Affordability is consistently ranked as the top concern for people shopping for a new home. It’s no surprise that homebuyers like you want to ensure that they are getting a good deal, regardless of whether you’re a first-time buyer or a more seasoned homeowner who is looking for your dream home.
If you’re considering purchasing your first custom home, you might be particularly concerned about price. Many customers fear that custom homebuilding will include a variety of hidden costs that will bust their budget before the house is even complete. In reality, there are only a few obstacles that can lead to additional costs during the building process. By familiarizing yourself with them early in the project, you’ll be in a better position to avoid them altogether.
Custom Homebuilding’s ‘Hidden’ Costs
Most customers do not experience unexpected costs during their custom build project. However, occasionally changes to the construction plan, as well as factors outside of the builder’s and the customer’s control, can require a bit more funding in the midst of a project.
Let’s take a look at some of the most common sources of additional costs:
Changes to the site plan. Gary Culp, purchasing agent for Adair Homes, explains that customers can encounter added costs if they make changes to the site plan after the site development budget is finalized. “For example, if the customer moves the position of their home on the lot from the time we do the initial site visit and we create a site development budget to the time they actually excavate, that can change the cost,” Culp says. “We have to adjust the project because it’s not what we planned for.”
Soil conditions. Culp explains that in some cases, the condition of the soil at the build site can lead to unexpected costs because it complicates the excavation process. “Usually it’s one of the following extremes: Either the soil is very soft or it has a high water table, there are a lot of large rocks or boulders, or the construction team is running into bedrock just below the surface,” he says.
In each case, homebuyers will need to invest a bit more in the site development stage in order to ensure that their home can be built correctly. Soft soil in particular costs more, Culp says, because it has lower bearing capacity, which will require wider foundation footing for the home.
Kyle Bradstreet, director of purchasing at Adair Homes, says homebuyers can help prepare for these types of costs by hiring a geotechnical engineer or consultant. “Before construction even begins, have them examine the soils so you and the construction team can better predict what you might encounter during excavation,” he says.
Weather delays. Excess precipitation can also lead to construction delays, Culp says. If the site requires extended dry-out time because of rain or snow, this may lead to additional costs if the project is significantly delayed.
A sloped lot. The grading of the land might also impact your budget. “Sloped lots may require extra excavation costs, as well as additional foundation, lumber, and siding,” Bradstreet explains. “Depending on the floorplan and the degree of slope, the house may also necessitate a deck.”
Wildlife. Bradstreet says it’s not uncommon for homebuyers to discover wildlife, such as gophers, living on their property. In some cases, they are required to gain a permit from the U.S. Fish and Wildlife Service to create a mitigation plan for the animals to ensure the construction process accounts for habitat conservation. This process can sometimes lead to delays and unexpected costs.
Impact fees. The city or county in which you build may also tack on a few additional fees. “Many jurisdictions have specific development and impact fees that are applicable to specific zoning areas,” Bradstreet explains. “The buyer should consult with the jurisdiction prior to the construction phase so that they can accurately account for all the necessary impact fees and ensure there are no surprises.”
Permitting process. Every jurisdiction can vary for their permitting turn times. While some will have plans fully approved within two weeks others can take several months. Understanding the process in your area will help you plan accordingly.
Other unexpected site problems. Finally, Culp warns that buyers should be aware of other unexpected issues, such as site easements and restrictions, that may emerge during the site development and construction phases. “The best way to avoid these types of costs is to properly research the property—before you begin building,” he says.
As you begin the custom homebuilding process, it’s important that you fully understand all the steps that go into it. By arming yourself with information, you will be better equipped to find land that suits your needs and will not lead to unexpected expenses.
To learn more about everything that goes into building a custom home, download our “Homebuilding Process Timeline: 13 Steps from Start to Finish.”