Custom Home Building

First steps in building a custom home

by Mike Mikoll, Mikoll Company LLC

Custom home building is not for the faint of heart. If you think it´s expensive, that´s true, but the cost of financing and building the house is less important than your commitment to follow the project through. The following questions have been answered by a custom home builder, Mike Mikoll, the owner of Mikoll Company located in Puyallup, Washington.

Deep down most of us would love to build a custom house that meets our individual needs. Is building a custom home out of range for ordinary homeowners?

That depends on the location of your property as well as where and what type of utilities are required. Will your property require a septic or sewer design? Set-backs may limit buildability of the lot or property. There may be wetlands or other conservations issues to contend with or zoning and other land use regulations as well as easements. On the other hand, if you buy a lot in a development, the costs of sewer and water are incorporated into the cost of land.

Before you purchase the land, you need to aggressively pursue getting all of the important information about it. More than one buyer has purchased what they thought was the ideal parcel, only to discover that the buildability for the type of structure they had in mind was not feasible. It´s an expensive mistake and one that is avoidable, if you do your homework.

What is Step One?

The first step is to find the right piece of property. Consider what your goals are from a short-term and long-term perspective.

Once you have selected the property, look up all the property details including information about the ower, location and zoning, tax records, land characteristics, and last sale price. Make sure there are no liens or encumbrances against the property.

Most, if not all, of the information is recorded at the county or city level. You may be able to gather all the information you need during your research. If necessary, you can order a report from a title company.

How can I finance a custom home? Are there different requirements for first-time homeowners and someone who already has a home? Is there a minimum financial commitment I have to make?

Financing options are very broad. The most important thing is to check out your lending institutions and find out what kinds of rates they offer. There is a difference between rolling and fixed rates, so you´ll need to find out which rate is more to your advantage. If you are working with a real estate agent, they can usually provide a list of lending or mortgage companies. If they are affiliated with a lender, you may choose to work with them.

Regardless of whether you use your own bank or credit union, or use a new lender, there´s a lot of paper work involved that may go back ten years. Depending on your circumstances, there are many costs that will accumulate at the end of the loan. These costs may range from $2500–6500 and sometimes more for just the costs on the loan.

If you plan appropriately you have a budget in mind based on your income and what you can afford. Depending on your credit history, your lender will assess your credit score and determine your loan rate and the points for which you qualify.

To finance your project, you´ll also need to have a complete set of plans that includes the site, foundation, framing, wall detail, roofing, electrical, plumbing, and finish details. If engineering is needed a plan is required for that as well. Complete design plans for septic or utilities location and costs will also be needed. Finally, if geotechnical recommendations are required by the city or county, you´ll have to supply plans or reports for those.

The following figures show the potential ranges, but depending on your circumstances and resources may be less or substantially more:

  Cost Range
House Plans $600–$6000
Engineering $500–$8000
Geotechnical survey $1000–$10,000
Utilities $1500–$12,000
Septic recommendations $1850–$45,000
Building permits and fees $1800–$9500

The minimum financial commitment requires that your property be paid off (or be a family gift). Typically, many financial institutions want to see that you have full ownership of the property. If you are working with a cooperative seller with respect to the property, you may be able to subordinate the loan into the construction financing through your lender, then pay off the seller at the first draw. In any event, the minimum cost for starting the project usually runs between $5000 and $12,000.

The range of possible contracts can be substantial. I have two projects now: one is a 2600 sq. ft. custom home that is being built on a hillside and another on a small lot that has a small footprint of 800 sq. ft, but has 3 stories for a total of 2400 sq. ft. The hillside project will cost almost $350,000 while the small lot project will run $215,000. Per square foot, the hillside project will come in at about $133 per square foot contrasted with $89 square foot for the small lot. Land, engineering, plan type, and building materials all factor into the final cost of your home.

Do I need an architect? Or can I have a builder take existing plans and modify them for my house?

I would say that most of the time, you would need an architect to draw the plans up because most builders don´t know all the codes and engineering that has to correlate with the plans. The engineering comes first; then the plans can be drawn up from the engineer´s recommendations.

What else should I consider?

Custom homes are a big time commitment. It requires money up front and a piece of buildable land. It can be a long, sometimes frustrating process from doing the necessary research and obtaining loans to making selections of every imaginable feature of your home. It´s a painstaking commitment of time and energy to make hundreds of decisions ranging from the huge to the relatively minor including endless decisions about color, flooring, cabinetry and so on.

Most important, building a custom home requires patience. There will be timing problems and scheduling issues. The unexpected occurs regularly so flexibility is also necessary. The reward is that you have what you want, the way you want it. You choose the neighborhood and the site orientation as well as the materials and the style.

The builder has to listen to you, the homeowner about how you want things incorporated. The builder wants to work with you to provide what you want. Communication is extremely important and establishing a good relationship is vital to the success of the project. Working with your builder to discuss the plans and incorporate your ideas before work starts means that the builder can take your doodles and create modified drawings. Once the changes are stable, the builder and owner can sign off the final plans.

If you do a good job of working with your builder and communicate your desires before the final plans are complete you can minimize changes during the course of the project. If you want to make changes after the final plans are signed off, then the builder will write a "change order" and the change order will cost more and often impact the completion date of the project.


Want help locating a builder in your area? If so, UpdateRenovate can help.

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