Whether you want to build a home on a piece of rural land or on an infill lot in Colorado Springs, you need to find a homebuilder that is up for the task. This means you will need to find a custom home builder since production builders do not typically build outside of their tract neighborhoods, not to mention you probably want a level of quality that production builders don’t offer. But what is a “custom home” anyway? Are there different types of custom homes or custom home builders? We will be unpacking these questions and many more while shedding light on the mysteries that shroud this popular alternative to purchasing a pre-built home.
In the many years we have been building we have noticed that there are several things about custom home building that are generally unknown or misunderstood, so we have created this page to help answer many of those questions and “demystify” custom home building.
A custom home is a one-of-a-kind home that is designed and built specifically for a client without the constraints of a pre-conceived plan. We like to say it starts with a blank sheet of paper where the clients’ needs, wants, style, lifestyle, personality, land features, and views are all taken into account. Many builders send their client to an architect or draftsman to design the home and don’t get involved until the design is complete. We, however, do our design work in-house which gives the client complete creative control over every aspect of the design as we guide them through the process to make sure they get everything they want, while avoiding any pitfalls along the way (we’ll talk more about the advantages of Design Build below). When you sign up for this highly involved type of project, you can expect a few months of working with us on designing, planning, and selecting work before we get to building, but the outcome is worth it!
A semi-custom home is like a custom home but starts with a pre-designed plan rather than starting from scratch. This is a good option for people that want a custom home but aren’t up for the task of designing a home from scratch, though they still get to select all the finishes, colors, etc. Most builders have several plans to choose from (with a range of sizes, layouts, and styles) that can be customized to fit a client’s specific needs and design taste. There are two levels of customization that are typical in the semi-custom category: Option (1) Is “layout revisions + finishes” which is where you take the existing plan and move and/or alter walls, windows, doors, etc. around to completely customize the space in addition to customizing all the finishes. This option gives clients a truly custom design while working within a plan that has many of the details worked out. There will likely be re-engineering costs involved depending on what gets changed. Option (2) is “custom finishes” where the plan stays the plan (no moving stuff around) but all finishes are selectable and customizable (even kitchen and bathroom layouts are able to be moved around, just not walls). Since the architectural and engineering work is already completed, this option can shave months and several thousand dollars off the total process over a fully custom design. Whichever option you choose, this is a great option for those who don’t have the time or ambition to do a fully custom design.
You may have seen some builders listing themselves as “Luxury” custom home builders in your Google searching… sounds fancy! There is no difference between a custom home builder and a “luxury custom home builder” other than their target market and the number of zeros in their preferred project budget. A luxury custom home will have high-end finishes and typically will have a stately appearance, though it is not limited to any one particular style. We have built homes all across the spectrum and enjoy all types of clients and builds!
Production building is different than custom home building in several ways. Production builders buy into developing neighborhoods with the promise of a certain number of lots available to them to sell and build homes on. They typically build a model home or two in each neighborhood they build in, which also doubles as a sales office. Most of them have a handful of models to choose from with a few client-selectable options to customize. The ranges in quality of these builders typically follows the ranges in price with the lowest priced homes having the lowest quality of products and sometimes workmanship. These builders keep costs down by building the same models many times (which allows them to have very tight tolerances in materials ordering) and keeping their builds in close proximity which allows them to get quantity-based pricing from subs and vendors. Because of the consistency in these homes, most production homes are fixed-price homes, meaning the builder gives you a price and it doesn’t change* unless you change something.
*During the post Covid materials hikes, many of these builders are having to alter their prices mid-build to stay afloat.
A speculative (or “Spec” for short) build is a home built as an investment to sell without a specific buyer in mind. The builder chooses all finishes and places the house on the market with the hope of making a good return on their investment. This is a fairly common practice for both production and custom home builders and can be a nice alternative for people who want a new home but don’t want to wait for one to be built for them.
The short answer is yes, there are better and worse builders for several different reasons. There are builders that are great at building solid homes but are not great at customer relationships, communication, systems, and practices (stuff like budgets and schedules, which are kind of important). There are builders that are great at communicating and administration that are not as good with quality control and building high quality homes. And the truth is that is very hard to tell what a builder is like until you work with them. This is where doing loads of research, talking with past and current clients, and touring some of their completed and in process projects is your best bet at knowing what a builder is like.
In the world of custom homes there are builders and architects (or designers), and then there are design-build firms. Many custom home builders use architects or architectural designers to design homes for their clients, then they create a budget and build a home from the plans that their clients and architects came up with. A design-build firm handles both the design and the building of the homes for their clients. There are great advantages to the design-build model since it is the builder, who has their finger on the pulse of the budget, finishes, etc., that is directing the design. Most (not all) architects do not have real world building experience to know if what they are designing is practical or even doable, and in our experience are more concerned with flexing their design muscles than worrying about keeping a budget intact. On the other hand, some (not all) design-build firms lack some architectural creativity in their designs, so do your sleuthing to determine which is best for you!
With the advancements that have been made in recent years in the modular building industry (not mobile homes, but rather factory assembled homes), there are some very cool and viable options for folks who have difficult to build on sites or areas that are hard to get good tradespeople. As far as alternate building products we have worked with several different product types over the years. We are big fans of ICFs and have our own secret sauce wall system that we have developed. We have never gone down the rabbit hole of earth homes, strawbale or tire-bale homes, or shipping container homes though they are all interesting concepts. We are always looking for smarter, greener, more sustainable, and more economical ways to build homes!
Most of our clients find their land with the aid of a realtor, though with a little Internet savvy you can find all the listed available land without one through websites like Zillow and LandWatch. In El Paso County we also have a great website for our county assessor that you can use to find all the important info for any plot of land (including the current owner’s contact info). So, if you have your eye on a vacant plot of land that is not currently for sale, you can use the assessor’s website to gain access to the owner’s information… You never know what asking might do!
Every piece of land comes with its own set of challenges to overcome to be ready to build on. Some of those challenges can cost substantial time and/or money and should be accounted for when calculating the entire project cost. Here is a small list of things to consider when purchasing land: Driveway access (we have seen plots that are amazing but have no access without crossing a neighbor’s private land. This almost never ends well.), utility connections and tap fees (we have had to pay big dollars to get electrical, gas, and internet onto some of our properties, though many already have them stubbed onto the land), well and septic (a must for most rural properties including Black Forest), soils conditions and ground water issues (both of these can be very costly to overcome, especially if there is clay or shallow ground water). Many of the expensive infrastructure challenges can be foreseen with a simple feasibility study on the land before purchasing. Soils and ground water issues are likely to be caught with sub-surface soils testing and septic profile pits. We have built homes on tricky pieces of land because, to the owner, the benefits outweighed the cost and we have absolutely no problem with that. It is just important to know what those costs are when considering the total project cost.
Here is a list of other costs that can be associated with a custom home build: Utility tap fees, utility connection fees, Plan check fees, building permit fees, land use fees (Palmer Lake and other townships), driveway permit, septic testing and engineering, septic permit, septic installation, well drilling and installation, well permit, lot clearing and prep, driveway culvert and VTC, driveway building, grading and erosion control systems, HOA submittal fees, survey and house staking, soils testing and engineering, architectural design fees, structural engineering, HVAC engineering, etc.
We have seen a wide variety of different ways that builders do their budgeting, and we have our own way of doing things based on our experience of what works and what doesn’t, so this is how we do things: Our budgets are based on a control estimate that is comprised of real world bids on all labor and materials required to build the home we designed with our client including all of the finish selections they chose. We work hard to have actual figures for everything and only use allowances if completely necessary. Every project has a budget contingency to act as a safety net to cover any market fluctuations from the time of original estimation to the time of purchasing. We only use change orders for changes in scope of work, not adjustments to details and we only charge a nominal admin fee for them. This is a simplified explanation of a complicated process, but it covers the basics. Please contact us for more details if you are interested.
In Colorado we have some extremes… extreme weather swings (four seasons in one day and/or two seasons happening at the same time within feet of each other), extremely beautiful scenery, and extremely varying soils makeup/conditions. You can dig two holes within ten feet of each other and have two completely different soil makeups. This definitely makes it interesting predicting what is under the topsoil. Every new home built in our region has an engineered foundation design that is based on the findings of a sub-surface soils test. This is conducted by a geologist who bores two holes deep into the ground and tests the makeup, density, and moisture content of the soil where the foundation will eventually be built. With this test they determine if the dirt is suitable to build on as-is, what the bearing pressure of the foundation will be, and if there will be any kind of over-dig necessary.
To answer the question above, soils conditions affect the build/cost in two major ways: (1) The foundation design and cost can vary quite a bit depending on the soil bearing pressure and conditions. (2) If the soils are unsuitable to build on (i.e., there is highly expansive clay present) we have to do what is called an “over-dig” to replace the bad soil with good soil. That may not sound too bad, but it can be a very extensive and expensive process. The tricky thing about soils and building is that, until the excavation is happening, there is no telling what you will run into even with sub-surface boring. We have had soils tests tell us that “for sure we will be doing an over-dig” and once we excavated, we found that was not the case and the opposite has happened as well. We warn every client that the dirt is the one unknown variable in the building process despite our best efforts to know what is happening down there.
A cost-plus builder is one who’s builder fee (or overhead and profit) is a margin on the total costs of labor, materials, and administration (e.g. if the total costs for the build are $600,000 and the builder fee is 20% ($120,000) the actual build cost is $720,000). With this type of program the client gets to have control of the budget throughout the project by making minor tweaks to selections, if necessary, to keep the budget where they want it. If the builder is open-book you will be able to see all invoices and payments to track the project down to the penny.
A fixed-price builder is one who establishes a price for the build, and constructs the home for that price. These builders calculate the project costs and add their profit and a buffer for any unforeseen costs and sell the project for their fixed price. With this program you do not get to see the books and any changes to the original scope of work or selections is added to the fixed price through a change order.
We have recently written an article on this topic that will give you all the info you need regarding the financing of a custom home. Please read this article for more information.
There are a few things to be aware of as you are looking into building a custom home. (1) Not all builders are created equal. We know a lot of them and many of them are great people, who take great care of their clients and build amazing homes. Some of them are not as great, and the bummer is that it’s hard to tell until you are locked into a build contract with them, and their true colors come through. This is why it is important to get current references from anyone you are interviewing and look at their reviews… if there is an unsettling pattern showing up you might pass on working with them. (2) The only accurate information on how much things cost and how long things take is going to come from the people who actually build in the area you want to build. There is a TON of bad information floating around the internet that will confuse you and set you up for disappointment. Talk to local builders and even the local building department for current and accurate information. (3) When comparing builders (especially when it comes to pricing, overhead and profit, administration costs, etc.) it is important to ask the correct questions like “do I get your pricing on materials, or do you mark them up?”, “do I get to see all invoices and the canceled checks that match them?”, “do you charge a fee or markup for change orders?”, “what necessitates a change order?”.
The reason this is important is because there are ways that certain builders will pad numbers to make it look like they are offering a better rate than another builder so they can land a contract, but in the end, they are cheating their clients. For instance: if I were to tell you that I can build your home for a 15% markup (instead of the 20% average) but then I had my vendors give me two sets of invoices (one with my cost that you will never see, and one with retail pricing that you get to see), and I failed to be clear on what exactly is included in your budget so there will be a lot of change orders which all have hefty fees associated with them on top of my markup… you get the picture. This tactic is far more normal than you would think, in fact every vendor we have an account with has asked us if our clients get to see our pricing or if they need to give us two different prices… every one! We have a completely open-book business model because we feel like there should be absolutely nothing to hide from anyone if we are doing our business with integrity. These are all things that are appropriate to ask the client references as they are likely to tell their experiences with this, especially if they had a bad experience. Once you have done your research on a builder and there are no red flags, make sure you feel good about interacting with them since you will be for the better part of a year.
We hope this information is useful to you! If you have any questions we did not address, please contact us so we can answer then for you, and maybe add them to this page!