Have you ever admired a custom home and wondered what it cost to build? When it comes to Northern Virginia custom home prices, even an experienced builder won’t be able to accurately tell you how much it costs without knowing much more about the project than what you can see from the curb. 

Having a set budget is certainly possible, but you need to understand what drives project costs and how the builder you select prices their projects. Alair Arlington’s regional partner Chad Hackmann explains why pricing custom home builds is more complicated than meets the eye and shares tips on working within a budget without compromising on quality or services provided.

Inputs Vary

As expected, there are cost and quality differences between windows, doors, flooring, cabinets, trim, paint, etc. — the list goes on. The higher the quality of finishes used, the higher the cost.  

Home builders in Northern Virginia might opt for cheaper materials over the ones they prefer to use to stay within budget. Since most builders don’t specify every item that goes into the house in their contract, you may not even know if these swaps were made in your project.

If quality is your priority, you’ll need to work with an Arlington home builder who is transparent about materials costs to ensure you get precisely the custom home you’re paying for — at the quality level you want.

Pricing Models Vary

When it comes to home building, different pricing models can significantly affect the final cost and quality of your project. While many try, you can’t negotiate for a custom home build or remodel like you would negotiate buying a car. 

Fixed Price

A popular pricing approach is bundling all the guaranteed costs associated with a project, assuming the cheapest finishes will be used. That’s what you see when developers price a home model at an exact cost on their site — just like in an ad for a model car.  Many homeowners are drawn to this approach because the exact cost is known and determined upfront. However, there are some concerns to consider with the fixed price model.

First, you don’t have visibility to the project’s actual cost as the builder will not disclose their markup, which can be 30% or more. Second, you won’t have full visibility to the actual level of finish. You get what you get. Under this type of fixed fee for a given scope of work, the builder will stick to your budget, but as the cost of materials fluctuates, they might change the quality of the finishes to keep their promised price. You may not understand how low-quality the basic finishes are until you near the end of the project when it’s too late — or too expensive — to change. Since the builder controls the contract, what you might think are minor changes can result in large upcharges. 

Cost-Plus

Another popular pricing model in the industry is cost-plus, which offers transparency but lacks budget controls. Under this model, the price is based on actual costs to the contractor plus an agreed-upon markup rate and management fees. You might be drawn to this model because you will have freedom in selections that the fixed price model did not allow, and you know the builder’s markup, but there are a few things to consider.

Builders using this model can talk about budget early on, but the model does not lend itself to keeping to any budget. Once you get into construction and have agreed to cost-plus, there are no barriers to increased costs. You will get invoiced once a month or once weekly, and you must pay it to keep the project going. Additionally, contractors using this model often do not provide a breakdown of management fees, which can result in a hefty bill at the end of your project. Finally, many contractors only use selected trades or suppliers, opening the door to price fixing to increase project profit.

Alair’s Transparent Model 

Another approach to pricing is to work with a builder who puts transparency at the core of their pricing model…like Alair! 

Our projects begin with a detailed project planning phase, identifying every item going into your home to ensure we deliver your vision. Before starting construction, we determine, disclose, and request consent for 100% of all costs, including management time. 

With our unique Client Control® system, you can access the breakdown of costs (including markups!) associated with your project to know exactly what types of services and finishes you’re getting. High-end or not, you’ll be informed of the quality of the materials used and understand what is driving your variable costs. This model gives you the power to select the best products for your vision; then, we pass on our contractor-preferred prices to you. You sign off on every supplier, tradesperson, and product entering your home.

We also require you to make selections up front so you are not surprised by extended timelines. Making your selections early in the process doesn’t mean you can’t adjust some during the project (and you can without penalty), but it does mean that your entire tile order is not hung up because you can’t figure out the exact shape and style of the niche. 

If we think you might need some contingency in certain areas, we will discuss it and have you approve it prior to the action. Then, if it is not used, you get the money back. If more is needed, we have to ask for permission and approval. 

This transparent approach to pricing allows each of our homeowners to be confident that we will deliver their dream homes at the quality and price they expect.

Tips to Managing Your Northern Virginia Custom Home Build’s Budget

With these different pricing models in mind, here are some tips for managing the budget of your custom home build or renovation:

  1. Take your time to get into the details of your project and fully understand them. Only pay for what is presented and justified to limit surprise or hidden costs. Avoid relying on a few cost categories — drill into each selection as much as possible. For reference, our typical projects might have over 50 individual selections vs. just a few overarching categories.
  2. Don’t pay ahead without justification or as an incentive for a lower cost. Once a builder has your payment, you no longer have much leverage. Just recently, I saw a couple pay a reputable builder a substantial deposit, only to have him come up with excuse after excuse as to why they were delayed. The initial 6-month timeline ended up being over a year and counting — without any compensation for the inconvenience. 
  3. Demand to see their actual cost. You’ll have more peace of mind knowing you can see everything going into your project and that nothing is being left out. You’ll also be able to ask questions and make any adjustments based on the quality of the material selections and document them so they can’t be switched out later. We often see that builders rarely give enough detail on what a change order covers, leaving clients with what looks like a massive cost for a minimal change. In reality, many builders use change order costs to cover the change and other mistakes or cost overruns they made along the way.

We hope we shed some light on what goes into pricing custom home builds in Northern Virginia so you can tackle your project with confidence…and money well spent. Contact us today to learn more about our commitment to transparency.