Home Improvement

First time building custom home – builders bid is more than double what they estimated several months ago? $600/sq ft?!

By June 5, 2019 28 Comments

Apologies if this is not right for this sub. My MIL inherited some lakefront property and decided to build a lake house. My hubby and I have been pretty involved since it’s meant for us to use and probably retire in some day. Hired a separate architect and builder at the same time. The builder was onboard with keeping the architect from coming up with something too costly. We all met together several times.

At the start, the builder was saying we should expect $150 to $350/sq foot if we had all high end finishes (not including cost of the architect). This matched what other builders said. Seemed reasonable.

We finalized plans and paid the architect and met with the builders to get their budget for us. With supposed mid-range finishes the total came back at nearly $600/sq ft! I just about fainted.

That means $1.2 million for a 2000 sq ft 3 bed, 2.5 bath home in Eastern Washington. The land is not included in that number since it was already paid for. The architect’s fees are also not included in that. There are some nice elements in the design like a high ceiling in the living room and kitchen, but it doesn’t seem super fancy or complex. We cut quite a few things we wanted and would only have stained concrete on the bottom floor. The only obvious thing that seems overly expensive is that they have budgeted 42k for custom cabinets. Even if they are artisans, that seems too painful to pay.

We’re out the money for the plans/architect and at least as much to the builders for their deposit and initial planning work, budgeting, and getting the site ready for the well we had dug.

Has this happened to anyone else before? How did you proceed? Is it wasteful to just walk away at this point? I would like to ask if they can do anything to lower that number, but I’m worried my MIL thinks it will insult them. I also would like to take our plans to some other builders to get a ballpark, but don’t want the current ones to be upset since it is like a small community. I’m afraid my MIL feels like she has to go ahead with the project because it is so far along (ground has not yet been broken!).

That much money could buy so many other things, including a fully finished lakefront or riverfront home on a much larger lot, including the cost of the land. Or literally anything. My husband and I are panicked and feeling awful that we didn’t see this coming. 🙁


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28 Comments

  • yimilton says:

    If you have the architects plans, bid them to multiple contractors… in my experience, if they know they’re the only bidder the price goes up dramatically.

    I had the same thing happen and walked away until I found a contractor who would give me the price I wanted without sacrificing quality (then let the original contractor know how unhappy I was… a few phone calls and google reviews got my point across)

  • hilbug27 says:

    I had this happen with the retaining wall around my house that needs replacing. Contractor told us to expect it to cost around $40k, but that we should get the drawings done and then he’d be able to give an exact cost. So we did, and meanwhile we upped our budget to $50k to account for any unknowns, and when the drawings were done by the structural engineer the contractor came back with $80k as the estimate. 1.5 years later and I still have no new wall.

    I’d ask the contractor what made the cost go up- is it material costs (recent trade wars have made raw material costs go up, I understand) or elements of the design? If the latter, work with your architect to reduce any unique design elements (ie a custom staircase vs your standard staircase) to bring the cost down.

  • justwanttolurk says:

    That sounds like ‘Fuck Me’ pricing. As in the builder doesn’t want the job (too busy, don’t think they will work well with you, etc.) but doesn’t want to say no directly. So they throw out a number so high to make it worth their while and ‘fuck me, I have to take the job’….

  • EngineerWithADog says:

    Just went through the exact same thing last summer. Did you have them bid firm-fixed or cost-plus? They may be building in way too much contingency in a firm fixed price. If it’s cost-plus, each subcontractor may be padding their estimates. The reality is none of the good contractors are hungry these days. The new home market is booming.

    We ended up sitting down with the contractor and going over their quote line by line to talk about ways to reduce the cost (Don’t use the 30-year, top-of-the-line paint, less concrete work, etc.). It was a very amicable meeting, and while we still weren’t able to get the price where we wanted it (and to be fair, we were nowhere near $600/Sq Ft) it was a helpful discussion. My plan now is to wait for the market to cool down, then build a rental property on my land.

    Their quote to us was $167/Sq Ft for an 1900 sq ft house, then my mother in law turned around 2 months later and is building a 1400 sq ft house with similar finishings for $110/sq ft. Granted hers is a “catalog” home from a local builder, but it goes to show that the prices are all over the place. My boss worked as his own general contractor and built a completely custom home for $90/sq ft.

    There are ways to save money, but generally they will take a large investment of your own time.

  • decaturbob says:

    if you have a good set of plans, submit them to other home builders

  • LOWLIGHT77 says:

    Pricing varies by region, but I can’t imagine one region is 3-4x the cost of another high cost region. In the NE you will pay $150-200 sq ft. One thing I notice on this sub a lot is people afraid to upset contractors when it comes to their own money. Do you think that contractor went through the mental anguish you are going through now when he decided to give you that crazy bid? Nope, he bid it and slept like a baby that night because you’re just a number to him. You guys aren’t friends, this is business. He doesn’t want the job, or he thinks you’re a rich sucker he can take advantage of.

  • seektosolve says:

    Communication is key here. Any good contractor is going to anticipate that you will ask about the jump in expected cost. Just be friendly and ask. It’s not insulting, it’s just wise. Perhaps there is an element in the design of the home that is skewing the cost. Please just ask….

  • Reddiphiliac says:

    This builder figures you are an idiot, and is trying to part you from your money.

    At this point they have demonstrated you cannot trust them. You will have to supervise and check everything at every stage of the process because *they are actively trying to rip you off*. There’s a line between negligence and malfeasance, and they crossed it with this new pricing with
    rates grotesquely far above normal. You need to cut ties with the builder.

    >We’re out the money for the plans/architect

    Was your contract with the architect through the builder or direct? If direct, even if introduced by the builder, you’re out nothing. Keep working with the architect. If though the builder, you never had an architect in the first place- the builder had an employee, and you had a (probably deliberate) false impression.

    >and at least as much to the builders for their deposit and initial planning work, budgeting, and getting the site ready for the well we had dug.

    The well is one thing. The rest of the deposit is another. You probably need a consultation with a lawyer. Will cost a few hundred bucks. Tell the lawyer you want all work product up to this point, as much of the deposit as you can claw back due to gross misrepresentation, and you want to dissolve the relationship. Bring all paperwork and contract documents you have.

  • mycatwearsbowties says:

    I work in contract surety (construction bonds). All of my contractors who do both commercial and residential are struggling with laborers. The demand is high and supply is short. As a result, they’re either having to bid high to maintain gross profits, or bid low and potentially cut into their profits. It’s also difficult to get subs at good prices right now.

    That being said, I would expect you might be paying more right now than you’d expect, but a 100% increase is bonkers. Bid out to more contractors to get a more realistic idea of what you need to be paying.

  • MisterBill says:

    Look, I just finished building a custom house. I probably got screwed on a couple things. Do not ever forget that these guys are NOT your friends. This is a business relationship for everybody involved.

    You need to get over the reluctance to have these uncomfortable conversations and be willing to take actions.

    Personally, I know there is a lot of info that we don’t have, but this totally does sound like a bullshit quote.

    5 years from now, if you’ve done this right, the hard conversations will be long forgotten AND you won’t have hundreds of thousands of dollars of regrets.

    Look out for your and your family.

    YOU CAN DO IT!!

    Now go get 2 more bids.

  • slightlyintoout says:

    > at least as much to the builders for their deposit

    Why have you already paid a deposit to the builders before you had any sort of pricing/contract in place?

  • Tedmosby9931 says:

    I’m an architect, so I work with a few builders, and my guess is that you either chose a builder that thinks you’re going to be a pain in the ass and that’s why the price doubled or is a dumbass themselves and severely underbid in the beginning.

    Either way, the architect you worked with should know a roundabout number for what it should cost.

  • Aloe_You_Vera_Much says:

    This is coming from someone who works at an architecture firm in western Washington: that number is high and can probably be brought down. That’s a price we’d see over here.

    However, I don’t know the property, and anything close to water can get really complicated really quickly. It could be based on civil design, surgery, land use constraints, or other situations, the price had to go up to match that. But if the original quoted price was half that, you are absolutely within your right to shop around. Take the architectural drawings to other builders, collect some quotes and bring them back to your builder. First I would recommend going to your builder and saying “here is my concern, this project came out as double, why?”. That’s not rude at all, that’s business.

    You can also ask your architect for recommendations. If they’re a good architect they should know several people at different price points. They have a vested interest in seeing your project get built, so they’ll want to help you make that happen.

    Lastly, 42K for mid-range custom cabinetry is reasonable. Assuming you’re getting a kitchen, bathroom vanities, and maybe some built in shelves somewhere. If it’s just kitchen it might be a little high, but depending on your configuration and design style (things like solid wood cabinets drive up the price) it might still be midrange. Cabinets always surprise people. They’re very expensive.

    You could always bring that down by going with standard sizes “off the shelf” cabinets from a builder store. But don’t compare good mid-range cabinetry one would put into a custom home to ikea kitchen prizes. The two aren’t even in the same ballpark.

    Try sitting down with your builder and going through the budget line by line. How much of the budget is going to permitting costs? Contingency fees? Taxes? Etc. construction costs have skyrocketed in all of Washington so I really hesitate to say he’s purposely ripping you off, but i think you can find ways to lower your cost. Don’t compare this project to the same size house someone built in South Dakota not on a lake.

  • -sybilfawlty- says:

    I’m a designer, so was the second estimate based on your actual selections? If so, it’s not as surprising, but definitely means the builder didn’t understand what high end and mid-range mean to you.

    $42k for a whole house of custom cabinetry is reasonable to me. If you don’t want to pay that, totally fine! But that’s not expensive, generally. You can likely cut costs by changing door profiles and swapping to semi-custom in secondary baths/mudroom/laundry, etc.

    You don’t have to stay with the same builder, but the best way to keep the relationship positive is honesty. Tell them that this is much different than you were expecting and you’d like to get other bids. Ask them to explain the estimate discrepancies (busier season so subs aren’t as available? Builder too busy? Higher end materials? Tariffs?), or show you where costs can be cut. Maybe they really are trying to gouge you, but in my experience, clients who don’t understand actual costs of a project (and therefore the value of what they were paying for at the high end) are disappointed at the end when the finished result isn’t as high quality as what they were expecting when they reduce the budget.

    Long way of saying, communication is crucial. Really understand what you’re being asked to pay for and know what is worth it to you and what is not. Other bids will likely help you gather that info; just be upfront with your current builder.

  • psolv says:

    Agree with the consensus here … $42k for a higher-end custom kitchen isn’t unreasonable, but $600/sq ft seems very high. It all depends on the finishes you want, but modest finishes would bring you closer to the $200-$300 range. Your GC is probably trying to make a big profit, or has another project that he/she prefers to take.

    We are all assuming you’re building a relatively modest home without luxuries like basement swimming pools and imported Italian marble floors.

  • GHMariner says:

    This is the builder telling you he doesn’t want the job.

  • Getmeoutofhere85 says:

    Construction project manager based out of San Francisco here, $600/sq ft is within average for current pricing for a custom home in SF, just mentioning it for further context.

  • SleeplessInS says:

    Walk away – even the current 600$ is going to end up being more like 800$ once they have finished squeezing you dry.

  • league_of_fail says:

    > At the start, the builder was saying we should expect $150 to $350/sq foot if we had all high end finishes

    > This matched what other builders said.

    1) Talk to the builder and bring up the original estimate, then ask what accounts for the significant upgrade. If the answer isn’t reasonable (which I am honestly struggling to imagine aside from them not wanting to work with you or a major economic shift that he didn’t see coming and hit between your initial talk and recent quote), just ask him flat out if he gave you a fuck-off bid because he doesn’t have the time to fit this project in or doesn’t want it.

    > Is it wasteful to just walk away at this point?

    2) Whenever you’re prepared to spend money, you should also be prepared not to spend it (e.g. be ready to walk away)

    Waiting for later or just going back out for bid on those architect’s plans, which aren’t going to expire, are better moves than saddling yourself with all that unexpected expense.

    > I also would like to take our plans to some other builders to get a ballpark, but don’t want the current ones to be upset

    Ah…do you believe they are losing sleep over essentially tripling the price they gave you originally as your project anchor point?

    > I’m afraid my MIL feels like she has to go ahead with the project

    Y’all sound like a bunch of people pleasers. Tell MIL that it’s apparently not the right time or not the right builder for this project and that you are going to explore other options.

    Bottom line is it sounds like you guys jumped in without adequate research (whether or not you knew the line for adequate research) and in your panic, you’re thinking of trying to continue digging to get out of the hole you’re in. This is a business deal, so set your emotions aside.

  • TacDragon says:

    At an architectural firm we oversee the bid process.

    Typically we get drawings to 5 builders, hold a meeting where we open all 5 bids at the same time. Compare them to make sure the bids are apples to apples then review them with the clients. Typically throw out the high bid and the low bid, the others should all be pretty close to each other.

  • chopsui101 says:

    find a different builder….

  • ZippyTheChicken says:

    it would have to depend on the choices you made but a 2k sqft home .. that is really way out of line considering you own the land.

    ​

    The land is normally the cost when you get around any lake anymore.

    I would just slow down and then you need to learn more about your project

    find out why are the costs coming in like that and what you can change to bring them down

    ​

    putting in a vaulted ceiling is really not expensive today with trusses its really not much different than a standard ceiling .. but covering everything in imported woods and stone is very expensive.

    maybe you just need to get off pintrest and get a grip on yourself.. but who can say without knowing the details

  • Junkmans1 says:

    Get more than one quote!! AND, get references for prior work and actually follow up and call the references to see how the work went and see if you can take a quick look at the work (or at least drive by).

    If your MIL, or whoever needs to work with the builder, is afraid of questioning things because they don’t want to “insult” them then I suggest they just don’t do the project. They’d probably be far better off looking for a different already constructed property to buy and then just sell the land they inherited.

    > Is it wasteful to just walk away at this point?

    No it is not wasteful to walk away. Instead you should evaluate your future options without regard to how much you’ve already invested. There is a sound economic and psychological concept on this called the **Sunk Cost Fallacy**. Google that term for more information. The basic idea is that whatever you’ve invested in the past in a project is gone and should not be considered in terms of your decision about what to do next. In this case the amount spend on architectural plans and builder estimated shouldn’t enter into your decision nor considered wasteful. Instead you should look at what is best next. For example, even though you might have spent thousands on the project so far you might be better abandoning it and just buying an existing property that serves your needs if that costs less while being as good as, or better, than going forward on the new build. Likewise, even if the quote was accurate and reasonable the fact that you spent money on the design shouldn’t cause you to continue building a $1.2 million house if all you really wanted to spend was $600K.

  • wellsfargostillsucks says:

    If they have already gone from $150 to $350 to $600 I’m terrified to think what it will be in the end.

    Look up the definition of sunk cost fallacy.

  • Noneth_the_Above says:

    have you ever paid to fuck someone? Cause you’re about to pay this contractor to fuck you.

    shop contractors, ask questions, don’t beat around the bush. Its YOUR money and if your straight to the point and you’ll get the answers and results you want.

    This is construction, leave the feelings at the door, as long as your respectful to one another as humans no feelings should get hurt. This is a business contract not a friendship. If they want to whine and complain, give them a hurt feelings report to fill out and give back to you

    https://i2.wp.com/bitsandpieces.us/wp-content/uploads/2013/09/hurt-feelings-form.jpg?w=584

    and find another contractor.

  • llDemonll says:

    You should be able to keep those architectural plans (if you paid for them, they’re yours unless you had some really weird contract) and just shop them with different home builders to get quotes

  • BuzntFrog says:

    ” I would like to ask if they can do anything to lower that number, but I’m worried my MIL thinks it will insult them. ”

    You need to take a step back here. If anything is insulting it’s doubling the cost of what they told you to expect. It’s your money and YOU are in charge here. Take some time to think about it and don’t be afraid to tell the contractor to pound sand if they want to try to lay you over the barrel like that. It’s good it’s happening up front and this give you an opportunity to earn a mutual respect for each party.

    ​

    Don’t fall into the sunken cost fallacy. You are very early on in this project and you have many options available to you.

  • hoockdaddy12 says:

    When the price of any job (small or BIG in this case) doubles the contractor/builder owes an explanation and should expect to give one. Even with decent explanation I wouldn’t want someone building my house who is that clue-less on quoting.

    The $42k for cabinets is definitely on the higher end, but not egregious On the other hand, jumping from $150/$300 to $600/sq foot is ridiculous.

    Sounds like a combo of: Higher expected building cost + not really needing the job + thinking your stupid = $600/sq ft

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