GREEN GUIDE TO PREFAB: Building Your Green Prefab Home on Budget
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In the last two articles of our Green Guide to Prefab series, we showed you the best way to build a prefab home that suits your lifestyle and makes the most of your building site. In our latest article, we’ll look at the elements you need to consider to ensure the financial success of your [...]
In the last two articles of our Green Guide to Prefab series, we showed you the best way to build a prefab home that suits your lifestyle and makes the most of your building site. In our latest article, we’ll look at the elements you need to consider to ensure the financial success of your project – green homes offer dynamic environments that are a joy to live in, but in order to successfully build one it’s essential to be realistic and control costs to avoid winding up in the red. Read on as former Lindal Cedar Homes CEO and green design consultant Michael Harris returns to Inhabitat to discuss the ins and outs of building your dream home on a budget.
Establishing Your Budget
Whether you are building from scratch, buying an old home, or setting up a prefab home, it is necessary to determine what your spending budget is. Simply put, your budget is the total investment you are prepared to spend in your project, and this number plays a vital role in successfully obtaining your dream home. To help guide you on your path to establishing a budget, I’ve laid out some key questions that you will need to ask yourself when determining how much you are willing and able to spend on your new home.
1. What’s your total?
Setting a total figure ensures that all of your homebuilding costs will be accounted for. It also ensures that items that are sometimes overlooked don’t become ugly, costly surprises. These items can include design and engineering expenses, permits, and anything that involves preparing the site for the house – such as clearing trees, excavation, septic systems, wells, drains, driveways, electrical lines, and so forth. Keep these added costs in mind when evaluating your budget.
2. Are you prepared?
You’re budget should be a discretionary figure that you are comfortable with, given your other financial obligations – it should never include your “last dime”. It is wise to set your budget 5-10% below what you’re able to spend to allow for inevitable unforeseen expenses, such as blasting, digging a deeper than anticipated water well, or to cover that “must have” polished concrete floor tile or dual-burning Norwegian fireplace. By building in some flexibility, you are less likely to find yourself in a entrenched situation.
3. Are you being realistic?
It’s very important to be realistic when establishing your budget. It should be reality-based – not a figure you wish you could build for, or the amount you built your home for sixteen years ago. If you are planning to finance your new home, start with a mortgage bank. Go through the easy and immediate process of pre-qualification. This will give you the maximum amount the bank is willing to lend you, in addition to a specified cash down payment. Add to that sum any amount in excess of the down payment that you have saved and feel comfortable liquidating. This total will give you a reality-based budget.
The sales value of your present home is likely to be a key element of the pre-qualification figure. In this market it is prudent to confirm that the assumed sale price and resulting equity are realistic. Invite three realtors who have fully staffed offices in your town to provide you with written sales evaluations in anticipation of listing your home. Use the lower of the three evaluations or the middle figure. Compare that number to the bank’s pre-qualification sales value, and add or subtract the difference from your reality-based budget. Write that number on the inside of your research notebook so it will never be far from the front of your mind. Even if you do not need bank financing, it is still important that you establish a budget. Estimate the equity in your home using the same realtor evaluation method. What share of your liquid assets are you prepared to add to the equity? Your financial advisor or accountant will offer guidance.
If you haven’t taken the time to realistically assess your budget as you begin your exploration of various housing options, it is quite likely that you have already set yourself up for failure. It is also important to remain open and transparent throughout the entire process. When a home builder or an architect asks you what your budget is in an effort to guide you to an appropriate solution, “I don’t have one” is not an acceptable answer – this makes it impossible for that person to perform. Not only will you not be taken seriously, but there’s about a 90% chance that the solutions they will suggest to you won’t be what you want.
An equally inappropriate response to the budget query is to respond with a number 25% lower than your budget because you’ve been told that “budgets are never respected.” This is a myth in my world – the reality is that you may well get 25% less than you want because the supplier provided you with a 75% solution.
Share your budget openly with home builders you are considering. Make it clear that you did your homework to set the budget, and that it is the builder’s responsibility not to exceed that number. In doing so, you will definitely be taken more seriously and guided more carefully. Beginning the planning process with an open and honest budget – at any level – will lead to fewer expensive re-designs, less time wasted, and more focused service, every time.
Building Your Dream Home On Your Budget
You have a building site, and with that a wide array of options to explore — but do you know what to expect when building your home on a budget? Here I will discuss some important things you need to understand when you are working with an architect or buying a prefab “modular” or a prefab “kit home”.
Working with architects
The traditional architectural approach offers you unlimited design options. However, the track record of architects successfully predicting and controlling material and on-site labor costs is abysmal. Therefore, this approach does require somewhat of an elastic budget. In general, architects are not specialists in any one building system, and while they control what goes on paper, they have no control – and sometimes little knowledge – of material and building costs in your community.
When it comes to building on-budget, prefabs provide the most predictable spending path. Modular homes are pre-designed, so there is little opportunity to adjust the exterior or interior layout for your site or your lifestyle. In their simplest form, modular homes are factory-built, so your efforts are largely directed at choosing fixtures and finishes from a menu of pre-selected, pre-priced offerings. This process of selecting finishes varies a great deal amongst different prefab home builders. Where one might only present a printed price sheet with a display of samples, another might offer something more sophisticated by using 3-D computer models to show you how each finish will look in your home, while also keeping track of costs. Blu Homes, for example, has developed a 3-D modeling tool that is sophisticated, enjoyable, and that provides excellent and accurate cost information.
Additional costs also apply to prefab modular homes, including: sales tax, delivery to your site, (this can range from 8-10% of the cost of the finished house depending on the distance between the site and the factory), site preparation (e.g. permitting, excavation, septic, well, driveway), and on-site assembly. With the exception of site development, these costs are quantifiable in advance of purchase. Therefore, it’s important to obtain a written quotation and then check it carefully to ensure that they have been accounted for.
As I have already suggested, kit homes are by far your best option in terms of designing to your lifestyle and fine-tuning your home to its site. However, given the flexibility of design, and the larger on-site labor component, kit homes come with some large challenges. Here are a few basic steps you should follow that will help you make informed choices when building a kit home:
When deciding who you will work with, look for a kit home company that:
- Has firsthand knowledge of local building costs in your area – this typically requires in-market experience.
- Can visit the site and advise you on eco-siting, and different methods of reducing site development costs.
- Is able to establish a baseline cost. Start with the design you wish to modify and then obtain an estimate based on the standard specifications. If you intend to plan a house from scratch, select a model of about the same size and configuration as you’re looking to build, and use that as a reference to determine your baseline.
Once you get the things rolling, ask for an estimate and check to make sure that it was done in an orderly way. Was the estimate accompanied by written specifications so that you know exactly what it includes? Were you interviewed about the general quality level of the finishes you want to use (with regard to floor coverings, plumbing fixtures, cabinets and countertops)? Are these included in the estimate as allowances? Finally, does the estimate for the house include complete additional building, installation and delivery costs, or does it only include the cost for the kit? If the answers to these questions are largely negative, you may want to go elsewhere. If you are interested in the product but disappointed by the estimate they provide, say so – and see what kind of response you receive.
The best way to complete the planning process while staying on budget is to:
- Establish the baseline cost.
- Take care in establishing allowances for finish items based on quality levels you expect.
- Obtain a written revision to the baseline cost for every iteration of design, (ideally this should be done before the design is changed to protect you from spending time and money on drawings and becoming attached to modifications you cannot afford).
- Obtain construction estimates from prospective general contractors early on in the process – after the design development phase, but before beginning any detailed construction drawings.
- Make sure the estimates include, taxes, design, drafting, engineering and all the costs required to complete your home.
A Case Study from My Own Experience
Here’s an example from my own professional experience that details the modern process of designing and building a kit home on-budget while also considering the other key factors (personalized design and eco-siting) that we’ve discussed in previous installments.
Whether your vision is a Lindal signature Prow, a classic Craftman style, a fresh and modern Turkel Design, or a Lindal Architects Collaborative Design, Lindal Cedar Homes offers a diverse portfolio of designs that can all be personalized to suit any client’s lifestyle. Each home is designed to be seamlessly sited and in-tune with the ebb and flow of nature.
Moving into a new home on budget is in your control – just make certain that your chosen builder takes budget checks as seriously as you do. Every Lindal project begins with an estimate – not just for the materials – but for the completed home with allowances for finishes. For just a modest cost, in a short period of a few weeks, a client will receive scaled drawings with a full floor plan and elevations for a design that has been modified to their needs. Each set of drawings comes complete with 3-D exterior renderings and a price for the Lindal materials. By providing these “basics,” Lindal enables local home builders to complete a comprehensive estimate, while providing the client with all the information they need to make efficient and well-informed decisions as they move forward.
One last thing; don’t leave this page thinking that the responsibility of building your home on budget belongs to someone else. Make no mistake; it belongs to you. You must begin by establishing a realistic budget, sharing it openly as an important criterion for decision-making. While the house is under construction, it is your responsibility to select items covered by allowances within that budget, or that fit within the contingency you’ve established. Houses that begin on budget often fall out of budget when clients make decisions that exceed the limits they set for themselves. No home manufacturer or building professional can save you from yourself!
Lindal Cedar Homes is the world’s largest provider of quality custom cedar homes. Founded in 1945, there are more than 50,000 Lindal cedar homes—and satisfied homeowners—worldwide. Known around the world for their signature post and beam building system, quality building materials and detailed craftsmanship, their experienced Lindal Cedar Homes dealers will help you each step of the way.
Michael Harris is a MIT graduate with two degrees in architecture. Michael has made it his professional mission to innovate system-built design and the planning process to ensure fulfilling client experiences. Michael spent 31 years at Deck House Inc.working with clients, designing new products, innovating client-centric sales process and marketing, and was involved in the acquisition of a competing brand (Acorn Structures). He led the company as CEO and served on its Board of Directors for 15 years. In 2006, Michael joined Lindal Cedar Homes, working with executives, staff and dealers to build a new strategic plan, then implementing the plan as President and CEO. Today he works as an independent consultant and dealer (testing the efficacy of the plan by” walking the talk”).
While at Lindal, he led the company’s entry into the modern market; forged a collaboration with Dwell Media initiating Lindal’s participation in the Dwell Homes Collection; and created the Lindal Elements program, a new line of on-system designs and process he designed with the company’s creative staff. He brought the iconic industry player to become the first “Green Approved” building system by the NAHB Research Center and the only single family home included in TIME Magazine’s Green Design 100 in 2010.
In addition to selling and consulting, he serves on the Board of Advisors of Blu Homes, writes on the subject of manufactured housing, and enjoys life with his wife Carol, splitting their time between Seattle and their family’s home base in New York City.