Homeowner Looks to Slash Costs As Teardown Costs Double

By Nancy Keates

Editor's Note: This is the 20th installment of "Teardown Diary," a feature by Wall Street Journal correspondent Nancy Keates. The column details her decision to demolish the Portland, Ore., home where she lives with her family and build anew. In the months ahead, she will chronicle what led to the decision, the financial costs, hiring an architect, knocking down her house, choosing the features of her new home and the final product.

Some things haven't changed. In the 1948 movie "Mr. Blandings Builds His Dream House," Cary Grant and Myrna Loy buy a fixer-upper that ends up as a complete teardown; the new home they build becomes that quintessential dream house, with all the accompanying costs and headaches. In a number of scenes, the Blandings meet with their architect and gush about what they want in the house. The architect draws merrily away, knowing that the price is going up and up.

That's what architects do: They keep designing the house you want, plugging in all the materials you pick, and you don't have an idea of how much you will spend until the process is finished.

In the interviews I've done with people who've built new homes, there isn't a person who's said their finished design met their original budget. In most cases, it doubled.

That's what has happened to us. In the beginning, I said I wanted to spend about $800,000 for 3,500 square feet. We are now up to over 4,000 square feet for about $1.6 million. We can't afford that. So what's next? How did this happen?

It occurred step-by-step with everyone in the room in a conscious state.

How could we have prevented it? We should have said, "Stop," when the project started to balloon. I could have calculated exactly how much would be needed and kept a running tally of where we were when picking out materials. I didn't do either because the dimensions kept changing and it seemed easier to pick what I wanted and make the cuts at the end.

One possible way to slash costs is to keep the third floor unfinished. I discovered, however, that we wouldn't save much money that way. The city requires some form of barrier on the walls -- plastic is commonly used. We might as well install drywall. Also, there's no point in dry walling without having the electrical in place. There also has to be a surface on the floor. Even if we only semi-finish the space, we won't be able to cut $100,000 off the price.

We need to go through every material we've picked and look for cheaper options. There can be wood instead of tiles in the entryway and the powder room. We don't need an expensive high-end toilet.

All these changes add up. We'll have to explore cheaper alternatives for the big stuff…like the roof. The one I want is called the "Fully Interlocking Roof Component Roofing System" made of metal by Interlock Industries Inc. in black. It's said to never need cleaning because pine needles and leaves (which we have an abundance of) supposedly slide right off. But it would cost about $17,000 plus another $20,000 in labor for installation. We could easily halve that and still find something else that'll work.

Friends have warned me to look out for inflated interior painting estimates; it seems that's an area where contractors can raise profit margins.

As we go through this process, my husband and I notice a brand new, 4,000-square-foot spec house on sale at the bottom of our street for $1.4 million. Given the builder had to pay quite a bit for the land, and that he intends to make a hefty profit, we wonder why big builders can put up homes for so much less money.

It's all about volume, says Kira McCarron, chief marketing officer for nationwide builder Toll Brothers. Since they build so many homes a year (almost 9,000 in 300 locations in 2006) they get huge discounts from companies like Kohler and General Electric and negotiate price reductions on everything from tile to lumber to concrete.

A company like Toll Brothers also pays less for labor, says Ms. McCarron. "Our labor contracts are more advantageous," she says. "We can keep whole crews of plumbers and painters employed. They move with us from site to site, from community to community."

Of course, there are limits to building what's called a semi-finished house: clients choose from a select number of designs and materials. People who tend to choose them are too busy to make all the decisions necessary in a fully customized home, Ms. McCarron says.

No offense to Toll Brothers -- but they look to me like cookie-cutter homes. Is there any way to get the volume discounts the large companies get without having to adhere to their designs?

There are companies that band individuals together to negotiate lower prices. One is UBuildIt, which claims its clients "build up to 25% more home for their money." The selling point is that builders pay for materials and subcontractors directly, with little markup on labor and materials.

Meg Jaquay, a co-owner of the firm's Gresham, Ore., office explains that much of the appeal of her company is that consumers get to control their own projects rather than paying unknown markups and compromising on materials. Almost none of the five to eight homes her branch builds a year use an architect. "Architects design homes you can't afford to build," she says. "People have Taj Mahal dreams but want to build on a beer budget."

Bring on the Budweiser. We'll need it as we make our cuts. Any suggestions from readers about where -- or where not -- to cut are very welcome.

Join a reader discussion on the Teardown Diary discussion board.

-- Nancy Keates is a correspondent for The Wall Street Journal and lives in Portland, Ore.