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Building Designer Polling R.E. Agents!

Real Estate Agents earn a great deal more money than architects. Did you all know that? Despite a fee percentage ranging from about 10-15% of the estimated construction cost typically, architect's profits are typically about 10% of this amount or 1-1.5% and often it's negative. Agents earn 3-6% notwithstanding the horror stories which I am sure you all have experienced.

Further, the amount of work it takes an architect to earn their money is substantially more than real estate agents as well including free consultations, programming, conceptual design (models and color renderings), design development, construction drawings and specifications, bidding administration, construction administration and post occupancy administration at which time 7-10 years of liability commences.

A typical custom house takes 1.5-3.0 years from first meeting to the move-in and often longer. Most people cannot afford a custom house and many people, a lesson learned the hard way, cannot afford the inflated cost to pay a standard mortgage. Most architects I know who were no afforded a silver spoon or a legacy account, cannot afford the homes they design for others or any home for that matter due to the downpayment requirements.

Is the downturn therefore beneficial?

The poll involves 2 opinions?

1. Architects now will earn less if they base their fees on construction cost due to the downturn. Are hourly fees an acceptable, revised fee structure?

2. Does the current downturn in the nation's Real Estate market reflect more accurate house values given that more people will be able to afford a home?

Posted by John Gil on 01/14/2009 06:25 AM

Comments (7)

POLL: House Values in the Real Estate Market Channel

poll, fees, architect, architecture, market, downturn

7 Comments on Building Designer Polling R.E. Agents!

JAN

Oh Boy are you going to get hammered on this one!!

You can't seriously think that the Realtor gets the whole commission to put into their fat bank account. When I make a sale I figure that I end up with about 1 to 1.5% of the price of the home, but that is BEFORE expenses.

I will leave it to the others to expand on how high our professional fees, advertising, communication and car expenses are. THE GRASS IS ALWAYS GREENER somewhere else.

To answer your poll:

1. Consumers are smart and will figure out the total fee whether you charge by the hour or as a percentage of the cost of the home. I don't see that it matters much except that a fee based billing system is much more difficult to impose. What consumer wants to pay for the interest on your college loan, or the thousand other things that go into the dollar amount that you have to charge to be able to stay in business. Seems to me it is just easier to keep the percentages. However, unless you reduced your percentage rate when prices of homes went up, I guess you can't increase the percentage now that prices have fallen off a bit.

2. Yes, I think that is a good point. In some areas the market seemed very much out of balance. A correction was due and we may find ourselves in a healthier market when the dust settles.

You said FAT bank accounts not me Eileen? Wink! Bring on the hammers. LOL I made no assumptions about overheads and expenses. Just mentioned the rate as I did for building design. It's about the perceived impact upon fees to preface the questions, not truly a comparison which would be apples to oranges.

What agents do for 1.5% and what building designers do for 1.5% of 15% are remarkably different. One involves providing a service while the other involves selling the result of the service as a product. The hourly rates if calculaed as such are increibly different. I have met many millionaire agents where only corporate architects get paid more than $100K as a salary with few exceptions.

Why this makes a difference to me is that hourly rates place some of he burden on the future home owner to be responsible for what they are asking for. Many change their mind repeatedly and expect that all the uncertainty be included under the same fixed percentage fee. Lawyers often advise them to do this given that building designers bill bi-weekly, monthly or at project milestones. If a client denies the completion of a milestone intentionally by waffling, some feel they are getting more options for their money but this comes at the expense of the building designer who often end up paying their own money to cover salaries for s-l-o-w projects! It's damned unethical and I do not allow this anymore.

You do mention the horror stories. As for the questions, architects will do the best they can to make a living like the rest of us. Some will do better than others and those not worth their fee will find something new to do. And, the value of a property is relative to what can be paid for it. If it can't be carried by the rents and the owner can't make up the difference or if a new buyer can't make it carry, it may be too expensive. Incomes will tell you when the affordability of homes makes sense again for each area.

Heath, your response raises an important issue of value versus cost. This is the core of my question and might be a better way of phrasing the questions. Does the cost of service reduce when the value of the product is reduced? I say no which suggests hat hourly is the way to go or else the service is tied to the reduced value.

Hi John,

I have to say, I really-really respect you getting on to ask these questions. I could give my opinion, but it would likely be better as a blog post because it would be so long. :)

For short, the word 'custom' tends = double the build price down here.

So, it is not always the designs always that people can not afford- it's the fact of WHAT they design that they can not afford. Does that make sense?

I totally respect what architects and designers do. My thoughts for a while have been to have more stock plans that are easily changed. That way people can pay by the hour for those changes plus an amount to help cover the costs. Semi-Custom I guess.

I have no idea if that would ever work or not. Just a thought.

Otherwise, I don't think I have an answer...but I hope you work it out.

JAN

Stephanie hi and thanks for saying. It is one of the lesser discussed issues rather like teen issues for parents but the fact remains we are in this together despite the differences between the professions and different approaches to stressful times.

I have worked in many capacities from fully customized solutions to developer's catalogs as if architecture were merely a kit of parts. I bring a strong philosophy and technical prowess to my work as well special consultants to back up what I do not know. I say this to suggest I am fully convinced that the best solution is to allow the beast to die. There, I said it.

The solution is not reviving an old paradigm but nurturing the new. Finance car manufacturers who commit only to the immediate obsolescence of the internal combustion engine. Mandate higher salaries for teachers, postal workers and trash collectors etc. whose efforts keep our communities shining. Remove the garbage from television and reward innovative ideas that promote human wellness. This is how the housing market will turn around!

A previous blog of mine outlines certain criteria that I think are critical for new communities and possibly even cities to consider given that our lifestyles must change in response to the end of three decades of greed and a political environment that is well beyond the scope of network news reporters limited perspectives. It's up to us fullstop!

BLINK Design is based on the book named BLINK by Malcolm Gladwell and it's concepts as well it's an acronym for the elements of design I consider most important. BUILDING (How do we make a wall and why?) / LIGHT (Primordial ordering of life itself) / INTERIOR DESIGN (The source and not the consequence of great architecture) / KITCHENS (The place where our new lifestyles must begin). These are frontier times and self sufficiency plus a return to community is mandatory.

The questions surrounding how we charge for what we do is an important symptom indicating inevitable change, but the real issue is what are we willing to do different in order to live healthily for ourselves and others? It's not about the money anymore as a definer of personal success but the quality of our lives which begins with a we attitude.

I am extremely confident that the correct epitaphs have been satisfactorily designed. Like Lincoln and JFK before him, I suspect soon to be President Obama has the inordinately corrupt Federal Reserve in his sights and that its radical reconfiguration or dissolution is at the core of the solution to the financial woes we are currently facing.

Why were banks advised to lend lend lend fully financed mortgages to unqualified borrowers while clear minded individuals described the inevitable outcome years ago in international forums having been blacklisted by our own media? Where did the bailout money go besides corporate entertainment? Have any of you heard of the Comprehensive Annual Financial Report(s) - CAFR? The North American Union? The CANAMEX Highway project whose CEO is Rudy Giuliani? Don't get me started!

Barack Obama is an exceptionally brave and brilliant man whom we all will do well to find through him our own inspired solutions. Ask not what your government can do for you... indeed!

Hi John,

A few things you mention really peak my interest- One talking about the BLINK book. You said:

"These are frontier times and self sufficiency plus a return to community is mandatory"

Yes! But when you mention that maybe you should let the beast die, if by that you mean architectural industry the quote above is exactly why that can't happen. I don't think people realize how important your industry is to the Nation and the World.

Yes, there are a lot of changes happening now and in the future. But design, especially sustainable design, is oh so important.

(Oh, and one more thing: if we were to rely on builder catalogs, the floorplans would never be relevant to life's needs. Most are awful! ) :0) There, I said it.

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