If your dream is to build to a custom home with every feature finished to your specifications, you likely will need deep pockets and a plenty of patience. Though some costs of custom-home building have decreased, buying land, hiring an architect and working with a custom home builder is still an experience reserved for those who can afford a home with a million-dollar price tag.
"Building a custom home is not for everyone, but almost everyone has an idea in the back of their mind that if they could do it easily, they would," said Jim Rill, principal of Rill Architects in Bethesda. "To build a custom home, you need the wherewithal and perseverance to strive for a goal. There's a tremendous reward involved at the end of the process, but you do need resolve to get there."
Jim Brown, president and CEO of Creighton Enterprises in Leesburg, Va., said his customers focus on creating a special place for their family to enjoy.
"These buyers are not building a home for resale value; they are more interested in spending their money to have the lifestyle they want for themselves and their families," Mr. Brown said.
Nevertheless, custom-home buyers concentrate on creating a home with the best quality they can afford, which, in turn, can add lasting value.
"We are a 100 percent custom builder and will do anything a customer wants, but I do caution people once in a while to think twice about something extremely outrageous or different," said Scott Prendergast, president of Apex Custom Homes in Leesburg. "You never want to build something so specialized that no one else would ever want to buy it."
Mr. Rill said most people who buy a custom home are doing it as a "labor of love, not an investment. They want to stay until they are carted out the door, and hopefully their kids will benefit from the investment in the property."
Financing a custom home may be the biggest obstacle for many potential buyers because tightened lending standards and appraisal issues have made it more difficult to borrow the funds for the project.
"Five or six years ago, you could make a down payment of $100,000 on a $1,000,000 home, but now you need $300,000 or more," Mr. Rill said. "One lender was asking someone to demonstrate that he had $1,500,000 in liquid assets, so it almost makes more sense to just pay cash.
"It used to be that you could build a custom home with 20 percent down on the land cost alone, so if the land was $800,000 and you built a $1,200,000 home, you only needed $160,000 as a down payment. Now you would need at least $600,000 or more as a down payment for a $2,000,000 property."
Mr. Rill said lenders today rarely approve bridge loans, which enable borrowers to finance a new home before their current home is sold, because lenders are concerned the borrowers will not be able to sell their current property once the new home is finished.
"Fewer lenders are offering construction loans today, and those that are require higher fees and a down payment of 20 [percent] to 35 percent," Mr. Prendergast said. "On the other hand, this can be a great time to get into a custom home because interest rates are so low."
Mr. Prendergast said land prices have declined a little bit, but some materials have increased in cost in recent years, particularly petroleum-based products. He said many builders are willing to work on a smaller profit margin to keep building homes.
"In order to remain competitive, we don't make the same profit that we used to, but we are keeping the quality of our homes the same," Mr. Brown said. "We are able to realize some savings because we are big enough to get work with dealers and the lumber yard to get special prices. We have our own mill shop to keep the quality the way we want it, too."
About a third to a half of Mr. Brown's customers pay cash for their custom homes, but he said he works with local banks to help ensure his customers can obtain financing if they need it.
"A private lender can usually be more flexible, especially if they are financially healthy," he said.
Obtaining financing for a custom home also requires an appraisal, which can be complicated when there are few comparable homes.
"Some buyers are adding square feet to their home just to make sure they appraise at the right price because appraisals are based on quantity, not quality," Mr. Rill said. "If you are paying cash and don't have to qualify for a loan, you can build something smaller if you want. If you need an appraisal, you need to be aware that you'll get a higher appraisal for adding a 12-by-12-foot bedroom than for $100,000 of built-ins."
Building a completely custom home can take from as little as six months to more than a year, Mr. Prendergast said.
"We spend as much time as possible before beginning construction because our goal is not to have a lot of change orders," Mr. Prendergast said. "We do complete design plans and customization, and we can also work with customers who have plans that they want us to modify."
Mr. Prendergast recommended that customers collect photos and ideas of what they like. He said he and his wife, an interior designer, try to make the process of creating a custom home as much fun as possible.
Mr. Rill said, "My clients start with a blank piece of paper and a lot of ideas, but they are often scared it won't be right. Our job is to stay on task and get it done so that they enjoy what they are designing and can afford it."
Though custom builders often will build anything in any style for their clients, many builders specialize in a particular architectural style. For example, Creighton Enterprises has built mostly European-style homes for the past 10 years. They currently are building a 20,000-square-foot French chateau at Creighton Farms in Loudoun County. Apex Custom Homes also builds homes with a European influence and does not usually build contemporary-style homes.
"Every client is different, and every site is different, so we focus on our client's desires," Mr. Rill said. "We're very flexible and have built contemporary, traditional, Craftsman-style homes, really anything the customer wants."
Most custom builders include environmentally friendly and energy-efficient features in their homes simply because these typically represent good-quality building practices.
"We use passive solar design as much as possible and focus a lot on insulation, indoor air quality, geothermal heating systems, insulated windows and low-VOC paints and caulks," Mr. Rill said. "We don't necessarily always go for LEED certification because we want to be both economically sound and environmentally friendly."
Mr. Prendergast said many of the larger homes built by his company have utility bills as low as a smaller home because of their use of highly efficient heating and air-conditioning systems, cocooned insulation, better windows and 2-by-6 planks for the walls. Apex Custom Homes uses reclaimed hardwood and lumber as well as local stone for interior and exterior walls.
If you have decided to work with a custom builder, Mr. Brown recommends checking referrals and visiting homesites where the company has properties under construction.
"Not every custom builder is financially healthy, so you should be careful to do some research and talk to past customers," Mr. Brown said.
Mr. Prendergast said consumers should interview builders to find one who matches their architectural style as well as their communication style.
"Good communication is essential between the homebuyers and the builder throughout the process," Mr. Prendergast said. "You should interview not only the builder, but also talk to past customers about their experience. You can even talk to Realtors who work in the area where you are building because they often know a lot about local builders."