If you’re in the market for a home and you’re wondering of custom home building is more expensive than buying a home that’s already been built, the honest answer is “it depends”…
How Much Is A Custom Home Builder
Builders of custom homes come in many different shapes, sizes and price points. You could build a traditional home from a set of pre designed plans, make a few modification that fit your lifestyle, and spend $150-$200sqft.
If you’re building a custom home from scratch, the pricing can jump anywhere from $350-$1,500/sqft.
Now, let’s look at the cost of home that have been built already…
Custom Homes vs Track Homes
With keeping the pricing above in mind, let’s take a look at the typical cost for a track home (new or pre owned).
The figures below are taken from the 3rd quarter of 2022, by city.
| City | Single-family Residential Building Cost | Multi-family Residential Building Cost |
|---|---|---|
| Boston | $310 | $250 |
| Chicago | $375 | $300 |
| Denver | $337.50 | $255 |
| Honolulu | $420 | $355 |
| Las Vegas | $262.50 | $252.50 |
| Los Angeles | $292.50 | $310 |
| New York | $472.50 | $325 |
| Phoenix | $307.50 | $200 |
| Portland | $262.50 | $262.50 |
| San Francisco | $395 | $492.50 |
| Seattle | $277.50 | $330 |
| Washington | $327.50 | $280 |
Source: Statista
As you can see, the prices aren’t too far from custom home pricing. Along with that, keep in mind that these pre owned homes will require remodeling, of which could cost you thousands (even hundreds of thousands) that would contribute to your over cost.
Along with the added costs from a remodel, you also get to enjoy the stress that comes with a remodel. Kinda like building a custom home 😉
How Do Custom Homes Builders Charge?
Custom home builders typically charge a flat fee to build, or cost plus (Cost of materials/labor + X%). Both of them have their benefits, but the cost plus model seems to be the most common that we hear of among our clients.
The way Cost Plus works is that for every expense that is incurred to build your home, you will be responsible for paying that PLUS an additional percentage which ranges on average of 30%.
So if the entire hard cost to build your home was $300k, you’d be paying $390k in total (for soft pricing on a 2,000sqft home the hard cost would be $150/sqft/. The market up price would be $195.)
Why do custom home builders charge a percentage on top of the cost to build your home? Because it’s how they are compensated for the services of you hiring them to build your home.
Custom Homes vs Spec Homes Cost
Having a custom home built vs having a spec home built can relatively cost the same. Specs allow for some customizations, but custom homes are designed from the ground up.
Want the morning sun to hit a specific corner of your kitchen island at precisely 6:15am while you drink your favorite coffee? You can have that with a custom home, with a spec home it’s highly unlikely.
Is Building A Custom Home Worth It?
Yes. It’s worth building a custom home because it will be built around you. When it’s “built right the first time” you don’t have to worry about remodeling for a long, long time. Plus, you’ll be able to enjoy every moment of living in your home.
With either purchasing or building a custom home being such a large investment that you’re going to be working for the next 30 years or so to pay off, you might as well enjoy your home. Don’t settle if you don’t have to.
Custom Home Builder vs General Contractor
If you’re comparing a custom home builder vs a general contractor, typically they’re one and the same. Not all general contractors are custom home builders, but all custom home builders are general contractors.
Who Designs Custom Homes?
Designing a custom home is typically done by an architect, whether in house of the custom home builder, contracted out as a third party, or is found independently by you.
Architects are responsible for designing all aspect of your custom home, while structural engineers are the ones that make sure your home remains standing.
The order typically runs like this:
- Architect
- Structural Engineer
- Mechanical Engineer
- Interior Designer
- Landscape Designer
How Much Does A Custom Home Design Cost?
If you’re working with a custom home builder, the cost to design your home is usually party of the soft price. If you’re hiring an architect independently, you could be paying anywhere from $15-$45/sqft, all of which depends on the architects experience, their portfolio, etc.
So for a 2,000sqft home, it would cost you anywhere from $30,000-$90,000. \
Keep in mind that if you’re paying $45/sqft for your architect, chances are you’re building a home a lot larger than 2,000sqft.
Many of our clients that are building homes ranging from 6,500-40,000sqft (yes, 40,000sqft) are typically the ones paying the larger numbers.
To sum everything up, yes, building a custom home can be more expensive. But if your goal if to have a home that is perfectly designed for you, then the cost is about the same.
