What to Expect for Architectural Fees on a Custom Home Project

At Propel Studio - www.propelstudio.com - 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.

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.

Fixed Fees

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.

Percentage of Construction

Another approach is setting our 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 to adjust fees accordingly as the scope of work 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

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 a client knows what they want and makes quick decisions or if you are looking to explore options before the full scope of work is defined. In this case, we simply put a fee schedule for the cost of our time in our proposals 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.

Reimbursable Expenses:

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.

Budgeting for a Custom Home

Based on the fee structures above you can start budgeting for your project. Things to consider include the cost of the land, the cost of construction, the cost of permitting, and then the design fees. Assuming you aren't using cash for all of the expenses considering the cost of a loan would also come into play.

Here in Portland, Oregon we see typical construction costs for a new home start at around $350 per square foot and up. Thus for a 3,000sf home, you would be looking at a construction budget of approximately $1,050,000. Design fees would fall around $105,000. Land costs can vary greatly depending on location, but there are some lots in the general area going for around $200,000. Permit fees can also vary greatly but I would use $50,000 as a general ballpark. Add that together and a new custom home budget should probably fall around $1,405,000 and up.

Have Additional Questions?

Our goal is to help guide people through the process of designing and building custom residential projects. If you are considering building a home and have questions about budgets, costs, fees or other aspects of these projects, don't hesitate to reach out. We are always willing to talk through your ideas and offer tips or advice. Feel free to email me at [email protected] or visit our website, www.propelstudio.com for more information or to schedule a consultation.