Architectural Fees for a Custom Home
We understand that hiring an architect to design a new home for your family is a significant investment. Discussing costs and fees is one of the first questions we get from prospective clients so we want to be open and transparent about our fee structures. There is no single fee structure that works for every project, and thus we have a range of options depending on what you are most comfortable with, what services are being offered, and what the scope of work is.
In this article, we outline a few of the fee structures we have used with recent clients as we think this will be helpful for those of you in the process of considering a custom home project. However, regardless of which fee structure you prefer, as a quick jumping off point as you are developing your project budget, we recommend starting with 10-12% of the construction costs as a budget line item for design fees.
Finally, at the bottom of this post, we discuss invoice and payment schedules and some additional costs that might come into play so you know what to expect as we begin this design journey together.
This is by far the most common fee structure we use for our projects. We find that most of our clients want some cost certainty when it comes to the design fees for their projects and this provides that. In this case, when we put together our proposal we balance the time we think it will take our team to complete the project, compare that to a rough percentage of construction cost, aim to anticipate challenges or complications, and develop a fixed number that we believe will cover the amount of work needed. When we send you the proposal, it will outline the phases, the scope of work, the deliverables, as well as any services that will fall outside of the contracted work. The goal is to give a lump sum fee that covers the entire design process so you can have some peace of mind and don’t have to worry about cost increases as we work through the design process. For custom homes, we typically include structural engineering fees in our lump-sum proposals however sometimes clients chose to contract directly with the engineers separately.
Percentage of Construction Costs
Another approach is setting fees as a percentage of the cost of construction. If the cost of construction goes up or down, so would our fees. The main advantage to going with this fee structure is when a project isn't quite defined yet and you are still considering the size or budget for the house. If you decide to add components or additional scope of work, the agreement is flexible as the fees would increase if the size and cost of the house increases.
Typically we charge between 10-15% of the cost of construction depending on the scope of work, complexity, and size of the project. A large detached single-family house would be on the lower end of the range while a renovation to an existing structure, or a smaller scale project will be on the higher end. Again, we typically bundle the structural engineering fees in with our design fees in this arrangement.
Hourly fees are another possibility and are typically used when clients hire us to work on feasibility studies or to explore multiple options to see if or in what direction a client would like to proceed. This is the most flexible fee structure as time is really the variable that determines the final fees. This can work well if you are looking to explore options before the full scope of work is defined. In this case, we simply put together a fee schedule for the cost of our time in the proposal and then invoice for each hour worked. If you prefer to move forward on an hourly basis we invoice for our time and then all other project expenses are in addition to our fees - for instance structural engineering fees.
Along with the design fees outlined above, each project has reimbursable expenses that we add to each invoice. Reimbursable expenses include all of the various out of pocket expenses we incur while performing the work. For instance, this would include the cost of printing, travel costs, consultants that aren’t included in our contract, permitting fees from the local jurisdiction, mail, shipping, or any other expenses required to complete the work. We markup all reimbursable costs 10% and include them on each monthly invoice.
Invoice and Payment Schedule
To create predictable invoices for our clients, and revenue for our firm, we send invoices on the first business day of each month. Depending on the fee structure we agree upon above, this monthly invoice will either be based on the actual hours worked during the previous month plus reimbursable expense, or a set percentage of the total fee plus reimbursable expenses.
Upon receiving an invoice we operate on a net 15 basis - where payments are due within fifteen days of us sending our invoice. To make this process simple and quick, we accept electronic payments (which is made directly through the invoice we send), checks or cash. Most clients chose to pay electronically as it is quick and secure.
As mentioned above, a good rule of thumb as you are planning your project is to budget approximately 10% of the construction costs to cover the design fees. So if your full project budget is $1,000,000 then the design fees would be approximately 10% or $100,000, leaving $900,000 to cover the cost of construction, permitting, etc.
If you have any additional questions about fees, or projects costs feel free to get in touch and we are happy to discuss our project in more detail.