When building your home, how did you determine what is included in the cost to build? Builders and I have never discussed contract type.

List of any and all materials to be used in the home. Not broken out pricing but a solid list of all material choices.

@millworkman Do you mind sharing your builder's name and website?

I did not build new, I bought existing. But have worked in the const. supply business for 35 plus years that last 12 plus in commercial in the NY market.

A detailed statement of work does not require an itemized price list. Knowing exactly what work will be done is a must. Knowing what costs are included and which are additional charges and how they are figured is part of the contract. Recognizing what portion of the check buys what part of the house is of very little benefit as the house is only useful as a whole.

@Lyndee Lee All I've received so far is the builder telling me a number/cost over a video call. The SOW would be great. I just wanted to know if I was expecting too much and you confirmed, I am not.

@JuneKnow Agreed. Nothing in your comment states that all I get is a number/costs via a video call. I should get something in writing. Overall, I’d like to choose my own interior finishes. Do you know any NoVa builders you can recommend?

I live in Alexandria, and one builder I've seen frequently in the area is Harry Braswell, Inc. I don't have any personal experience with them, but they are building a large addition two doors down from my house and so far the owners seem to be very pleased with Braswell. The logo on the truck says they have been in business since 1992.

There is a lot of renovation work going on in this area, but new house construction is not that common because there aren't many open lots in the area. If you are farther out in Fairfax or Louden County there may be more builders doing new construction.

Bruce

We have a custom home. Our process was to find a builder we wanted to work this first. We did this before we even bought our tear down house. The builder actually reviewed lots with us and confirmed
His take on feasibility of the lots and any red flags. Once we bought the house we planned to tear down and build on we officially signed on with the builder.

But we didn’t just go with him out of the blue. We met with two other builders too initially. One fixed price and two cost plus. All three gave sample budgets for projects of our scope and discussed their fees and their role. Once we bought the house we interviewed two more builders as the house was in a different city than originally we had planned. Again these two builder brought in budgets and walked through numerous things.

We had a firm max we would spend and we had two builders be honest and say they didn’t want our project. Totally fine and fair. Glad they were clear.

In the end we stuck with our original person. He fleshed out a basic budget for our lot and our conditions. This was just a starting point though. But if gave us a good grounding and jumping off point. It was clear their fees, what we would have control over, and what would be site dependent etc.

We then engaged a designer and the builder came to meetings with them too and helped keep design things in check with budget. The designer and builder worked together to make sure that our project would be approved by our district and be within budget.

Once our permit package was set we moved onto interior design. Same designer. Builder was a god send here as designer specked numerous things that were grossly over budget. We found replacement items that were within budget.

Only at this point, at least a year into our arrangement, did we get a more accurate true budget as it was literally an itemized cost of every selection etc

Anyway this is my ping winded way of saying it is reasonable to get an idea of what the costs will be. Especially if the builder works in your city often and has built similar sized homes. It is not reasonable for it to be anything more than a jumping off point.

The contract is really key. What is their mark up? What happens if you make changes? When are you billed and how? Do you see original invoices from subs or do they just invoice you no extra info? What are the clauses about overages, increased costs, delays etc?

But all of that might be impacted by your type of build. If builders owns land not you, if bank involved etc.

I don't think I provided an appropriately detailed answer. Yes, you need more details prior to choosing a builder. However, nothing is free in this world and if you want good information, it will cost you money. Read the answer from A S carefully and you will see there is another party in their project which is a designer. Given the difficulty and expense of this type of project, very few builders will work with an unexperienced individual. You need some additional expertise on your team and it might come from a designer, a contractor's project manager, an architect, an independent consultant or other experienced person(s).

It seems you are at the point where you need to spend money to determine the feasibility and direction of your project.You may find a firm which is willing to continue working with you for a "free" estimate or a minimal design fee. If they are taking on the risk of working without a guarantee of return, the risk is high. Therefore, the return to them must be high or they won't be in business long term. In total, you will likely spend less money buying professional expertise at this point.
One approach might be to contact the local planning authority and get names of builders and architects from recently issued building permits. That is public information although you may need to be persistent to get someone to assist you. Drive by their projects and see what information you can glean from careful observation.

I do think I should clarify that we only engaged the designer once we had a commitment to the builder, sample budgets, and a budget for our build we were happy with. This was also we had clear discussions on what the builder mark up was and had signed a contract. So we did a lot before engaging a designer.

The designer and builder then worked together through design but in order to choose the builder we didn’t need the designer.

I don’t understand your goal? To get lowest price possible? To make sure builder doesn’t “mess” with numbers? To build and get max quality at lowest possible cost? A 2,000 Sq ft house is very small potatoes for a builder. What is your main objective?

Probably to find out how much it is to build a small house. Seems like an entirely reasonable request to be. I suspect the OP wants to get a few examples from builders on what costs would look like, who they might feel comfortable working with, what different cost strategies builders have, and who they are a match with.

Building a home is a huge investment and people deserve to have an idea of all of this before they dive in. The belief on this forum that they don’t is completely mind blowing to me. Of course you get more once committed but why would anyone commit to a builder if they weren’t willing to discuss pricing and overall costs and expectations? This is a two way street. You want my money and to build my home, then show me how you would do it and give me an educated guess in costs.

Hi @Flo Mangan! My main objective is to obtain the upgraded interior with the finishes I would like. I've seen builders choose all the interior finishes per their packaged/Turnkey home and the homeowner just have to live with it. For instance, fireplace versus coffered ceiling or hardwood flooring versus powder room. If I have the itemized pricing, I can make the adjustments. The reason for the ~2000 Sq ft is to have all main living spaces on one level. I have issues with stairs. I don't mind a bonus room upstairs (a room I do not have to access everyday), but the laundry, bedrooms, bathrooms, great room and kitchen must be on the same level.

Anita it doesn’t sound like you are doing a custom home? If so then your process looks very different

@WestCoast Hopeful Really? What makes it not sound like a custom home?

Builders don’t choose fixtures and finishes for custom homes. Homeowners do. Builders don’t get to swap out a coffered ceilings or hardwood floors. The homeowner does. In a custom home the homeowner is the one who adds or deletes finishing items. Even in a fixed price contract if a homeowner suddenly said I don’t want carpet I want hardwood that is their change, which they would pay through the nose for late in the game, but they are the one making it.

Ok. That helps. You need a “cost plus contract with semi custom builder”. Your cost per square foot includes all selections so your “finishes” are primary driver of cost per square foot. A builder of 2,000 sq ft homes has a very small margin of profit to stay in salable range. So it will be a tough resale situation down the road possibly. I would talk to some local real estate folks and get some “comps” in the area to see what sales ft have “closed” and at what cost per sq ft. Builders that do 2,000 sq ft homes usually are what we call “track” builders. They build volume (number of homes) using similar designs and finishes with minimal buyer selections. This allows them to save costs by volume buying and save buyers cost to purchase. What you want will end up being a semi-custom home. Or full custom home. The big question is “what total cost” do you want to stay within? You run a risk of buying a Chevy Volt and putting Italian leather interiors with wood dash detail and custom flooring at twice the cost of base car. Lol

Just make sure if you try and go the semi-custom route that you understand fully what is and isn't included. What you can change, and what charge there is for the change, and what you will need to keep as is. Endless people come back and post here upset that a simple change cost X dollars or the allowance for X items wasn't nearly enough.

Hey @Flo Mangan, If you had the choice between a track builder home that included an upgraded kitchen and bathrooms versus a custom built home with laminate counter tops and linoleum flooring which would you choose?

Someone else's priorities and choices are irrelevant to your home building choices. You need to nail down your priorities and preferences because even building a tract house requires a multitude of coordinated decisions. Find local assistance that includes getting to know how you live and what you value in life

@Lyndee Lee wisdom is found in the multitude of counsel

Have you considered just buying a house? Not new, not needing massive updates, but that has some upgrades and will meet your needs? Alternatively buying one that you can make your own by easily changing kitchen and bath to what you really want.

What we have always done, is find the location we want first. Then research the best builder in that area. Then negotiate with that builder for “must have elements” within our budget. Once in the home, make changes we would “like” as budget, timing, and return on investment warranted. Location is vital to us because it is vital to resale advantages. In the area we are currently in, the only houses on the market are ones in less desirable locations. So we are leasing in this area watching for the best combination of specific location, floor plan that suits our needs, and budget. Maybe leasing is your answer for now.

@Flo Mangan Since you're a PRO here, do you mind sharing the current average "margin" for custom builders? You can state it in percentage of cost to build, if that helps.

Margins are proprietary business info that are specific to each professional. A guy whose office is a truck and who does 6 builds a year will have different numbers than a small builder with an office in a warehouse district, 2 project managers, and who does 12 homes a year. Or a big company with a design center in that bigger warehouse office, with designers and administrators on staff, as well as a dozen project managers, and who does 300 homes a year. A smaller client to builder/project manager ratio generally correlates with a higher end, higher priced job, no matter the amount of overall staff, or size of company.

Some builders break the money down to “overhead and administration” and “profit” as different categories. Some just use a larger calculation number to be able to put all of that together in an easier to understand bookkeeping chore. There is no “standard” or “should”. There is only each builder’s numbers, and his ability to (rightfully) command more because of skill and reputation.

There is no substitute for extensive footwork. For both your architect and your builder partner. Because it IS a partnership. Not an adversarial relationship.

If you want cost transparency, and a more definite bottom line, the answer is usually not going to be a new build. The answer will be to buy existing. It’s a lower cost solution, with much more of a known quantity result.

Why are you not considering buying an existing home?

Cook’s Kitchen said it well. I believe from statements you have made, you are extremely fearful of a builder making too much money based on some belief or experience you have had. So you are going to be unhappy if you do build no matter what. You have already mentally decided. I know and have worked with many builders. They take much of the risk, yet EVERYONE squeezes them. Buyers, subs, suppliers, everyone in their sphere wants “better price”! Some handle that better than others. So since you know you will have a bad experience building, why do it? Think about this hard. I wish you luck. Find a house you like 85% and fix the 15% you don’t like. There is no such thing as a perfect house or perfect builder. What I can guarantee is concrete cracks and builders are human and mess up. It’s all in how you as a buyer react. I hope you take this in the way it is intended. To help you not set yourself up for failure.

Agree with Flo. There is a lot of trust required in a build and it’s still frustrating and hard at times with that. If you go into the relationship already at odds with the builder and their profit so to speak it is bound to go poorly

Wow! You all are a really emotional bunch. Margins are a basic business data element. I am looking for numbers for the home building industry.

If you're looking for industry averages for the home building industry, you don't need to look any further than the National Association of Home Builders. They do an annual Cost of Doing Business Study which reports builder margins among other things.

NAHB's 2019 Cost of Doing Business Study reports average builder revenues of $16 million, average gross margins of 19% and average net margin (profit) of around 7% How those averages stack up against the margins earned by the various builders you are considering is anybody's guess.

Thanks @Charles Ross Homes that means the 30% and 56% I'm looking at is high. I just want to be fair.

@ffxnovanewbie,

First, keep in mind that the NAHB stats are for builders with an average volume of $16 million. Most small-volume custom builders could add their revenues for five years or more and not reach $16 million.

Then consider that the math--or perhaps it's the accounting-- isn't as simple as it might seem. One builder might treat the cost of job supervision (e.g., superintendent wages) as a direct cost; another might treat it as an indirect cost and cover that in their gross margin. The overall project cost might be the same, but the builder who puts the job supervision into the project's direct cost bucket looks like he/she's operating on a lower margin. Builders will also adjust their target margin based on project size/scope, risk, travel distance to the job site, current work backlog, how much hand holding a particular client is likely to need, etc.

It's important that you align your expectations about the level of quality and service you expect with the capabilities of whichever builder you select.

@Charles Ross Homes Will do!

Anita, based on the small amount of info you have shared here, and likely the small amount a builder would randomly share with you for free, you have no idea what their margins are. You need to decide if you can afford a build that gets you what you want. This is separate from what a builder makes on it. I fear your are looking at this from the wrong perspective. I hope it works out for you.

You might try the Custom Builder Council in Chantilly. It was founded by the NVBIA and they have a directory of custom home builders.

http://custombuilderscouncil.com

@User I’m having the exact opposite experience from your advice.

I get that you want to pay a fair price. That's reasonable. But getting a price that is fair for you has nothing to do with how much money your builder makes or loses on your build. It has to do with the market for houses in your area. So rather than asking "what are his margins", you should go "open housing" to see what new-build houses that meet your criteria are selling for in your area. A realtor can help you do this.

Once you know what your "benchmark" price should probably be and the features you get for that price, decide how much more than the benchmark you're willing to pay for your house to be custom. And understand right from the beginning that the benchmark house is guaranteed to be cheaper than your perfect house because of economies of scale. Your home will be unique; it won't be in a row with a bunch other houses the developer is building at the same time; it won't be from a plan the builder has already paid licensing fees on; it will use different finishes and likely different suppliers.

Once you know the market and know your budget, then you can start shopping for a builder.

Tell them you are looking for something like "those houses in subdivision X that sell for around $Y00 K. Explain why one of those houses (as built) doesn't perfectly meet your requirements so they can understand where your extra expenses will be.

If you find someone who you hit it off with, expect to pay for them to write up a Statement of Work (SOW). This is a major undertaking and should not be free-- though it's often credited towards the job if you accept the contract. Do not expect the SOW to contain line item costs. You may possibly get high level costing for chunks of work but not always. Do expect the SOW to contain wording like "dig and pour foundation according to plan (ref#) using type X material, type Y reinforcement...". All of this language should be carefully reviewed and revised until you both are happy. If you want grading done or a particular paint brand used, make sure it's mentioned in the SOW. If it's not there, it won't be done. And whenever you can, use the builder's preferred sources and methods to save money.

Close in, small square footage, luxury amenities. That’s a condo.

https://www.zillow.com/homedetails/6900-Fleetwood-Rd-215-Mclean-VA-22101/305373926_zpid/

https://www.zillow.com/homedetails/1411-Key-Blvd-APT-311-Arlington-VA-22209/248441373_zpid/

https://www.zillow.com/homedetails/1881-N-Nash-St-UNIT-810-Arlington-VA-22209/94727586_zpid/

https://www.zillow.com/homedetails/2000-Clarendon-Blvd-1302-Arlington-VA-22201/2078533699_zpid/

https://www.zillow.com/community/bexley-condominiums/2079520895_zpid/