The Custom Home Process

A Step-by-Step Guide

Please see separate section for the home remodel process

To the uninitiated, the process of building a custom home can be a daunting and mysterious process. Most people venturing into the acquisition of a new home are embarking on the largest personal financial commitment that they have ever made. All of this added together can give people reasonable cause to want to understand what they are getting into before they commit themselves. The average home in our area has over 40,000 individual parts involves the skills, and management of, over 100 different companies. Constructing a quality new home demands over 4,000 on site worker hours and over 2,000 managerial hours to make the dream a reality. One quote that can simply explain the building process is “The construction business is a very complex choreography of a zillion very simple tasks.” With this in mind the best way to understand the process is to break it down into its individual parts. We look at the construction process as being made up of 10 main elements that are tied together in various ways. These elements are as follows:

Budget

The budget drives everything and everyone has a budget. The budget may be dictated by the bank or by your personal comfort level. Another item, which can affect your budget, is the reasonable fair market value for the home you are contemplating. Be prepared to discuss your budget constraints frankly with your designer and builder early on so that the guidelines for the rest of the process can be established. I hope that when you finish this review, you will understand that this exercise is for naught if the team does not have a budget guideline to go by. You should establish a budget ceiling and then use your professional team to find out how much you can fit into those limits.  There is a reasonable concern that if a budget is known up front then the builder will jack up the price to meet the budget. This does not happen with The Foley Companies. We have stayed in business for all these years by being honest with our clients and working very hard to give them the most for their invested dollar. Besides making your own evaluation of our building Team, it is always a good idea to interview several previous clients and see what they think about their experience. When we hear from homeowners about a bad experience they had with a previous builder my first question is how much time did they spend researching the company they selected. The level of disappointment is usually directly related the time they spent doing their homework up front.

The budget is composed of 5 basic elements – Land, Land Development, Home Plans, Specifications, and Financing.

Land

The land is the single largest line item in any construction budget. In our area it usually ends up being somewhere between 1/2 and 1/4 of the overall price of the home. If this line item is handled incorrectly, then the remaining elements of the budget will be seriously impacted. The single biggest mistake that customers make is to go out and purchase a lot without considering the other elements of the budget. If a person pays too much for the lot in relationship to the rest of the budget or if they pick an apparently cheap lot that has large land development costs, there may not be enough money remaining in the budget to meet the minimum standards for the home that they envisioned. This is not an anomaly and happens far too often when people purchase property without consulting a construction professional to put together the entire budget first. It is our recommendation that a customer meet with design and building professionals before embarking on a land search. You need to put together a budget concept to see approximately what the home and required finishing will cost so that it can be determined what is left in the budget to purchase the property. Our firm encourages customers to have us walk their potential lot(s) so that we can give an evaluation of how the lot and its price might fit into their overall budget and construction plan. Often times we will do a brief evaluation free of charge.

Land Development

Land Development is probably the least understood area of the entire process. It is not only misunderstood by the clients but also by large number of design and building professionals. For this reason, many builders will try to make the land development an allowance item, some builders even exclude land development from their scope and have the client handle it separately. They do this because they either do not know how to calculate what the land development costs will be or don’t want to take on the potential cost overrun risks associated with Land Development. At The Foley Companies, we give you a fixed price. Builders define land development differently, but in our company we find the following explanation the easiest for everyone to understand:
If you can imagine placing a hook on top of the home and picking it up from the lot – all the work that remains on the site with the home removed is “land development.” This includes excavation, clearing trees, septic fields, sewer, water, bringing in and connecting utilities, driveway, driveway piers, landscaping (lawn, seeding, bushes and trees), engineering, and permits. On a typical 1 to 2-acre lot in northern Virginia it generally runs between $60,000 and $150,000. As you can see this could easily be the second largest line item in the overall budget right behind the cost of the lot. We feel that it is unconscionable for a builder to ask an owner to go into the custom home process without having a very good idea as to what the overall land development costs are going to be.

Home Plans

Home plans can be obtained in many different ways. You can engage an architect or a design/builder to create your plans. Either one can make modifications on some existing plans that they own or start with a blank piece of paper and create a totally unique design. Plans can also be obtained from plan books that are available in most bookstores and online. Plans can also be created by combining many different ideas from many different sources into a unique plan that fits your needs. Many times the custom home plan process is actually a combination of the above. One word of caution. You need to be very careful that you are dealing with an honorable design team so that the very strict house plan copyright laws are not violated in your design process. If a copyright is violated the penalties can be very severe for the designer, the homeowner, and the builder. The home design process should not start until an overall budget review has been agreed upon between the owner and the design team. Before the first pencil meets paper, the designer and owner must come to a general agreement as to what the overall size of the home should be, the general specifications and what the overall budget is for the structure and finishing items. National statistics indicate that if this policy is not followed then the money and time put into the design process probably will not end up in a home being built. Over 50% of the people that come to our office that have already purchased their lot and have a completed set of plans end up never building their dream home, because the overall cost for the plan vastly exceeds their budget. We have many customers that have invested between $10,000 and $150,000 and up to two years of their time putting a set of plans together only to find out from us in one-half hour that they are so far over their budget that the plans have to be thrown away. Unfortunately this happens all too often, but with the aide of an experienced design team, you can guard against doing this.

Perhaps, the most infectious disease in the custom home process is the “while you’re at it” syndrome. Everyone is guilty of this including architects, builders, and homeowners. The syndrome works like this… “While you are at it,” let’s add a 4th garage, because that would be really nice. “While you are it,” let’s put in 2 dishwashers and 2 refrigerators. “While you are at it,” let’s make the library 10′ bigger in each direction. etc, etc.

Having a builder involved in the design process from the start should help avoid the potential for significant budget over runs. 

Specifications/Selections (“The Shiny Stuff”)

Many of the technical selection items, such as what kind of lumber to use, how the drywall will be glued and screwed, etc., that are necessary to put the home together can be made by your building contractor or designer. Most homeowners are not knowledgeable enough to make these decisions, so it is wise to pick an experienced and trustworthy builder. He can advise you in this area and explain to you the relative quality of the various ways to put a home together and its associated costs. The fun part of the selection process is what we call the “shiny stuff.” That includes the plumbing fixtures, light fixtures, cabinets, counter tops and so forth. Some of this stuff is not shinny (like carpet), but we still call it the “shiny stuff” any way. Once again, if the budget has been carefully monitored up to the point of making the selections, then there should be enough money left in the budget to put the finishing touches on the home that you envisioned.

If the budget is handled improperly, where the cost of the lot is too high; the land development costs were unknown until it was too late; the home design has grown larger than the budget can handle, the selection and finishing items will suffer greatly. This does not have to happen if the whole budget process is carefully evaluated at the beginning.  Enough money needs to be set aside to do the nice light fixtures, marble, appliances, cabinets, etc., that transform a house into the dream home that you have envisioned.

There are two stages in specifications — the budget stage and the final stage. Everyone has heard about budget overruns in the finishing areas. This sometimes leads to an ill-advised process of the owner trying to pick every knob and light bulb before the construction process starts. In all of our years in business our experience tells us that this approach is not wise.  To date we have not had a client who has been able to do this without going back and completely revisiting all of their selections and putting themselves through the process two and three times. We believe the correct way to handle the specification process is as follows:

The designer/builder can block out the various finishing areas and you can address those one by one. A reasonable quantity, quality, and price needs to be allotted to each of the areas to make sure you preserve enough money in the budget so that when you come to the finishing you can put into your home the “shiny stuff” you had envisioned. You can help this stage by creating a simple file with ideas taken from your previous home, magazines, visits to stores, etc.. File the photos by category (kitchen, plumbing, trim, etc.) Do not wear yourself out by trying to make your final decisions at the budget stage of construction. You will burn yourself out and will change your mind multiple times as you see the home being built. Our in-house design specialists help our clients to get a reasonable “education” on each of the finishing areas so that they can agree with the designer/builder as to how much needs to be allotted for each particular area. For instance, in the area of appliances, the thousands of appliances available can confuse any purchaser. In our initial budget process, we would have a 15-minute discussion as to what level of quality of appliances you think you are looking for and then we offer suggestions that fit into that category. Our design and selections staff can guide a customer to a quick “ball-park” selection which will lead to a reliable line item in the budget to take care of appliances. We will suggest a refrigerator, dishwasher, disposal, oven, cook top, etc. which should meet the level of quality that you have stated you want. We will then put prices on each of these appliances for you and show you a total that we will suggest be included as a line item (allowance) in the budget to cover appliances.

Once the entire budget is put together, you can revisit each of the selection areas in a casual and informed fashion to refine the selection in plenty of time so that the product can be ordered and delivered within the construction schedule. We have our customers start the selection process early, so that once they are done they can go back and make tradeoffs from one selection category to another, to come up with a final specification that meets their needs at the agreed upon budget. Our goal at The Foley Companies is to have the allowance tradeoffs “revenue neutral” at the end of the job, so that the owner does not run over the agreed upon budget. It is infrequent that any of our clients run over the budget significantly.  The overruns, when they come, are generally caused by the client completely changing their mind as to the level of finishing that was originally agreed upon.  Sometimes clients have set aside a contingency fund for builder overruns and as they see that we always meet our budget they put that contingency fund into upgraded selections.  Many customers are concerned about being penalized for making changes as the process proceeds. If you selected a good, quality, true custom builder as your contractor, there should be no monetary penalty for you to change your mind during the selection process. At The Foley Companies, you can change your mind on the refrigerator as often as you want, up to the date that we actually place the order. We are, after all, a custom builder and custom means unrestricted choices.

Financing

Financing is the last item in the budget process, but should be thought of first. Many times the amount the bank will finance drives the overall budget. In most cases, the finance part of the overall project is a small percentage of the cost and is really not a very big line item in the overall budget. Custom home financing in Northern Virginia is generally handled as follows. With the cooperation of the builder, the owner will obtain the loan to acquire the building lot, build the home and provide for permanent financing once the home is complete. This is typically referred to as a “land acquisition/construction/permanent loan.” This is a very specialized area of financing and we strongly recommend that you interview lenders that specialize in this area of financing. We have witnessed unnecessary delays and expensive stories when clients went to their everyday bank for financing and end up having their construction delayed 6 months or more, because the bank was not familiar with this type of special financing. We can provide you with a list of good lending institutions that will treat you fairly and will gladly have an initial no-obligation meeting with you to further explain the process. They can also quickly give you an idea as to how much they will finance and what the costs to you will be. 

Team Members/Designer

The next area to review is the Construction Team and their duties. Referring to the chart at Appendix A, you can see the team is composed of the Owner, Designer, Builder, and eventually the Subcontractors and the Suppliers.

OWNER

The owner is the most important part of the Team and their duties should be intuitively obvious. These duties include communicating to the other members of the team what they are envisioning in their new home and how much they are willing to spend. Duties also include making selections on a timely basis, funding the project, and cooperating with the rest of the team during the process.

DESIGNER

The Designer has the obligation of putting the dreams of the customer on paper in a professional manner so that it can be understood by the other professionals that will be charged with actually building the home — all within the agreed upon budget and in a reasonable time frame.

We offer turn-key design services within our company or are happy to work with a qualified Architect of your choosing.  We even have several outside architects we love to work with and can recommend to you.  Different designers tend to specialize in different styles or types of construction.  Some designers are great at designing a remodel and others at designing new homes.  Some designers are great at designing contemporary while others traditional or colonial styles.  The designer should be chosen based on experience they have with the type of construction (remodel or new home) style (contemporary, modern, traditional etc.), complexity and cost of the home you have in mind.

BUILDER

At the end of the day the builder is ultimately responsible for turning your dream into reality by delivering a quality product on time and on budget.  The builder is responsible for choreographing the entire process.  They will interact closely with every member of the team to ensure that deadlines and costs are met so that the project will run smoothly.  An inexperienced or unorganized builder can be a huge burden on the client (constant 911 calls needing selections you didn’t even know you had to make) and can cause serious delays which is not only frustrating but can have significant consequences on the overall cost of construction and financing.  For a typical new home in northern Virginia our company will generate and manage more than 5,000 pages of construction documents.  These include the blueprints, selections sheets, contract agreements with trades and suppliers and documents needed for the lenders and government agencies that oversee the project.  All of these documents and tasks have to be in harmony with each other for a project to be a success.  Our dedicated team and advanced management software will ensure that the construction of your project runs smoothly. (link to co-construct page)

SUBCONTRACTORS AND SUPPLIERS

Subcontractors and suppliers should also be a part of the Construction Team and not a company that happens to be the “low bid” on your home. Many times these trades are looked at as subordinate to the overall process and this attitude can lead to lack of cooperation, an unstable schedule, and poor quality. At The Foley Companies, we have selected some of the finest tradesman in the Washington area and make sure we treat them fairly.  By making the subcontractors and suppliers a part of the Team, we are able to get the best prices for top quality work and keep the jobs on schedule.

DECORATOR/INTERIOR DESIGNER

Not many of our clients engage these types of professionals, because we provide a lot of this through services in-house. A decorator or interior designer can be helpful in making selections and in helping define the “look” you want the home to have. As with an architect, you have to make absolutely certain that they understand your budget parameters and the importance of making selections on time. It is important to remember that they are assistants in the process and that you and you alone, have the ultimate responsibility of making sure that your selections are made on time. We would encourage you to spend as much time researching your interior designer as you would your builder. You want to make sure that you select a professional who has experience with new construction, and understands the importance of a budget and a schedule.

If the budget is handled improperly, where the cost of the lot is too high; the land development costs were unknown until it was too late; the home design has grown larger than the budget can handle, the selection and finishing items will suffer greatly. This does not have to happen if the whole budget process is carefully evaluated at the beginning.  Enough money needs to be set aside to do the nice light fixtures, marble, appliances, cabinets, etc., that transform a house into the dream home that you have envisioned.

There are two stages in specifications — the budget stage and the final stage. Everyone has heard about budget overruns in the finishing areas. This sometimes leads to an ill-advised process of the owner trying to pick every knob and light bulb before the construction process starts. In all of our years in business our experience tells us that this approach is not wise.  To date we have not had a client who has been able to do this without going back and completely revisiting all of their selections and putting themselves through the process two and three times. We believe the correct way to handle the specification process is as follows:

The designer/builder can block out the various finishing areas and you can address those one by one. A reasonable quantity, quality, and price needs to be allotted to each of the areas to make sure you preserve enough money in the budget so that when you come to the finishing you can put into your home the “shiny stuff” you had envisioned. You can help this stage by creating a simple file with ideas taken from your previous home, magazines, visits to stores, etc.. File the photos by category (kitchen, plumbing, trim, etc.) Do not wear yourself out by trying to make your final decisions at the budget stage of construction. You will burn yourself out and will change your mind multiple times as you see the home being built. Our in-house design specialists help our clients to get a reasonable “education” on each of the finishing areas so that they can agree with the designer/builder as to how much needs to be allotted for each particular area. For instance, in the area of appliances, the thousands of appliances available can confuse any purchaser. In our initial budget process, we would have a 15-minute discussion as to what level of quality of appliances you think you are looking for and then we offer suggestions that fit into that category. Our design and selections staff can guide a customer to a quick “ball-park” selection which will lead to a reliable line item in the budget to take care of appliances. We will suggest a refrigerator, dishwasher, disposal, oven, cook top, etc. which should meet the level of quality that you have stated you want. We will then put prices on each of these appliances for you and show you a total that we will suggest be included as a line item (allowance) in the budget to cover appliances.

Once the entire budget is put together, you can revisit each of the selection areas in a casual and informed fashion to refine the selection in plenty of time so that the product can be ordered and delivered within the construction schedule. We have our customers start the selection process early, so that once they are done they can go back and make tradeoffs from one selection category to another, to come up with a final specification that meets their needs at the agreed upon budget. Our goal at The Foley Companies is to have the allowance tradeoffs “revenue neutral” at the end of the job, so that the owner does not run over the agreed upon budget. It is infrequent that any of our clients run over the budget significantly.  The overruns, when they come, are generally caused by the client completely changing their mind as to the level of finishing that was originally agreed upon.  Sometimes clients have set aside a contingency fund for builder overruns and as they see that we always meet our budget they put that contingency fund into upgraded selections.  Many customers are concerned about being penalized for making changes as the process proceeds. If you selected a good, quality, true custom builder as your contractor, there should be no monetary penalty for you to change your mind during the selection process. At The Foley Companies, you can change your mind on the refrigerator as often as you want, up to the date that we actually place the order. We are, after all, a custom builder and custom means unrestricted choices.

Scheduling

Every job has a schedule. Even if a customer says they are not in a rush, we eventually find that they do in fact have a schedule when they evaluate the cost of money and how it effects a job that drags on forever. How long a home will take to build depends on the difficulty of the land development, the complexity of the structure of the home, its size, and the level of finishing that will go into the final home. The schedule is also driven by the owner’s cooperation in making selections in a timely fashion so that the products can be on site when needed for installation. As a rule of thumb, on a reasonable lot with a reasonable design you should figure a minimum of 6 months to finish a custom home that is at or under 4,000 finished square feet on the top 2 floors. For every thousand square feet of finished square feet above 4,000 finished square feet, you should add about a month to the construction schedule. So, a 6,000 finished square foot home should take about 8 months. The schedule should be specifically addressed in the contract, as well the duties of the owner, contractor and other Team players so that a schedule can be established and adhered to by all parties. At Foley Construction, we include a start and finish date with our contract and if your selections are on time and the weather cooperates, we will not deliver the home late (Check our references).  As part of the management software you will be given access to, you will always know the current schedule of construction and when selection items are needed.  

Warranty

Many customers are not aware of what is in the warranty they are getting until the end of the project. We think that it is irresponsible for any builder not to discuss the warranty at the initial stages of negotiations and to include the warranty in the contract documents. A warranty, however, is only a piece of paper and is only as good as the builder who is behind it. Many of the warranty heartaches that we hear about in the industry are the direct function of the owner choosing an inexperienced contractor who has a poor track record of building a true quality home and an even worse track record of honoring their commitments to fix the legitimate complaints of their customers. In addition to honoring our warranty, we have a record going back 4, 5, 6 and even 10 years later to fix items at little or no cost to the owner. This is the honorable thing to do and just makes good business sense. In choosing your contractor, you should focus carefully on the builder’s reputation of honoring their commitments to the owners once they have been paid and the owners have occupied the home.

Change Orders

Change Orders are unfortunately looked on by many as the “dirty words” of the construction business. This should not be the case. A true custom builder should be willing to customize the home as the building progresses. At The Foley Companies, we are willing to make any changes or modifications at the initial stages of the design or any time during the construction process as long as we are reasonably compensated for our efforts. If we can move a closet from one side of a bedroom to the other with a pencil (on the plans) before it is built then there is little or no charge for this service. If, however, we have to move the closet from one side of the bedroom to another with a sledge hammer after it has been framed, dry walled and painted, then there will be a charge commensurate with the amount effort the workman have to expend and how the change delays the project. As a result of the step-by-step process we use to guide our clients, tearing things out is a rare occurrence. We pride ourselves in educating our customers in the whole process as we proceed so that they can make sound decisions in a timely fashion so that everything goes in right the first time. The change order process and the associated costs should be clearly defined in the contract with unit prices agreed upon up front so that there will not be any disagreements between the parties when a change order occurs. When a customer makes selection decisions or changes such as shifting from GE Refrigerator to one that costs essentially the same, a customer should not be penalized for this kind of change as long as it is made early enough prior to the orders being placed.

Contract

The contract documents serve as the road map for the construction process once the budget is agreed upon and the design is complete. A competent custom home builder who has been in business for a period of time should be able to provide you with a fair contract that will accurately direct the course of events throughout the construction process. You should expect the contract to be one sided in favor of the builder. This is because, the owner is usually a neophyte at this process, but the builder should be an expert in the home building trade. The builder should be in charge and held responsible for all the operations that occur in the construction of the home. We at The Foley Companies pride ourselves in having a contract that we have refined since our founding in 1976 that is clear, concise, and fair to all parties. Once we finalize our contract with you we encourage you to take it to your attorney and get their opinion. In many cases, our customers’ attorneys advise their clients that if we are as professional in our construction as we are in our contract presentation then they have made the right decision in a contractor. When you come to The Foley Companies, do not ask for our “boiler plate” contract, because we do not have one. We have a multiple selection contract basis which is customized for each owner and which is driven by their lot, the type of home and the finishing.

Contract Formats

Construction contracts take several forms, but these 3 are the most popular.

TURNKEY

Most custom home contracts in Northern Virginia are referred to as “turnkey”. In this contract format, the owner and builder agree what will be in the home and the contractor gives a fixed price to complete the work in the contract documents.

FIXED FEE

This is another contract format where a detailed fixed dollar amount is agreed upon that the contractor will receive for his work. This is not generally used in this area because the fixed fee will change if the owner changes the scope of the work. A fixed fee also generally means that the owner is responsible for whatever the cost of job ends up being which can be dangerous without a budget guarantee from the contractor.

COST PLUS

There are several forms of cost plus contracts. The cost plus contract that results in the owner paying all the costs plus a mark-up to the contractor is the best scenario for a builder but the worst for the client. At our firm, we have a problem with a contract format that allows the contractor to make more money as the job budget runs out of control.

Summary

Hopefully this outline has made you more comfortable with the overall custom home process. I will repeat what I said initially in that there is no way the entire process can be explained to the uninitiated in this short space and time. Your best key to a successful custom home process is to do your homework and check references extensively so you choose a good, competent, experienced custom homebuilder to guarantee your dreams will become a reality in a cost effective, timely and enjoyable fashion.

Contact Us

4 + 10 =

1861 Wiehle Ave #130 Reston, Virginia 20190

703-932-5279

shawn@foleyhomes.com