Thinking about using an architect for your home and wondering how much they charge? And why they use percentage fees? Here’s some answers.
If you’ve ever thought about using an architect in the renovation or build of your home, you may have done some research into how much do architects charge.
At that point, you may have entered the tricky loop that is associated with determining the cost of an architect.
Most architects set fees for their services as a percentage of the budget you’re spending on your project.
So, you have to have a handle on your budget first. However, if you don’t really know what your renovation or new build is going to cost, then your budget can be challenging to firm up. And if you can’t firm up your budget, then you can’t confirm the architectural fees. And if you can’t confirm up the architectural fees, then you can’t firm up your budget.
And there’s the loop. It’s one I’ve seen frustrate a huge amount of homeowners.
There are various ways architects charge for their services, which include fixed fees (or lump-sum fees), hourly rates and percentage fees. Generally which one an architect chooses for your project will depend on how much help you will be seeking from them.
What’s the use of percentage fees?
What percentage fees do is build in flexibility. They mean you can get going early, without having to determine the finite scope of building or renovation work, how much help you’ll need from the architect, and what the final budget is.
You can estimate a budget, agree to fees on that basis and just get going – and things won’t change as long as you don’t change your budget.
However, therein lies the challenge.
Building and renovation budgets can change. And in a percentage fee structure, that means the fees will change. And industry agreements generally work such that the architect can back-charge you for work at that higher amount.
So what can you expect from percentage fees?
Industry standards for architectural fees range between 9 and 15% of your construction cost. This ‘construction cost’ figure is the cost to complete all the work that the architect is involved in designing, coordinating and helping oversee on site. What is and isn’t included can vary between agreements and architects though, so always understand this upfront.
Why do architects use percentage fees?
If an architect has to price their fee at fixed rates instead of a percentage fee, they’ll have to estimate your fees based on how long they think the project, and everything involved in it, will take. Remember architects are in a service industry, so this is a time = money equation.
If it takes less time than their assumptions, you don’t get the savings back. This is where a percentage fee is advantageous – you only pay for what you do build or spend time on.
And if you change the scope, add new desires to the architect’s brief, or unexpected surprises or requirements turn up during the project that are not part of the original fee agreement, you will be charged a variation to the fee. Our course, you have to agree to these variations along the way, but you don’t get ‘free’ work just because you fixed the fees at the beginning.
However, the link between budget and fees causes issues for clients, and this I completely understand from your point of view.
It can look like “all win” from the architect’s position … they go over budget, they’re ok (and you’re out of pocket). They design something that’s more expensive, they get paid (and you’re over budget). The percentage fee builds this in.
Many clients ask “Where’s the incentive for them to meet my budget, and design something that won’t cost more to build? And if it’s going to cost more, they’ll get paid more – so why wouldn’t they design something more expensive for me?”
This is one of the big hairy elephants in the room when it comes to percentage fees. How do you incentivise an architect to meet your budget, when their fees increase as your budget does?
[We’ll talk more about this in my next post about how to avoid paying your architect too much. But just keep in mind that an architect who regularly goes over budget in an effort to bleed his clients of fees will not have a great reputation overall, and will find it hard to keep and secure projects, and clients.]
Generally, architects charge percentage fees when being commissioned for full services. Full services means that they will be with you from the start to the finish … a process that can sometimes take 2 years to get through – particularly with more contentious projects, or older suburbs in certain areas of Sydney and Melbourne. Up to 12 months for design, council approvals and tendering, and up to 12 months for construction.
So the flexibility of percentage fees certainly supports this arrangement. It’s a long time, a long involvement together, and lots can change. You don’t need to know all the detail of how those 2 years will pan out, and how much attention your project will need. You can navigate it knowing that any anticipated work involved is included in your scope, and set by how much you spend on your project.
And of course this flexibility has to work for the architect too. If you change your mind about how much you want to do, and how much you want to spend, then you will most likely need more work designed, or drawn, or managed on site. The architect has to know they have a mechanism in place to cover the fees associated for that work.
If you spend less, you’ll pay less. And if you spend more, you’ll pay more.
Everybody wants more
It is extremely rare during the design process that a client says “I want less”. Pare it back. Simplify it. Make it smaller, include less, make it cheaper. (Not until the first tender quotes come in, of course).
What they’re usually saying is “Can we afford to add this?”, “Do you think we could also include this?”, “Can we make this bigger?”.
So it becomes the responsibility of the architect you’re working with to educate you of the financial impact of those “I want more” decisions.
And it is up to the you to listen, and make a choice to pull back, or to proceed – knowing the impact of that decision on your wallet.
This doesn’t seem fair
I hear lots of questions around percentage fees, so I’ll deal with some of them here.
1. Why should architectural fees cost more if my budget is $500,000 or $700,000. Is there really that much difference in the work involved?
The difference in the budget will come down to two things. One will be the size of home you’re building or extension you’re adding. The other will be the inclusion of bespoke and detail elements.
Both of these will take work to specify accurately and oversee on site, and in time resolving with you. Remember this is a time = money equation. So more discussions with you = more time. More discussions with the builder = more time. More questions from the builder = more time. More time selecting materials and products to specify = more time. More drawings = more time. More time = more fees.
(Read this blog about how many drawings you really need for your home reno or build)
2. Why should I pay more fees based on whether I pick a $30 tile or a $60 tile? It changes my budget, but surely it doesn’t change the amount of work required by the architect?
That is a very fair question. It shouldn’t. Because it doesn’t. And sometimes choices such as this will be excluded from the definition of “construction cost” (check your agreement).
In reality though, choosing a $60 tile over a $30 tile will probably have very little impact on your fees in total. Let me explain.
When building a new home, or undertaking a large renovation, finishes (such as tiles, carpet etc) usually only make up around 10-15% of your overall construction budget. So the overall cost of them (and the variation in that) has very little impact on your overall construction budget generally (and the portion of architectural fees associated with them).
Where the real money in a construction budget lies is in the extent of work, and the size and style of design elements within it … not the things you cover the surfaces with.
3. My budget is really small – so why isn’t the percentage much smaller?
There is a point where the amount of work it takes to design, draw and deliver a project doesn’t relate to the budget you’re spending on it.
It is possible that a $150,000 project (based on what you’re doing with that $150,000) will take as much time and work as a $400,000 project. When you think about it, it still involves design, drawings, tendering, and managing on site. It may happen a little faster, but there are still the same steps involved.
Again, remember this a time = money equation. Behind those percentages lies an assumption about how many hours your project will take, multiplied by an hourly rate.
So that’s why architects will often have ranges of fees associated with ranges of budgets. And the percentage will get lower as the budget increases.
For example, up to $500,000, they may charge one percentage – say 12%. From $500,000 – $800,000, the percentage may drop to 11%. From $800,000 to $1M, it may drop to 10%. And over $1M it may be 9%.
There are a few reasons I don’t do percentage fees
I prefer to take the time up front to set up expectations for all involved
I prefer to scope out the architectural work I’m needed for, so both the client and I understand what is involved in having me on board.
I know how many reviews it takes me to create a design the client is happy with (incase you’re wondering, it’s 3 reviews).
I know roughly how big a home is going to be (in m2) based on a brief from the client before I’ve designed it.
Based on that, I know roughly (before I’ve designed) whether their budget is close.
Red flags get put up before pen goes to paper. Client tolerance for budget increases is ascertained before I’ve spent any of their money on designing.
Yes, there may be little things like specialist joinery that increase the budget etc, but what I generally do in that instance is create a fixed fee for the drawings as listed and then identify hourly rates or package fees for those extra components. I know based on a home size, how long that fixed list of drawings will take to design and produce.
I very rarely manage a project the whole way through
This is a decision I’ve made over the course of my career in how I can best serve my clients, and work with them to create great homes.
I do believe having the right architect work the whole way through with you will get you the best outcome.
However, not everyone can budget for that, so I prefer to offer my expertise where I know it makes a massive difference – upfront in the design. It helps me help more people, and work remotely on projects everywhere.
Even with every expert opinion, building quotes can be hard to predict accurately
Building quotes are open to so many variables … the state of the market generally, how much work that builder has on, whether material costs have increased, whether certain trades are increasing in price, what the Australian dollar is doing, how closely the builder has paid attention to the drawings (and how many assumptions they’ve made).
For example, my industry feedback at the moment is that Sydney construction / renovation quotes have been much higher than expected – which is often the case when the real estate market starts to improve.
So I do everything I can during the process to get confidence around the budget as we go and not wait until construction tendering to do this. I encourage all homeowners to do this.
Your choice in the end may not be driven by budget
I’ve seen instances where projects that have a budget of, say, $500,000, can receive quote between $450,000 through to $650,000 between 4 quotes.
Now what if all the quotes include (in essence) the same work and quality, but the client prefers the personality, and the working style of the $600,000 builder over the $450,000?
Budget isn’t driving your decision then, but if my fees are linked to budget, there are ramifications for my fees.
I don’t think you should have to pay me an increase in fees to go with the builder they prefer to have in their lives for the next 12 months. (I’d be interested to see if anyone has experienced making a choice on this basis and had their architect increase their fees.)
Some clients pay games with their budgets
I’ve had clients quote me ridiculously low budgets because they thought that was the only way to ‘control’ my design process.
I’m honest with my approach. I ask that clients be the same.
I don’t design homes extravagantly. I design what suits the client: their budget, their site and their life. I seek to embed value in every design decision – getting bang for buck and making sure every investment will return dividends, both financially and in lifestyle benefits.
I link my fee with the value I add, and the time it will take. Not the budget. I’m driven by adding value, and unlinking my fee from the budget (for me) helps me demonstrate that more strongly.
I’ve found this helps everyone be honest from the start.
Next blog I’ll share how to avoid paying your architect too much
I’ll also share some general advice in establishing agreements with these consultants – whether they’re building designers, architects, draftspeople or interior designers. And I’ll give you some insight into the different phases in your project and what to expect from each.
Have you found this percentage fee a challenging concept in your search for a design consultant? Do you not want to use a design consultant at all?
Remember you don’t have to use them the whole way through. I still believe that a qualified design consultant is the best person to create your design so it maximises and explores every opportunity to create a home that truly supports your lifestyle.
Other blogs you may find useful if thinking about using (or not using) an architect …
This one will tell you the what the top 6 reasons to not use an architect are
This one will outline the difference between an architect, a building designer and a draftsperson
This one will help you understand why builders don’t like architects
And this one will give you some great design tips if you don’t want architecture with a capital “A” (but do want great design)