Building a Custom Home In Arizona

By LINDSAY FRICKS

With the number of homes for sale at a record low in the Phoenix Valley, many people are considering alternatives to residential resale. This week I met up with my friend Nathan, owner of Rebuild the Block, to discuss the custom build process. Nathan’s company specializes in building very high quality luxury spec and custom homes in Arcadia and Paradise Valley areas of Arizona. Recently a number of my clients have been inquiring about the custom build process so I was excited to pick Nathan’s brain on how this typically works with his company.

Let’s first talk about why someone would want to build a custom home. Aside from the obvious lack of homes available, many think that building will cost them less than buying something already completed. Nathan says that is FALSE. Between the lot, site prep, design and build there are many expenses that people overlook when considering custom building. In Nathan’s opinion, a custom build is for some who wants what they want and can afford to pay for it. The ideal candidate for a custom build is someone with both lots of money and time on their hands to participate in the process which can be equated to a part time job for the duration of the project.

Speaking of money, financing a custom build is not like getting a traditional mortgage. You’ll need a construction loan which is typically a shorter term, higher interest loan based on the projected value of the project at completion. The loan is paid out in installments to the builder as the home is at various stages of completion. Beware that most builders aren’t willing to start construction without payment so you’ll need to be prepared to pay the first draw payment out of pocket before financing has released money. Most of Nathan’s custom build clients are cash buyers.

Not too intimidated yet? Once you’ve decided a custom build is the path for you, here are the general steps the process will follow:

Lot- The first step is finding and purchasing the land for the home. Depending on the area this can be one of the toughest steps since land, especially in more desirable areas, is difficult to come by and very expensive. Nathan recommends being prepared to pay cash for your land in order to compete with other developers and people looking to build. On rare occasions, the builder may have some land in their inventory they can sell you, but most often you’ll need to work with your real estate advisor (me!!) to find and purchase your land.

Build Your Team- You can opt to interview and hire an architect, designer, structural engineer, civil engineer, landscape architect and builder separately. Or, you can work with a “design build” company like Rebuild the Block who will manage the process in house and act as the quarterback for your project. The most important part of this step is working with someone you know, like and trust. The building process is a collaborative and intense process that can stir up conflict. Making sure you hire the right person to partner with you is critical for success.

Design Contract- Assuming you’re not crazy, at this point you’ve identified your design build partner, they’ll create a “Design Contract” to kick off the process. This will include the cost for all the different trades required to sign off on the project before moving to the permit process. With a company like Rebuild the Block, this phase typically takes people 3-6 months to complete and cost $10-$15 dollars per square foot for a typical 3000-4000 square foot custom home.

Construction Contract– Once the structural design is completed you will move into the construction phase which will begin with a new “Construction Contract” that is separate from the design contract. One of the most common pricing models for construction is called “Cost Plus”. This is where you’ll be paying for the exact cost of materials and labor plus a percentage as the fee to the builder. For example, Rebuild the Block is a cost plus 25% model so if the materials and labor total $750,000 you’d pay an additional 25% to the builder for a grand total of $937,500. Remember land and design costs are on top of these numbers.

Permits– Before building can begin, permits will be submitted to the powers that be for approval. This process can take 2-4 months. While the permits are processing, finishing touches are being put on your interior design and demo and site prep are taking place at your land.

Building– You’ve jumped through all the hoops and now the fun can begin. Once permits are in hand, your builder will start ordering materials for the project. Depending on your builder you will likely have a set schedule to walk the property and review the progress. Rebuild the Block scheduled a weekly on-site meeting so clients are highly involved during every step. This is often where people run into changes that weren’t anticipated that end up increasing building costs. Rebuild the Block recommends clients provide a 10% cushion to account for changes that are bound to arise during the building process. The build process generally takes 8-12 months to complete depending on the size and scale of the project.

FINALLY your new home is complete! All your blood, sweat and tears are behind you and you get to move into your gorgeous new home!

Whew! That is quite a process! I am so grateful to Nathan for helping me understand this process so I can better guide my clients to determine if this is the right route for them. Be sure to stay tuned for next week where you’ll get to know Nathan a little better as I highlight him in my Local Leader Spotlight.

Lindsay Fricks, helping you, your family and friends Live & Love in Arizona!

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One Comment

LA February 27, 2021 at 4:50pm

Great article! I love the house that is pictured here! Is there somewhere on the website where I could see more pics of it? Thank you!!

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