Are Architects expensive?
There is a very common misunderstanding about Architects fees and whether or not we are "expensive". The basis of this misinformation is that out there is not quite understood what Architects do, their scope of work and the value that they bring into the project.
In this section I will just focus on the overfall fee.
When I speak with prospect clients and are asked about fees, I explain that typically Architects in the industry charge a 10-12% of estimated construction costs; after any common mortal runs few numbers in their head and thinks of a 2-3M dollars construction cost, the initial reaction is that they choke, thinking that the fee is outrageous “for just as et of plans”.
When I approach the following simple explanation, by comparison, it all starts to make sense and the opinion suddenly changes.
Being a person who loves to speak by metaphors, I use a simplest example, comparing the Architect’s fees with the Real Estate Agent working on the same property, then, I compare efforts, liabilities, and credentials.
Let’s say that a developer acquires a lot for 2M in California and improves it by building a 4,000 square feet house at a 500/sf cost of construction. The cost of construction turns out to be 2M and the total hard cost turns out to be 4M. The soft cost (all fees associated with the property) is generally about 20-30% of the construction cost, lets use 25%; the total cost of the development is now 4.5M.
The developer also has carrying costs and profits to add to the total to make sure the development makes sense. Using a very, very low carrying cost of 5% and a low/realistic 20% profit margin, if it all pencils out within the market, the sale price of the property would be around 5.8M.
The easiest math applied now tells us that at 12%, the Architect’s fees is 240k (12% 0f 2M), while the listing agent fee, at 6% is 348K (6% of 5.8M).
The Real Estate Agents fees are 145% of the Architect’s fees.
Now, let’s compare efforts, liabilities and credentials.
The Architects first creates an unique design for the property and then coordinates with other trades (Engineers, MEP, IDs, Security, AV, Lighting…) and assembles a set of drawings where all the trades are taken in account to resolve most of the conditions that will present during construction, detailing every square inch of the project. Furthermore, if there are any questions, issues or changes during the construction, the Architects provides timely responses and/or site visits to address any concern with the General Contractor. Every building designed is a prototype on its own.
On the other end, the Real Estate Agent takes some pictures of the property, markets through various medias both the property and his or her business, sits at the property for few hours every weekend for open houses and perhaps brings some water and cookies for the guests. The prospect buyers are walked through the house and shown features that are otherwise obvious to figure out.
“...and this is the kitchen with granite counter tops, stainless steel appliances and a large skylight…”
Unless you are both blind and wear a neck brace, we would all agree that you could figure this out on your own.
If the house does not sell fast enough, the price will be reduced representing a much larger loss to the developer than the agent.
This one is very simple; the Architect is liable for 10 years on any building designed under his/her responsible control, while the REA has virtually no liabilities unless he/she does not fully disclose what known about the property and is later found out by the buyer who could claim damages.
Architects are required, in order to be licensed, to have a degree in Architecture from an accredited college, 5000+ hours of experience working in under the supervision of a licensed Architect and pass a grueling sequence of 40+ hours examination distributed among 7-9 exams which is second to none when compared to the examinations that Engineers, Doctors, and Attorneys have to endure. In some jurisdictions Architects may have to pass an additional exam.
On the other end, to receive a Real Estate License, it is required to take a short class to be eligible for examination, and unless the subject has an IQ of 30 or less, study for just few weekends in order to pass the exam.
This article is not meant to minimize the efforts or not recognizing the expertise that Real Estate Agents have out there; it is a very competitive industry and takes quite a lot to become successful, so I quite respect the ones who put serious dedication in their profession, in addition I am friends with some very successful ones and witness that they grind all the time. This article is instead meant to be an eye opener about Architects’ roles and responsibilities in a project, and to understand that we are not expensive at all.
In the future I may also divert this thought by comparing other licensed professionals such as Lawyers who get paid to lose your case or Doctors who hand you a release of liability knowing you are in pain and have no other option than to sign it.
That shall be fun.