Most custom home buyers approach selecting a custom home builder as a relationship decision, similar to choosing a wedding planner or a real estate agent. Instead, the selection of a custom home builder is a procurement decision that can be negatively impacted by the terms and conditions of the contract and the builder’s production capacity, often hidden behind a very nice first meeting.
Read experience as production history, not years in business
A firm that has been around for 20 years is likely to have built either 40 or 400 homes (give or take). This is an important distinction when assessing their ability to complete a custom home. Ask the shortlisted firms how many homes they completed in the last three years on average, what the average contract value was and how many of those homes were true custom designs rather than semi-custom plans based off of a number of standard designs. A builder that completes on average 6 homes per year is going to have very different relationships with their sub-contractors and a different scheduling capability to a builder that completes on average 60 homes per year.
While volume is important, relevance is even more so. Someone who has completed multiple houses on flat lots may not be the best choice for a sloping block, for a project with a heritage overlay, or for a project that includes a lot of structural steel. Find out how many similar projects the builder has completed. Aim for three or more.
Questions that reveal capacity
- How many homes are currently under construction, and how many site supervisors are managing them?
- What is the average build duration against contracted duration for completed projects?
- Which trades are employed directly and which are subcontracted?
- Has the company traded under a different name or entity in the past ten years?
Test design flexibility before you commit
A custom home builder’s ability to be flexible and amend plans after they have been costed out can vary greatly. So, ask them what would happen if you wanted to add another wall to a room after they had costed out the original plan. Could they re-engineer the amendment themselves or would they send your drawings off to an external consultant and wait two weeks for them to re-engineer the amendment and for the amendment to be costing-ready? Also, ask them to confirm that they would charge you for this service and that there would be no hidden costs.
Where does the builders’ flexibility stop? While some builders may accommodate unusual floor plans, others will maintain that they can accommodate any layout, but there will be certain products that they insist upon using such as cabinetry, windows and bathroom fittings. If you are shopping the Midwest market, it is worth putting a firm with in-house design capability such as Indianapolis North custom home builders on your shortlist so you can see how quickly a plan change moves back into pricing. In addition to ensuring that such products are of good quality, the builder’s volume purchasing will ensure that you receive the best possible price for the goods and a reduced incidence of defective products. It is essential that you are advised of a builder’s inflexibility prior to signing a contract rather than after you have signed and you are presented with a list of restricted products at the selections process.
Design and build models compared
| Model | Design control | Cost certainty at contract | Best suited to |
| Design and construct with in-house team | Moderate, guided by builder’s system | High, single point of pricing | Clients prioritizing speed and budget discipline |
| Independent architect, builder tendered | High | Low until tender returns | Complex sites and bespoke architecture |
| Independent architect, early builder engagement | High, with buildability input | Moderate, improves through design | Projects where value engineering matters |
| Modified standard plan | Limited to defined options | Very high | Straightforward lots, tight budgets |
Insist on transparency you can audit
Transparency, a key indicator of a good fixed price contract, is revealed in documents and the way they have been set up. Look for a detailed specification, a schedule of finishes with trademark licensed products such as cabinetry (e.g. Hafele), windows and doors (e.g. Colorbond or Reynobond) and other external products (e.g. Taps, toilets, shower heads etc). Note the number of allowances or variations and their scope, is it for supply only or supply and install and are they current given the fluctuations in the market over the last few months.
The builder’s variation process is particularly critical to ensure that unforeseen items do not strip too much of your budget. Check that any variation will require written approval from you with a fixed and fully costed price. Check that the builder’s margin on any variation is capped at a fixed percentage. Request a copy of their sample progress claim and cost-to-complete reporting that they issue to clients, and if they are unable to provide either of these documents then assume you will have to manage your budget blindly.
Warranty terms worth verifying
- Statutory structural warranty period and the entity that carries it.
- Defects liability period after handover, and whether it is three, six, or twelve months.
- Manufacturer warranties passed through for waterproofing, roofing, and appliances, with certificates supplied at handover.
- The builder’s documented response time for warranty callbacks and who administers them.
- Insolvency and home warranty insurance coverage, confirmed directly with the insurer.
Judge construction quality on site, not in the display home
Display homes are provided fully finished with unlimited time and resources. Try to get to visit the homes that the builders have previously completed at the Frame completion stage and then at Lock-up stage. Look for things like straight framing, neat and workmanlike service penetration, good waterproofing detail around wet areas and overall cleanliness of the site with materials neatly stored off the ground. This gives an indication of whether the builder’s site management is sound enough to ensure that your new home is completed to a high standard and will remain defect free for 2 years +.
Weigh local builder options based on recent references from clients and drill down into the nitty-gritty of how they managed the last three months of the last few projects. It is a small investment to engage an independent building inspector to come to your site and assess your home at frame, lock-up and practical completion stages. The cost is barely a percentage of the contract value and will give you a lot of credibility when you need to make a complaint about any deficiency later.
Bring the criteria together
Evaluate the prospects on a number of criteria, production history, design process, contract and other documentation, warranty administration, and observed workmanship. If one builder scores lower on price than another but higher on the above criteria then that builder will generally provide better value for money by handover.