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Hometime Explains the High Cost of Custom Homes vs. Production Homes

Why do custom homes cost so much more to build than production homes based on stock plans? Consider the elements that go into any home—land, labor, and materials.

The first episode of sticker shock strikes as you start looking for lots. Typically, the best lots are locked-up by builders who stockpile land to make sure they have plenty of lots available in the future. As demand rises, they can charge premium prices for those lots. And that's assuming they'd even sell you one—most builders will only sell the lot if they're going to build the house. At this point, most land seekers head farther out and discover there's more available land out there—undeveloped land, that is.

Of course, what drives people to build a custom home is the desire to own a one-of-a-kind home encompassing a new and interesting floor plan as well as unique and uncommon materials. Unfortunately, when it comes to building, the words "new," "interesting," "unique," and "uncommon" are all synonyms for "expensive."

Plans are a good example. Production builders work from stock plans they've accumulated over the years, so the cost to buyers is minimal. Custom plans, on the other hand, bring architect's fees, which are usually based on a percentage of the home's final cost and can quickly amount to tens of thousands of dollars.

In addition to an array of stock plans, production builders also maintain a network of subcontractors who've built from those plans many times before. The resulting speed and efficiency help hold down labor costs. With custom plans, most jobs slow down as the subs puzzle over how to accomplish what the architect has indicated on the plans.

Custom materials (and what custom house doesn't have custom materials) add to the bottom line both in their initial expense and in any delays or extra labor their installation causes. Bear in mind, every delay adds to the cost, whether it's increased labor, increased interest on the construction loan, or both.


Reprinted with permission of Hometime®. For further information about building a home, tune in to Hometime or visit © Hometime 2003, all rights reserved.