Spec home intelligence 101 for Builders

I have builders tell me fairly often that my fees are too high for them. It used to bother me, now I just laugh at them (they don't know I do it...but I do it). Why do I laugh? because they have yet to learn the lesson that I proved over 2 decades ago, and that is, quality design and construction documents will save you money as a builder and increase your ROI on spec home projects.

I know there are doubters out there.... some will see this...builders who have told me I charge too much. Here's the facts.

Two projects, one built from my plans, one built from someone else's plans that were cheaper. The livable sq. footage is the same, the overall design is very similar. I was given the other plan and told to improve the design and "sellability" of the home. End result: This home was built in 1992.

Home A: Designed by someone else who charged a lot less for their design and plans.

Design & Plans: $10,000.00

Cost of construction: $285,000.00

Cost of land: $65,000.00

Total costs to builder: $360,000.00

Home sale price: $403,000.00

ROI:  $48,360.00 12%

That's not terrible. In fact many builders would consider that a win. But, lets look at Home B Designed by me, using the same sq. ft. the same target sale price in the same neighborhood and the end result...the ROI. Remember this was in 1992.

Design and Plans: $28,000.00

Cost of construction $260,000.00

Cost of land $65,000.00

Total costs to builder: $353,000.00

Home Sale Price $462,000.00

ROI: $109,000.00 23.5%

How exactly and why exactly does something like this happen?

While there are many answers to that, they all boil down to some cold hard facts. While almost anyone can buy a CAD program and become a "Home Designer". Their talent level, their experience and knowledge of markets and trends can be very limited. Those shortcomings cost builders money at both ends. Construction costs go up due to errors or omissions in the plans that cost significant amounts to correct, especially the later in the process the error or commission is discovered. A poorly put together set of plans can cost a builder up to 15% in added costs during construction. Then at the other end, the home will sell slower and for less.

This custom home was designed for a client in North Carolina.

Custom homes are not much different. The less you spend on design and plans the more likely it is you will be disappointed in the end result. The more you spend you will almost always end up with a more than satisfactory completed project.

There will always be those who believe that saving money is the same as getting a better value. I prefer to work with clients who understand that value isn't about saving money, it's about ending up with a superior product and having more money in your pocket at the end.

It's always possible to spend too much, but if you do, almost always, you'll be happy with the end result, as opposed to the bad taste you'll have in your mouth for years and years if you spend too little and get a less than satisfactory result.

Builders if you are looking to increase your bottom line, and individuals looking to have a home you will be proud of and love living in...call me...let's get started on your project soon!