When Buying, Consider a Custom-Built Home

If you are considering buying a home, you may be surprised to discover that having a custom home built is a realistic possibility. A custom-built home opens up an entirely new range of possibilities for you because you have so much control over the location, the design, the amenities, plus with careful planning you may end up with valuable equity after the home is completed.

We have been fortunate to sit down with luxury custom home builder Denis Littrell, CEO of the Louisville Building Company to discuss the process of having a custom home built. Denis has been in the custom home building business for over eight years, with a five year stint prior to that with one of the largest commercial design firms in the South. Denis’ specialty is his ability to do all of the custom design of the home in-house, plus supervise the building process through completion.

What is the difference between a custom home builder and a production builder?

A true custom home builder defines multiple completely original features in the home. In addition, a true custom home builder is multi-disciplined meaning they are able to incorporate the process of designing and building the home together in full cooperation with the client. A very beneficial difference is the ability to manage the budget to the client’s advantage because the custom home builder has intimate knowledge of the complete design and materials required.

What are the general steps in having a custom home built?

For me, the first step involves asking a potential client to fill out a detailed questionnaire to help define exactly what they want in a new home. From this questionnaire I am able to get a clear understanding of their wants and needs. The next step involves programming where we make a determination of the client’s budget and decide what features are going to be prioritized in terms of money. Next, we discuss design theory and I ask that the clients bring in magazine clippings, photos, and books that show features they find appealing. From this point we begin to sketch the design, first on paper, and then on the computer, from there adding detail to the design as my clients begin to see their new home come to life.

What are some ways to finance a custom-built home?

This really depends on whether or not the client has already purchased a lot for the new home. If there is a lot available, then that property can be used as collateral for a construction loan. Construction loans are different from a typical mortgage loan because the funds are always dispersed through a number of draws. Each phase of construction is defined in an agreement between the buyer, the builder, and the loan provider, and a certain amount of money will be provided for each phase. At the completion of each phase, the lender will inspect the work and determine if it has been completed as agreed upon. If the lender is satisfied, then they will release funds for the next phase of construction and the process continues. Depending on the specific terms of the loan, the construction loan may mature into permanent financing at the completion of the project.

If the client has not purchased a lot prior to initially contacting me, I can help them locate property that fits within their general design criteria, plus we will be able to look at all available financing options together to find the best fit for their investment needs. It is always an option for my clients to do owner financing if that is the best choice for their individual needs.

What terms are typically found in the contract you use when commissioning a custom-built home?

I use an industry standard construction agreement with additional provisions that identify all specific details of the project. The terms have been revised continually over the years and it is fairly well balanced between my needs and the buyer’s needs. The contract is similar to a normal real estate purchase contract except for a few key sections. The first is the warranty section. You should expect to receive a warranty for any home you have custom built, and you will typically find builders give a one-year warranty. For my homes I do provide a two-year warranty and will spell out the exact terms in writing.

Also, there will be a schedule of events in the contract that not only specifies an estimated completion date, but also details the buyer’s role in selecting and purchasing fixtures at certain times. Though we will have discussed in detail things like paint colors, cabinet styles, light fixtures, trim, faucets, door handles, etc., the buyer must make their final decisions and purchases by certain dates so we can maintain our agreed upon schedule. These items are called allowances and are important to not only the schedule and styling of the home, but to the budget, as well.

How does the design process work?

Using the initial questionnaire, extensive discussion, and the written contract, I begin to make hand sketches that are used to get the basic design into the computer. I use the computer for quite a few beneficial reasons such as time and cost savings, ease of design changes, plus the ability to email my clients any updates or changes to the design.

All adjustments to the design are made according to the contractual agreement. Anytime the design is modified, it requires a change order, plus any cost adjustments are calculated and agreed upon. The original drawings will be red-lined to show all changes, plus all parties involved will initial the updated design. This record keeping is necessary for effective communication, plus to precisely manage the budget.

How long does it take to build a custom home?

You can expect the initial specification phase to take roughly two weeks, with the design phase taking one or more months, depending on the complexity. The actual building process will take anywhere from six to eight months, or more, depending on the size of the home, the intricacy of the build, and the weather. It is also possible that certain materials for custom designs may take extra time to acquire. All of this will be explained in the schedule, and any delays will be noted and accounted for to keep the build on track.

What should the buyer be doing during the construction phase of the new home?

The buyer should be shopping for allowances. This will include all of the finishes in the home, such as paint, flooring, cabinets, fixtures, plumbing, appliances, and landscaping. The buyers will have a detailed schedule that they will need to follow to keep pace with the construction of the home. In addition, the buyers should be paying attention to the build-out and asking questions if they do not understand what is happening, or if they see something that is not to their satisfaction. It is much better to have open, effective communication and resolve any conflicts immediately to prevent scheduling and budget issues.

Denis Littrell is the CEO and principal designer of the Louisville Building Company. Examples of his work are at the link provided, and he can be contacted directly at 502.645.7991.