Hey Everyone. We are a small firm operating out of the DMV area (DC, Maryland, Virginia). We have a client who we need to send a proposal out to for the design of a custom home. The lot actually supports 3 homes and they would hire us for all 3, however they want to design just one floor plan and use the same thing on all 3 lots. The only difference would be some material change on the front elevations.
Another thing, they dont want some super custom home design, since they will be selling the properties. They want to use a sort of "generic" floor plan (I think so they can try to reduce the cost of design as well). We have some floor plans we can base a house design on but of course it still requires a similar amount of work.
How should we price this design out? I am thinking to break it down into the initial design of the home. Then an additional price per home and price for permitting (we will submit to county as well). I know its usually % of construction based but I am struggling to find a good fee to present them. Each home will cost approximately $1 million to build and theyll sell them for 1.6-1.7m.
I don't do SFR so my advice may not be the most appropriate. I know there are several users where who do SFR so they will be of more help with this.
I have done commercial jobs like this - several core and shell budlings that were very similar on the same site. While we did not charge a full fee for each building we did not give a steep fee reduction. I believe it was only a 20% reduction for the similar buildings. IE $120k for the first house, $96k for each additional house. Don't use these numbers though - it's just a 12% of construction fee.
One more thing - your client is asking for three custom homes. I don't care if they are a 'generic' floor plan. It's still custom work. Charge appropriately. You are providing value to the projects. If the client balks at this I would seriously consider not taking the work.
I have to agree with the last statement above. Without knowing a lot of context, each of these homes, even if identical in plan and scope are still subject to unique conditions such as underground utilities, vegetation, topography, privacy and most importantly light and shade.
These are all things I'm sure you think about, but (assuming these are three homes in a row) what conditions does the middle one have? When it hits the market, does it need to be priced $100k less than the two outer ones because it receives less light or has less privacy? I always feel like a middle unit has a bit less curb appeal as well.
I've seen builders and developers have this approach and in a tight sellers market it can work, but once a bit of inventory is sitting, the units with awkward floor plans and poor sightlines are a lot harder to unload for the seller. I've tried to have discussions with some builders about a space that's easier to sell and was once told "I'm an investor, I know that more bedrooms is better" without much regard to their size nor usability.
I think it could be entirely possible to create three identical houses that perfectly fit with each other, but there would need to be so much attention to massing and proper siting. This isn't the workload of one house being repeated 3 times, in fact I would argue it's significantly more.
Here's a good (or terrible) example of why you don't repeat four designs on one property. Years ago I looked at a neighboring property but was interested in following this one. The floor plans are awful, the houses have no privacy from each other, and there are so many missed opportunities.
Wow my jaw dropped... who in their right mind would live there?! Looks like a horror movie set
. Put four random households together with zero privacy and see what happens. Yikes.
Don't cut yourself short. You will do CA on 3 properties, not just one. I doubt you will only look at one property during CA because the other 2 are "replicas." You will need to review permit comments for 3 properties, not just one. That's your time and effort.
I did a custom house in Great Falls about 6 years ago. That home sold for 2 million. 6000 SF. I doubt they will sell for less than 1.8M, especially in NOVA or DC. NOVA especially has an intense buyers market, doesn't matter if it's a recession or great economy, housing market is very competitive in that region. People in that area always pay above asking/appraisal value.
I do commercial work and determining a fee with % of construction cost is problematic when the construction cost is under $2 million. Using a % of construction cost on these low budget projects will not give you enough fee for the work you'll be doing. In these situations it's best to determine the actual amount of time you think it will take to do the work.
I do all SFR, mostly renovations but a fair number of new homes, nice but not over the top. A lot of my clients are doctors and lawyers, to give you an idea. I have a few home designs that multiple people have asked to use as a predesigned home, including this one which was specifically designed for that: https://www.finehomebuilding.c... All cost around $25-30K to design (in today's pricing) and I am asking $7500 for them to reuse the plans as is, or a minimum additional $2500 if they want to make any changes. So far nobody has taken me up on it but I have one on the line now. I think $7500 is very reasonable, considering they are all unique, custom, flexible designs, that there will be questions during pricing and construction, and that I will have some amount of liability, regardless of any disclaimers. I would actually prefer to NOT make any modifications so the $2500 minimum fee for changes is meant to push them gently toward someone else to make the changes.
As OA said, I don't recommend charging a percentage for this scale project. Over 450+ projects, from bathroom renovations to $3M new homes, I have found that it almost always takes me 6-8% of the construction budget for design work, but it has varied from 4% to over 15%, and can be hard to predict because residential clients are fickle.
Start with a base fee for initial house plans / permit set. Example if initial house set costs 30k, the repeat copy / paste plans should cost around 75% of that as you are saving on design only. Remember, you are not only charging for "plans" but only liability that comes with a home design and construction. Each one of those homes will be owned by a separate owner who will have a legal claim against you if something is not done right.
When they build a Mercedes or BMW, the plant doesn't lower prices from the first prototype model, even though it uses the same design, plans, specs etc. they charge per car.
Pricing out a custom home design
Hey Everyone. We are a small firm operating out of the DMV area (DC, Maryland, Virginia). We have a client who we need to send a proposal out to for the design of a custom home. The lot actually supports 3 homes and they would hire us for all 3, however they want to design just one floor plan and use the same thing on all 3 lots. The only difference would be some material change on the front elevations.
Another thing, they dont want some super custom home design, since they will be selling the properties. They want to use a sort of "generic" floor plan (I think so they can try to reduce the cost of design as well). We have some floor plans we can base a house design on but of course it still requires a similar amount of work.
How should we price this design out? I am thinking to break it down into the initial design of the home. Then an additional price per home and price for permitting (we will submit to county as well). I know its usually % of construction based but I am struggling to find a good fee to present them. Each home will cost approximately $1 million to build and theyll sell them for 1.6-1.7m.
Any thoughts?
I don't do SFR so my advice may not be the most appropriate. I know there are several users where who do SFR so they will be of more help with this.
I have done commercial jobs like this - several core and shell budlings that were very similar on the same site. While we did not charge a full fee for each building we did not give a steep fee reduction. I believe it was only a 20% reduction for the similar buildings. IE $120k for the first house, $96k for each additional house. Don't use these numbers though - it's just a 12% of construction fee.
One more thing - your client is asking for three custom homes. I don't care if they are a 'generic' floor plan. It's still custom work. Charge appropriately. You are providing value to the projects. If the client balks at this I would seriously consider not taking the work.
I have to agree with the last statement above. Without knowing a lot of context, each of these homes, even if identical in plan and scope are still subject to unique conditions such as underground utilities, vegetation, topography, privacy and most importantly light and shade.
These are all things I'm sure you think about, but (assuming these are three homes in a row) what conditions does the middle one have? When it hits the market, does it need to be priced $100k less than the two outer ones because it receives less light or has less privacy? I always feel like a middle unit has a bit less curb appeal as well.
I've seen builders and developers have this approach and in a tight sellers market it can work, but once a bit of inventory is sitting, the units with awkward floor plans and poor sightlines are a lot harder to unload for the seller. I've tried to have discussions with some builders about a space that's easier to sell and was once told "I'm an investor, I know that more bedrooms is better" without much regard to their size nor usability.
I think it could be entirely possible to create three identical houses that perfectly fit with each other, but there would need to be so much attention to massing and proper siting. This isn't the workload of one house being repeated 3 times, in fact I would argue it's significantly more.
Here's a good (or terrible) example of why you don't repeat four designs on one property. Years ago I looked at a neighboring property but was interested in following this one. The floor plans are awful, the houses have no privacy from each other, and there are so many missed opportunities.
https://www.youtube.com/watch?...
Wow my jaw dropped... who in their right mind would live there?! Looks like a horror movie set . Put four random households together with zero privacy and see what happens. Yikes.
It's a cult
I thought the same thing JLC-1. Polygamist cult.
Charge % of total construction cost.
Don't cut yourself short. You will do CA on 3 properties, not just one. I doubt you will only look at one property during CA because the other 2 are "replicas." You will need to review permit comments for 3 properties, not just one. That's your time and effort.
I did a custom house in Great Falls about 6 years ago. That home sold for 2 million. 6000 SF. I doubt they will sell for less than 1.8M, especially in NOVA or DC. NOVA especially has an intense buyers market, doesn't matter if it's a recession or great economy, housing market is very competitive in that region. People in that area always pay above asking/appraisal value.
Good luck!
A bit on determining fee.
I do commercial work and determining a fee with % of construction cost is problematic when the construction cost is under $2 million. Using a % of construction cost on these low budget projects will not give you enough fee for the work you'll be doing. In these situations it's best to determine the actual amount of time you think it will take to do the work.
This may be different for SFR work.
I do all SFR, mostly renovations but a fair number of new homes, nice but not over the top. A lot of my clients are doctors and lawyers, to give you an idea. I have a few home designs that multiple people have asked to use as a predesigned home, including this one which was specifically designed for that: https://www.finehomebuilding.c... All cost around $25-30K to design (in today's pricing) and I am asking $7500 for them to reuse the plans as is, or a minimum additional $2500 if they want to make any changes. So far nobody has taken me up on it but I have one on the line now. I think $7500 is very reasonable, considering they are all unique, custom, flexible designs, that there will be questions during pricing and construction, and that I will have some amount of liability, regardless of any disclaimers. I would actually prefer to NOT make any modifications so the $2500 minimum fee for changes is meant to push them gently toward someone else to make the changes.
As OA said, I don't recommend charging a percentage for this scale project. Over 450+ projects, from bathroom renovations to $3M new homes, I have found that it almost always takes me 6-8% of the construction budget for design work, but it has varied from 4% to over 15%, and can be hard to predict because residential clients are fickle.
Start with a base fee for initial house plans / permit set. Example if initial house set costs 30k, the repeat copy / paste plans should cost around 75% of that as you are saving on design only. Remember, you are not only charging for "plans" but only liability that comes with a home design and construction. Each one of those homes will be owned by a separate owner who will have a legal claim against you if something is not done right.
When they build a Mercedes or BMW, the plant doesn't lower prices from the first prototype model, even though it uses the same design, plans, specs etc. they charge per car.
A house is a machine for living.
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