An Important Question Most Homeowners Don't Ask: How Is Your Builder Paid?

Honesty here is key.

The construction budget is only part of the equation. The way your builder charges for managing the project can also have a significant effect on your final cost.

There are several different construction contract models, but two approaches homeowners commonly encounter are percentage-based cost-plus management and flat-fee project management.

With a percentage-based model, the homeowner pays the actual construction costs plus a builder or management fee calculated as a percentage of those costs. Depending on the arrangement, management/overhead percentages in the residential custom-building market are often in the 10–20% range, although contracts and what those percentages include vary considerably.

For example, if a builder charges a 15% management fee:

• A $1.5 million construction cost creates a $225,000 fee.

If the construction cost increases to $1.8 million, the fee increases to $270,000.

• If it reaches $2 million, the fee becomes $300,000.

There is nothing inherently wrong with a percentage-based contract, and it can work very well when it is transparent and properly structured. However, homeowners should understand an important feature of the model: as the construction cost increases, the builder's fee may increase as well.

Why Evandale Homes Uses a Flat Management Fee

At Evandale Homes, we take a different approach.

Rather than charging a percentage of the construction cost, we establish a flat project-management fee for the agreed scope of the project.

We believe this creates greater transparency and better alignment between the homeowner and builder.

If a homeowner decides to upgrade their kitchen, choose more expensive stone, install higher-end appliances or spend more on custom millwork, our management fee does not automatically increase simply because the materials cost more.

Likewise, if we negotiate a better price from a trade or find a more cost-effective solution, our compensation does not decrease.

Our role remains the same: manage the project properly, protect the budget, maintain quality and deliver the home.

For many homeowners, this structure also makes the builder's compensation easier to understand from the beginning. Rather than wondering how every additional construction dollar affects the builder's fee, the management cost is established upfront for the agreed project scope.

We believe that transparency is especially important when building a custom home, where homeowners are already making hundreds of decisions throughout the construction process.

The Cheapest Quote Is Not Always the Least Expensive Home

When comparing builders, it can be tempting to focus on whichever proposal shows the lowest initial number.

But a low estimate can become expensive very quickly if it relies on unrealistic allowances, excludes important work or generates numerous additional charges once construction begins.

A better comparison looks at the entire scope.

Ask what is included. Ask what is excluded. Ask how allowances are established. Ask how changes are priced. And importantly, ask exactly how the builder makes their money.

A transparent proposal may initially appear higher than another quote while ultimately providing much greater cost certainty.

As John Ruskin famously observed:

“It is unwise to pay too much, but it is worse to pay too little.”

That principle is particularly relevant to custom construction. The goal should not be to build as cheaply as possible. It should be to receive fair value, quality construction and transparent management for the money being invested.