How Much Does it Cost to Build a Custom Home?

How much will it cost to build my custom home? It’s one of the first questions our clients ask as we begin the exciting process of designing their new build or remodel. It should be an easy question, right? Unfortunately, it isn’t. Estimating the cost of building a custom home can be tricky due to the large number of variables at play.

The same things that make a custom home so wonderful – the endless possibilities – also make it difficult to accurately estimate the cost of building during the early stages of design. That being said, it doesn’t mean you shouldn’t try!

Understanding where the money goes and the biggest factors that impact the cost of your custom home is a great first step. There are two primary phases of a custom home project — the architectural design phase, and the construction phase. We’re breaking down each with answers to clients’ frequently asked questions so you are familiar with payment structures and key deliverables. Most importantly, you will also come away with a solid understanding of key cost drivers and tips on how to keep your budget in check.

Table of Contents

• Key Takeaways
• Custom Home Architectural Fees
• Understanding Architectural Fee Structures
• Budget Management
• Why Do Projects Go Over Budget?
• Tips for Avoiding Additional Service Charges
• Custom Home Building Construction Fees
• Custom Home Construction Budget Breakdown
• Factors That Influence Custom Home Construction Costs

Key Takeaways

• A custom home build or remodeling project is made up of two phases and cost structures: architectural design and construction.
• Architects have four common fee structures. Understanding them is important so you select the best fit for your project.
• Architects can help monitor and manage the budget during the architectural phase.
• Ongoing budget management during construction requires a team effort between the client and builder.
• Being prepared, hiring an architect early in the project, and identifying common budget pitfalls will help you maintain costs.

Custom Home Architectural Fees

Architectural fees for custom homes are a big concern (and rightly so!) for many homeowners planning a new build or remodel. Fees vary per project and are influenced by a number of factors including size, scope, site, specifications, etc.

Understanding Architectural Fee Structures

Generally speaking, there are four common methods architects use to calculate their fees:

• Time spent (hourly)
• Flat fee
• Percentage of the cost of work
• Cost per square foot

Let’s take a brief look at each method, and examine the potential pros and cons.

Time

For some projects, especially those that do not have a clear definition of scope and program, the architect will bill an hourly rate for services rendered. The hourly rate charged will depend on the type of work performed and by which members of the design team.  Rates vary between architect, project manager, drafter, etc.

While hourly billing is fairly straightforward, charging an entire project based solely on time makes many people nervous – it feels undefined and open-ended.  For some aspects of the design, billing at an hourly rate is preferable. At KGA, we typically only bill on an hourly basis for tasks such as:

• As-built drawings (As-built drawings document existing conditions and are needed for remodels when the original plans are not available).
• Homeowner requests for changes that are beyond the original scope of the project or occur after certain approvals have already been made.
• During schematic design for remodels (When the scope is still being defined).

Flat Fee

When an architect quotes a stipulated sum for a project, he or she is essentially basing the number on gut instinct. If their educated guess is correct, then great! As a homeowner, you can know exactly what your project will cost. Unfortunately, this doesn’t always work out. We’ve seen many professionals – not just architects – lowball their quote in order to win the job, and then later realize that they aren’t charging enough to complete the project. At this point, they generally return to the homeowner and ask for more money. Not a conversation you want to be having.

Percentage of the Cost of Work

This is not a method that KGA uses, but since you may run into a firm that does charge architectural fees as a percentage of the total cost of work, we are including it. Imagine that the total cost of your home is going to be 2 million dollars – this includes everything: construction, finishes, details, maybe even interior design. If your architectural fees are 8% of the total cost, they would come out to $160,000.

Charging as a percentage of the total cost of work doesn’t make sense to us for one main reason: the quality of finishes, construction, appliances, etc. can vary widely, and why should you be charged more in architectural fees based on the quality of construction or of your appliances?

NOTE: This method does make sense in cases where the architect is providing interior design and specifications and/or construction administration in addition to typical architectural design services.

Cost Per Square Foot

This is our preferred method at KGA, as we believe it makes the most sense for everyone involved. At the most basic level, this means you’ll pay more for a larger home and less for a smaller home. Initially, it can be more difficult to pin down an exact cost, but once the scope of the project is in place and the square footage has been decided upon, the cost will only vary if there are any significant changes in scope or design after approvals have been given at certain stages of the design process.

Areas with different cost per square foot pricing include:

• New construction (finished square footage)
• Remodel
• Garage (generally included in base fee for custom homes)
• Outbuildings (pool house, barn, etc.)
• Covered outdoor living

If you are doing a remodel, your architect will need a copy of the plans for your existing home. If you do not have a copy of the current plans available, your architect will need to create “as-built” drawings, a fee that should be included in your budget.

Budget Management

It is the architect’s responsibility to manage the budget for architectural fees and assist in monitoring the overall project cost during the design phase. Even so, it’s wise to get familiar with the four main phases so you understand each milestone of the architectural design process:

1. Programming
2. Schematic design
3. Design development
4. Construction drawings

At KGA, during the programming phase, the homeowner will work with the architect to determine the scope of the project. This is the phase where the owner’s hopes, dreams, wants and wishes are listed.  A target for square footage is determined and the budget for architectural services is defined.

As the project transitions from architectural design to construction, budget management becomes the responsibility of the construction team. However, our team is happy to consult as necessary to help ensure the project remains true to the costs defined in the programming phase.

Custom Home Building Construction Fees

Once you’ve completed the design and architectural phase, give yourself a pat on the back — it’s an accomplishment that deserves a celebration! Now it’s time to move into the construction portion of the project, an exciting time because this is where you begin to see your dreams take shape.

It can also be a stressful time if you’re unclear about the various costs that make up the construction portion of your custom home project. Let’s examine the primary line items that will make up your construction costs.

Custom Home Construction Budget Breakdown

Below is a breakdown of the construction budget from a real project. We’ve broken the numbers out into eight categories. We’ll look at what goes into each category and what percentage of the budget it makes up. Remember – these estimates are meant to give you a general idea and better understanding of where the money goes. Each project is unique and actual numbers will vary depending on many different factors, like location, terrain, and material specifications.

Project details: Our pie chart is based on an approximately 6,000 SF finished home with a 3-car garage. If the construction budget is $500 per square foot, this would be about a $3M home.

What isn’t included? This is a construction budget, so it doesn’t include fees for consultants such as the architect or interior designer. It also doesn’t include costs for things such as furniture or landscaping.

Site Work: 3%

Site work is what happens before construction can begin. It’s everything the builder needs to do to get the site ready to build on. This usually includes:

• Water tap fee
• Sewer or septic fee
• Electrical temp pole
• Engineering consultants (structural, soils, etc.)
• Surveyor
• Erosion control
• Grading

Foundation: 5%

Along with framing and exterior finishes, the foundation is one of the biggest costs when building a custom home. The topography of your site will influence how much your foundation costs. Building on a hill is much more expensive than on ground that is already flat. In addition to the foundation itself, this number generally includes excavation, backfill, damp proofing and drainage.

Framing: 17%

Once the foundation is in place, it’s time to go vertical! Framing is when you really start to see your new home take shape. Framing costs include items such as lumber, timber, steel, trusses, stairs and labor.

Exterior Finishes: 17%

Style, design and materials all impact the cost of your exterior finishes. Brick is more expensive than wood, stone detailing is pricey. Roofing costs vary widely depending on the type of roof you’ve selected. Items that fall into exterior finishes generally include:

• Exterior wall finishes (masonry, stucco, etc.)
• Flatwork
• Windows and doors, including garage doors
• Roofing
• Gutters and flashing

Major Systems Rough-ins: 12%

Major systems are the behind-the-scenes rock stars of your home. They keep you cool in the summer and warm in the winter — they also directly influence your monthly utility bills. Major systems include:

• HVAC (heating, ventilation and air conditioning)
• Plumbing
• Septic
• Electrical
• Natural gas
• Security
• Home technology and automation
• Etc.

Interior Finishes: 29%

Interior finishes make up the largest piece of our pie chart, and for good reason. They’re the “touch, see and feel” elements of a custom home. The level of finishes you select can have a surprising influence on the overall cost of your home. Cabinetry is a great example. Basic kitchen cabinetry might cost $20K, while a luxury, custom designed cabinetry package could be $100K or more. Items that fall under interior finishes include:

• Flatwork
• Fireplace
• Masonry
• Insulation
• Drywall
• Trim, doors and mirrors
• Cabinetry
• Countertops
• Flooring
• Lighting
• Hardware
• Plumbing fixtures
• Appliances
• Painting
• Railings

General Conditions: 7%

General conditions cover necessary costs that we don’t normally think about. Safety rails, duct cleaning, a temporary toilet for workers…you get the idea. Things the builder needs to get the job done, but that won’t be a part of your home. General conditions is a broad term, and methods for estimating and categorizing general conditions vary. Costs that are usually considered general conditions include:

• Building permit
• Misc. fees and assessments
• Temporary toilet
• Utilities for construction
• Site clean-up (throughout the build and final clean-up)
• Duct cleaning
• Superintendent
• Trash pick-up
• Safety rails
• General labor
• Overhead allocation
• Insurance

Contractor Fees: 10%

This one is self-explanatory, but we had to include it. This is how your contractor makes money. Contractor fees generally run approximately 10% of the total cost of the build.

Factors That Influence Custom Home Construction Costs

As you go through the process of designing and building a custom home, there are over 200 decisions to make – each of which will ultimately affect the cost of the home. In order to better understand what variables affect the cost of building a custom home, let’s take a look at the four primary categories of cost:

• Site
• Scope/Size
• Structure Complexity
• Specifications

Site

In addition to the sales price of the site, there are numerous other aspects of the site that will affect the cost of building your home. Each site is unique, with its own benefits and challenges. Following is our list of top items to take into account when selecting a site for your new home. Each can have an effect on the cost of building.

• Topography: steep sites often require extensive and expensive excavation and fill. Dirt is cheap, moving it is expensive.
• Geology, soil conditions and vegetation. For example, expansive soils or rock formations beneath the surface will increase your building costs.
• Utilities: the availability of services to a site is an important consideration, as it is expensive to bring or upgrade water, sewer, power and other utilities, as well as roads and sidewalks, to a piece of property.
• Length and grade of driveway.
• Design challenges due to lot shape, zoning, easements, setbacks and building restrictions.
• Cost of fees for permits.
• Is your lot in a community with design guidelines? This means your home will be reviewed by a design committee to ensure it meets minimum standards for design, materials, etc.
• Storm water detention and drainage on or off-site.
• Other considerations can include (but are not limited to): flood plain, climate, snow load, noise mitigation, wildfire mitigation, etc.

Scope/Size

The size of your home has a direct impact on the overall cost to build it. Generally speaking, increasing the size of a project will increase the total project cost (but not necessarily result in an increase in cost per square foot).

For example, if you are building a 4,000 finished square foot home and your construction cost is $500 per square foot, your cost will be $2M. If, during the design process, you decide to add an additional 500 square feet to your home, it will increase your total cost by $250,000.

It is important to remember that size isn’t everything. Specifications, which we discuss below, have a significant impact on your cost per square foot. A smaller home built to luxury standards could easily cost more than a larger home built with only the basics.

Structure Complexity

Picture a simple two-story craftsman-style home. Now picture an elaborately designed old-world European home with volume spaces and arches in the interior, and a multitude of gables and chimneys on the exterior. Common sense tells us the craftsman will be cheaper to build, but why? A complex house is always more expensive to build than a simple house.

This is partly a function of the shape of the house and the relationship of the amount of roof and the amount of foundation to the area of the home.

• Homes with long rectangular plans mean more walls for the same square footage.
• Ranch plans are more expensive than two-story homes because they require more foundation and more walls for the same square footage.
• Angles are more expensive than square corners; curves more expensive than straight.
• Every corner and elevation change increases the cost of the foundation.
• Creative designs that require extraordinary structural members to span long distances become very expensive.
• The height of walls needed to create large volume spaces are costly because of safety concerns during construction due to the difficulty of installation.

Large swings in price can occur depending on a home’s structure and complexity. This is often where value engineering, in conjunction with the builder, is required in order to keep a project within budget.

Specifications

Specifications can be broken down into three main categories: structural, finishes and systems. This is another area where large swings in price can occur, and why we recommend a design build workflow involving the builder and interior designer from the start. Assembling and including your whole team in the architectural design process will give you a better understanding of overall costs throughout the process, and how design decisions impact your budget.

Structural

Structural considerations include the quality and size of materials as specified by the engineer to build the shell of the home.  Large and custom structural materials are more expensive. Materials for building a net-zero or energy-efficient home cost more now, but can save you money in the long run.

Some local governments and jurisdictions are beginning to include minimum green building requirements in their code language. Colorado in particular will update its code language in 2023 to include minimums for energy efficiency standards for all new construction, including solar-ready structures and all-electric systems.  

Finishes

All other things being equal, the total cost of a home built with luxury finishes versus a home built with basic finishes can vary enormously. Finishes are items that are visible and important to the eye – the ‘touch, see, feel’ – elements of a custom home. Cabinetry is a great example: a whole house package of cabinetry can cost anywhere from $20K for the basics to over $250K for top-of-the-line custom cabinetry. There are so many items that fall into this category that it can be easy to lose control of the total cost. Even a small increase in the cost of each item can impact the bottom line. Examples include:

• Windows
• Cabinetry
• Millwork: trim and moldings.
• Surfaces: this includes items such as flooring, countertops, backsplashes, bath surrounds, exterior walls, roofing, decks, patios, drywall, glass/mirrors, etc. Examples include:
  • Exterior walls: brick and thin stone add 30% over the cost of stucco.
  • A level 5 drywall surface can cost 40% more than a level 2.
  • Quality solid surface counters can be installed for $20 per square foot. An Iron Red granite or other premium material can set you back $100+ per square foot.
• Fixtures: lighting, plumbing, etc.
• Appliances

Systems

Systems are not something you can touch and see every day, but they have a huge impact on the comfort and functionality of your home. Systems include HVAC (heating, ventilation and cooling), thermal wall systems, home technology, geothermal, etc.

Outside Services and Consultants

Apart from your architect and builder, the services of various consultants may be required to complete your project. These services are typically billed separately and will add to your final project cost. For example:

• Surveyor (required)
• Structural Engineer (required)
• Civil Engineer (may be required, depends on the site)
• HVAC (required)
• Energy Rater (required, often done by HVAC contractor)
• Interior Designer
• Landscape Architect
• Lighting Specialists
• Home Technology
• Geothermal

Embarking on a custom home build or remodeling project is a major life decision! There are so many things to consider and select that it can feel overwhelming. That’s why hiring an experienced team as early as possible makes all the difference. At KGA, we love what we do, and we’re with you every step of the way during your custom construction project to make it as stress-free as possible.

We’d love to hear from you and learn about your project ideas! Contact us for a complimentary consultation.