do i tell them my budget

pilgrim192March 28, 2013

The builders in my area also design custom homes. We want a custom home built, but we also want whoever can build for the cheapest amount. I feel like the builder (since he's also designing the home) needs to know the budget right?

Our budget is 350k MAX. We've been quoted 115-125/sf in central texas (depending on the builder we talk to), AFTER telling them our budget.

How do I go about this? Should I meet with other builders and tell them I want X amount of square feet and ask what the budget would be for that? OR do i tell them my budget and ask what the general price is per sf? Do I do this over the phone or meet in person


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What's more important: 1) square footage; 2) maximum budget?

Whatever is most important is what you work with the builders to achieve.

Good luck on your project.

    Bookmark   March 28, 2013 at 10:12PM
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Is 350K the max you are approved for or willing to spend? If so, I would tell them a lower number since you will most likely go over. We told our builder our budget was 300K, we were approved for 375K, comfortable going up to $330L (did not tell builder this, of course). He came in at 308K, loan amount will likely be 320K with closing costs and other upgrades.

    Bookmark   March 28, 2013 at 11:29PM
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I asked several builders for an average price per square foot on their projects when I was interviewing them without giving them an indication of what we were willing to spend. I don't think you need to share your budget up front. You may also be limited by the area you want to build in - for example, we are building in an older neighborhood in Houston where the housing stock is being torn down and rebuilt, so while the market is on the way up, I didn't want to overshoot the price per sq. ft. to a point that we couldn't sell without taking a $100k hit, regardless of what we could technically qualify to borrow.

    Bookmark   March 29, 2013 at 12:05PM
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Maybe not tell them preliminarily, but you need to get them in a range that is fairly close or you will waste each others time. If your budget is $300,000 and they think your budget is $400,000 or you are discussing a house that will cost $400,000 to build no matter your budget, you just wanted a lot of time.

    Bookmark   March 29, 2013 at 12:14PM
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You would always tell the designer your budget but you would never tell a contractor your budget.

This is just the first of the many conflicts of interest you will discover in a Design-Build approach.

    Bookmark   March 29, 2013 at 12:54PM
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This is the only way we feel we can afford a custom home (architects charge 5K and more in my area, whereas the home design is included in the contractors plan).

could i ask something like: would you be willing to build a home similar to X (point out a home they've already built) for 80 per sf? or is that too vague?

    Bookmark   March 29, 2013 at 3:15PM
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Get a rough idea of the plan you have in mind, #bedrooms and square footage, # garage stalls etc. Rough sketch it out, list some basic finishes like flooring and countertop types and let them shoot you a price/sq. ft based on your general idea. Weed out the outliers and then work with whom can come in close to your budget. Its all negotiable. You will also get a better price/sq. foot buying a plan the builder is experienced building so if you have a chance to peruse their plans they can tell you what it would cost exactly. They are familiar so they don't budget in the "unknown" like on a full custom job. Good luck.

    Bookmark   March 29, 2013 at 6:33PM
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Design-Build is not necessarily cheaper; you could easily save $5,000 by bidding your project competitively and perhaps more during the construction phase.

I don't care how you do it but you should at least be aware of the common pit falls and false economies of Design-Build.

    Bookmark   March 29, 2013 at 7:09PM
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If they give you a cost per square foot, you should be aware that that number may be based on assumptions that do not apply to your project. For example, it might what he can do if you choose a plan of his that he's built before, on a prepared lot.

I would not just ask what they typically charge per square foot, but what they would charge for a project like yours (although there's a limit to how accurate they can be in estimating the cost of a not-yet-designed house).

    Bookmark   March 29, 2013 at 8:11PM
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The best you can do on a project like that is to ask what specific past projects ended up costing. And also ask what the initial estimate for those projects were, and where the homeowner went over on budget. There is still a big conflict of interest here though, as there is zero incentive to help you stay at your budget. They may initially tell you that you can build the plan for 400K, but base that guess on builder grade finishes while you had in mind something more mid grade. When the upgrades start happening and you need to come up with another 150K to get the home that you had in mind, that's when the chickens come home to roost about you not doing enough due diligence on the front end and not spec'ing things out well enough and getting competitive bids.

    Bookmark   March 30, 2013 at 12:12PM
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If they are designing your house they need to know your budget. And if you want it built it for as cheap as possible you shouldn't have your contractor design and build your home. You should finalize your plans and have it competitively bid by 5 GC's.

    Bookmark   April 14, 2013 at 3:48AM
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