Here is our stab at one of the most important and frequently asked questions our clients seek an answer to. They are looking to embark on an adventure they will engage in most likely only once in their lifetime.

If you are in the same boat, if you have been wondering if a truly custom designed and custom built home is a possibility for you, you probably wonder: What does it cost?

Can I afford a custom energy efficient modern home, created just for me, from the ground up?

The short answer is - you will pay more than what they tell you, and of course, “it depends.”

The truth is, not everyone can afford a custom modern home, and you have more cost effective options. What we are referring to here is a home that is designed to your needs and dreams, one that is curious about your way of life, and a home that is built well and from scratch. It is a prototype you will be creating for yourself - a one-of.

Your alternative options are to buy a home that is on the market, and ready to go, or to pick from a floor plan a developer in an emerging subdivision offers to you. If you're looking for the best price per square foot, one of those might be for you.

If you are looking for a home that will be created to your aspirations, from nuts to bolts, here is what you should expect:

Your budget will mainly cover 4 areas of allocation: 1) the Land, 2) the Design, 3) the Construction, and 4) Financing. In all of them the choices are largely yours. The questions for you become about what you value in each of them and how much you can and want to spend on their qualities.

Since everyone’s financial situation is different, we offer our help guiding you through each of these pieces and setting up a plan with you.

1) Land

As far as the lot is concerned, we have seen our clients spend anywhere between $120,000 to around a million dollars, here in the Carolinas. Obviously, the more you spend on the property the less you have left to spend on the house. But as good as any design team might be, an impressive view, a two-hundred-year-old oak tree, or the proximity to your favorite amenities will be hard to conjure out of thin air. If you are looking in the neighborhood you most desire, you see your bank account drain in real time. The only true way to beat the market prices is to look off the beaten path.

If you are looking at a somewhat balanced approach and especially if you are planning to eventually cover a good chunk of the expenditure by a mortgage, we suggest allocating 15%-20% of your budget toward the purchase of your land.

Nonetheless, we urge our clients to look at the entire financial picture, decide on how much they should allocate to the property, and go shopping. Everyone comes with their own budget parameters, wish list, and level of aptitude to compromise.

As it happens, the very first step for you in this process is to find a property. And so it will be the first true testing ground, whether this custom approach will fit your appetite or not. In most of the areas our clients have looked for land before, we have suggested to them that they don’t have much to lose. If you find the right property for you and think you can afford it, buy it. The Carolinas continue to be a desired place to many people around the country. If you find yourself suffering from buyer’s remorse, you will most likely be able to sell it again soon, and possibly even with a little profit.

2) Design

The design fees certainly vary based on the services and types of qualities you are looking for. We let our clients choose from a long list of services and fee packages that are based on the complexities of their project. We price our services between 7% and 12% of the cost of construction. In order to ascertain what you're asking us to do, we start with a feasibility study, our Design Goal Review. Once you and we know what you are after, we provide a proposal with options for you to choose from.

There are more cost effective offers out there. The cheapest might be to pick a house plan from the internet for around a thousand dollars or so. Keep in mind that it will still have to be worked on by an architect or residential designer to meet local building codes, local construction methods, and the ground conditions of your property. Nonetheless, you might walk away, spending around $10,000. For any changes you might be charged by the hour.

However, for a true custom design you are turning to a set of professionals. There are no prescribed cost structures underlying the design process of your home. Each design firm charges different fees. However, in general, the fees are comparable. Designers, architects, and engineers talk. They know how their offerings compare to those of others.

You are essentially left pushing various levers into the perfect spot for you. Here again the question becomes, what are you looking for? What do you value? Our clients have shared the following points of interest with us: Are you specialized in the type of house I am looking for? Is your expertise in the type of home we want? Will you guide me through the entire process or just provide a set of drawings? Are you going to be there during the construction, too? Will you help me pick out all the fixtures, appliances, materials and colors? Will you take care of the interior design, too? Will you guide me through energy efficiency options? Will you listen to my ideas? Is the design process interactive? Will you present me with new ideas and possibilities, I have never heard of before? And how technically proficient are you in the type of home I am asking for?

The most important answer will be to the question of trust. You will task your design team to handle your life savings and your dream of a better future. Is that what they are offering a fit for the outcome you are asking for? Can I trust them to take care of me and steer me safely to the end result?

Your particular home and situation will also require a very specific set of designers, a group of them. You will most definitely engage with an architect or residential designer, and with a structural engineer. Depending on what you are asking for, you might also need: an interior designer, a civil engineer, a landscape architect, an energy rating agency, a mechanical engineer, and a lighting designer. Other specialists will be involved during the construction and will be paid for as part of the building process..

Rest assured, we discuss this prior to starting the design process with our clients so that they have a full picture of the charges to come.

3) Construction

The cost of construction is equally dependent on what you are asking for. Usually we start with the budget that you think is available to you and with your wishlist, and come up with a plan to meet the two. Let’s just say, our clients usually have too good a taste, their eyes being bigger than their stomachs.

So we guide them through their choices and set goal posts to meet. During the design process we also acquire preliminary estimates for the construction cost to allow us to adjust, if so desired. Nonetheless, you are asking for a custom home designed and built from scratch, and those are usually more expensive to build than any house ready to buy.

Here in the Carolinas we advise our clients to at least consider a construction budget of $400 -$850 per square foot under roof (that includes the garage) as of the publishing of this blog post. And if you are asking for gold plated faucets, we let you spend even more than that.

The cost of construction has certainly increased during the course of the Covid pandemic, and supply chain issues still plague the building profession. Inflation has hit labor costs and material costs. Nonetheless builders are starting to get a handle on the recent ups and downs. Working with a builder during the design process and asking for preliminary cost estimates will provide you with the most certainty you can ask for.

I am sure you have heard that you will end up spending more than what you thought. We like to get you there before the construction starts.

Nonetheless, be prepared for changes in cost during the construction. Prices can change and you might ask for last minute changes. The biggest unknown is the ground you build on. It can hold some surprises.

Understandably, in the end you pay what you ask for. The more expensive the materials you ask for, the more expensive your house will be. The more specialized the labor you ask for, the higher the final bill will be. So ask yourself: What are the luxuries you crave? What is important to you? What do you want to pay for?

4) Financing

As far as financing is concerned there are essentially three ways to go about paying for the creation of your new home: pay out of pocket, pay with a construction loan that turns into a mortgage, or a mixture of the two.

If you plan to cover part of the cost with a construction loan, you might have to consider paying around 5% of your overall budget towards interest payments and closing fees before you move in.

Each lending institution offers different loans with different requirements. In most cases you are required to add a portion of the cost in cash up front. We have seen anything between 5% -20% of the total loan amount.

We are explaining the ins and outs of construction loans elsewhere. But beware, when you do involve a financial institution for a construction loan, it will affect the way we will slice and dice all these numbers with you. Banks have their own mind on what they are willing to pay for, and it will most likely differ from your ideas. 

I understand this is a lot to swallow. So ask your own design team to take you through the whole financial picture before you begin. It will allow you to make informed decisions and keep the surprises to a minimum.

~ Toby