case. A true custom builder should be willing to customize the home as the building progresses. At FDG, we are willing to make any changes or modifications at the initial stages of the design or any time during the construction process as long as we are reasonably compensated for our efforts. If we can move a closet from one side of a bedroom to the other with a pencil (on the plans) before it is built then there is little or no charge for this service. If, however, we have to move the closet from one side of the bedroom to another with a sledge hammer after it as been framed, drywalled and painted, then there will be a charge commensurate with the amount effort the workman have to expend and how the change delays the project. As a result of the step-by-step process we use to guide our clients, tearing things out is a rare occurrence at FDG. The change order process and the associated costs should be clearly defined in the contract with unit prices agreed upon up front so that there will not be any disagreements between the parties when a change order occurs.
The contract documents serve as the road map for the construction process once the budget is agreed upon and the design is complete. A competent custom home builder who has been in business for a period of time should be able to provide you with a fair contract that will accurately direct the course of events throughout the construction process. We at FDG pride ourselves in having a contract that we have refined over the years that is clear, concise, and fair to all parties. Once we finalize our contract with you we encourage you to take it to your attorney and get their opinion.
Hopefully this outline has made you more comfortable with the overall custom home process. Your best key to a successful custom home process is to do your homework and check references extensively so you choose a good, competent, experienced custom homebuilder to guarantee your dreams will become a reality in a cost effective, timely and enjoyable fashion. When you set up your first no-obligation meeting with us, we can explain anything in this process that you don’t understand.
Overview of Custom Home Process/Budget (WMFCC1998). This document may not be used or duplicated, in whole or in part, without the expressed written permission of Foley Development Group, LLC.