Original Research
An analysis of SEC filings, earnings calls, and investor disclosures reveals how much public builders actually earn from lot premiums, design studio selections, and structural options — and what it means for the rest of the industry.
March 2026 · Finch · SEC EDGAR
$104K–$236K
Options & upgrade revenue per home among builders who disclose
8–25%
of ASP attributable to options & upgrades depending on segment and process
3–5 pts
Gross margin premium on build-to-order vs. spec homes
Public homebuilders file 10-K annual reports with the SEC. Some of the largest break out “lot premiums, options, and upgrades” as a measurable component of revenue. Most don’t. The data is scattered across filings, earnings call transcripts, and investor presentations. Nobody has put it all in one place.
We went through SEC filings and earnings disclosures from 14 publicly traded homebuilders, supplemented by industry surveys and regional builder data, to pull out what we could about upgrade and options revenue. The picture: a revenue line that runs from 8–15% of ASP for entry-level production builders to 20–25% for luxury and semi-custom, generates higher margins than the base house, and gets almost no attention in industry benchmarking.
This matters for every builder, public or private, 50 homes a year or 5,000. The gap between builders who optimize this line and those who don’t is likely measured in hundreds of basis points of margin.
Of the 14 public builders we reviewed, only two disclose upgrade and options revenue at a level useful for benchmarking: Toll Brothers and PulteGroup. A third, Tri Pointe Homes, has publicly confirmed that buyers prefer incentive dollars directed to design studio selections over mortgage rate buydowns. The rest roll upgrade revenue into total home sales with no separate breakout.
The industry’s most margin-rich revenue stream is invisible in public financial reporting.
| Builder | Segment | FY | Homes | ASP | Upgrades/Home | % of ASP |
|---|---|---|---|---|---|---|
| Toll Brothers | Luxury | FY 2024 | 10,813 | $976,900 | $203,000 | 20.8% |
| Toll Brothers | Luxury | FY 2023 | 9,597 | $1,028,000 | $236,000 | 23% |
| Toll Brothers | Luxury | FY 2022 | 10,515 | $923,600 | $190,000 | 20.6% |
| PulteGroup | Mixed | Q2 '24 | — | $549,000 | $104,000 | 18.9% |
Look at the percentages: Toll Brothers at ~$977K ASP consistently captures 20–23% of ASP in options. PulteGroup, a diversified builder at ~$549K ASP, captures ~19%. The absolute dollars differ, but the pattern is clear — upgrade revenue is a structural share of every home sold.
$2.2 billion
Toll Brothers’ implied upgrade and options revenue in FY2024 alone ($203K × 10,813 homes). Yearley has called the design studios “highly accretive,” noting they generate over $1 billion in annual sales. A standalone business inside a homebuilder.
The most revealing number in Toll Brothers’ disclosures isn’t the $203K headline. It’s what happens when you split spec vs. build-to-order.
Between FY2023 and FY2024, Toll’s spec mix rose from 27% to 49% of deliveries. Per-home options dipped from $236K to $203K over the same period — a $33K decline despite nearly doubling the share of spec homes. Spec buyers spend less in the Design Studio than BTO buyers who select from scratch. That the per-home figure held up this well is the story.
Toll Brothers has disclosed that BTO homes with full Design Studio engagement hold adjusted gross margins above 30%. The company’s blended margin runs several hundred basis points lower, with spec homes dragging the average down. Most of that gap traces back to lower Design Studio revenue on spec homes.
200–250 basis points
The gap between Toll Brothers’ blended gross margin (~28%) and their BTO margins (above 30%). BTO homes with full Design Studio engagement consistently outperform spec. Process determines revenue.
Same builder. Same communities. Same base prices. Wildly different upgrade revenue depending on whether the buyer walks through a design studio or walks into a finished home. Upgrade revenue isn’t about buyer wealth or home price. It’s about how the builder runs the selection process.
Options & Upgrade Revenue Per Home — Disclosed Data
Toll Brothers (FY24)
Luxury20.8% of ASP
PulteGroup (Q2 '24)
Mixed18.9% of ASP
Robino-Corrozi (~300/yr)
MixedRegional builder
Estimated Upgrade Revenue as % of ASP by Segment
Luxury / Semi-Custom
LuxuryIncl. structural + lot
Move-Up
Move-UpDesign center driven
Entry-Level / Production
Entry-LevelLimited selections
Weighted Average
MixedDesign center only
Note: Toll Brothers’ 20–23% figure includes structural options and lot premiums alongside design studio selections. Pure design center spend (countertops, flooring, fixtures, smart home) is likely a lower share of ASP, though no builder breaks that out separately. The distinction matters: upgrade revenue is the sum of lot premiums, structural options, and design center selections, and each carries a different margin profile.
The other 12 public builders we reviewed don’t disclose upgrade revenue separately. But their filings, earnings calls, and investor presentations drop enough clues to fill in some blanks.
| Builder | Segment | Revenue | Homes | ASP | Upgrade Strategy | Disclosure |
|---|---|---|---|---|---|---|
| D.R. Horton | Entry-Level | $33.9B | 89,690 | $378,000 | Express Homes brand; limited customization | Not disclosed |
| Lennar | Mixed | — | — | $423,000 | "Everything's Included" bundles upgrades into base price | Not disclosed |
| NVR | Move-Up | $10.5B | 22,836 | $450,700 | Options affect margins but not separately reported | Not disclosed |
| KB Home | Move-Up | $6.9B | 14,169 | $487,000 | Design Studio is core brand identity; built-to-order model | Not disclosed |
| Meritage Homes | Entry-Level | $6.3B | 15,611 | $404,000 | Redesigned selection: 20+ hrs to 3 hrs via curated collections | Wakefield study |
| Taylor Morrison | Move-Up | — | — | — | Tracks lot premiums and options as part of incentive strategy | Partial |
| Tri Pointe Homes | Move-Up | — | — | — | Buyers prefer incentive dollars in design studio over rate buydowns | Partial |
| Century Communities | Entry-Level | — | — | — | Monetizes through option upsells and service agreements | Not disclosed |
| M/I Homes | Mixed | — | — | $483,000 | Smart Series (~50% of sales) with limited options | Not disclosed |
| Smith Douglas | Entry-Level | $976M | — | $340,000 | Value-focused; limited upgrade program | Not disclosed |
| Dream Finders | Mixed | — | — | — | Tracks lot option fees in adjusted margin calculations | Not disclosed |
| Beazer Homes | Mixed | — | — | — | Asset-light lot option model | Not disclosed |
For move-up and semi-custom builders (the segment where most private builders compete), the range runs from roughly 12% to 20% of ASP. On a $400K average selling price, that’s the difference between $48,000 and $80,000 in upgrade revenue per closing.
Across 200 homes a year, that’s a $6.4 million spread in revenue. At margins 3–5 points above the base house, the gross profit gap is roughly $2.5–3.5M.
$6.4M annual revenue gap
The difference between a 200-home move-up builder capturing 12% vs. 20% of ASP in upgrade revenue, at a $400K average selling price. At option-level margins (3–5 points above base house), that’s roughly $2.5–3.5M in additional gross profit.
See what these numbers look like for your floor plans.
Try It LiveEarnings calls and industry research point the same direction: options and upgrades carry higher gross margins than the base house. KB Home’s earnings data shows build-to-order homes running 3–5 percentage points above spec on gross margin. Toll Brothers’ BTO margins above 30% vs. a ~28% blended average tell a similar story.
The reason is straightforward. Design studio selections and structural options are priced at retail, with limited competitive pressure. The buyer has already committed to the builder and the community. Material and labor costs for upgrades are well-known. And many of the highest-margin upgrades (lot premiums, elevation changes, extended patios) involve minimal incremental cost.
Option margins also appear more resilient to incentive pressure than the base house price. When builders offer concessions, base prices compress. Design studio selections, priced at retail in a captive context, hold their margins.
The financial data is one piece. Buyer behavior is another.
In 2020, Meritage Homes commissioned a study through Wakefield Research on the new home upgrade experience. The numbers: 45% of buyers exceeded their upgrade budget, overspending by an average of $21,000. One in four found the process stressful. And 37% said their finished homes didn’t turn out as they expected.
Meritage responded by redesigning the process from scratch. They cut design center time from 20+ hours per buyer to about 3 hours using curated collections. The idea: a faster, less stressful process could maintain upgrade revenue while cutting friction and buyer regret.
45%
of buyers exceeded their upgrade budget by $21K+ on average. Meritage Homes / Wakefield Research, 2020. On an ASP of ~$400K, buyers planned to spend one amount on upgrades and spent considerably more. The experience itself drives revenue beyond what buyers initially intend.
Then there’s retention. Toll Brothers has historically averaged a cancellation rate in the low single digits — roughly 2–3%, well below the industry average. Yearley attributes part of that to the attachment buyers build through the design studio process. Once you’ve spent hours picking finishes and making a home yours, you’re less inclined to walk away.
Both Toll and Tri Pointe have said on earnings calls that buyers prefer incentive dollars directed toward design studio upgrades over mortgage rate reductions. The upgrade experience becomes its own form of switching cost.
Cancellations are among the most expensive events in homebuilding: remarketing costs, price reductions, carrying costs, lost momentum in the community. If a well-run upgrade process reduces cancellations even modestly, the avoided cost goes straight to margin.
Three reasons this data doesn’t exist:
SEC disclosure standards don’t require it. Revenue from options and upgrades is not a separately reportable segment under GAAP. Builders include it in “homebuilding revenue” and have no obligation to break it out. Only those with a strategic reason to highlight the metric — Toll Brothers using it to demonstrate ASP resilience, PulteGroup to explain margin performance — choose to disclose.
Competitive sensitivity. Option pricing, attach rates, and design studio profitability are among the most competitively sensitive metrics in the industry. Builders who have built effective upgrade programs have little incentive to quantify them publicly.
No standard taxonomy. “Lot premiums” may include community premiums, homesite premiums, or view premiums. “Structural options” may include elevation changes, room additions, or garage expansions. “Design selections” may include everything from countertops to smart home packages. There is no industry-standard definition, making comparison difficult even where data exists.
A note on Lennar’s “Everything’s Included” model
Lennar bundles many upgrades into the base price as a standard feature package, making direct comparison impossible. Their model effectively embeds upgrade revenue into ASP rather than reporting it separately. It’s a different strategy entirely — prioritizing operational efficiency over per-home customization revenue.
Private builders don’t file with the SEC. Most of the tens of thousands of active homebuilders in the U.S. also don’t benchmark upgrade revenue against peers, because no peer dataset has existed.
A few things stand out when you combine the public data with what limited regional builder data exists:
The range within each segment is wider than most builders realize. Entry-level builders may assume 8–10% is normal, but Robino-Corrozi, a ~300-home regional builder, reported that lower-end buyers spent 15–25% of selling price on upgrades, and that adding a formal design center increased option revenue by roughly 10% over the model home-only approach. The gap between “typical” and “optimized” exists at every price point.
Process matters more than price point. The Toll Brothers spec vs. BTO data is the clearest proof: the same builder, in the same communities, at the same base prices, generates significantly more upgrade revenue per home when buyers go through the design studio process rather than buying spec. A private builder doing 100 homes at $400K ASP who moves from 10% to 16% in upgrade capture adds $2.4M in annual revenue at above-average margins.
The most-cited industry benchmark is nearly two decades old. The ProBuilder buyer survey from 2007, which established the commonly referenced 10–20% range for design center spend, is still the most-cited source in the industry. Nothing comprehensive has been published since. Buyer expectations, design studio operations, and the universe of available upgrades look nothing like they did in 2007. This analysis is a step toward a current benchmark.
Upgrade investment correlates with retention. Toll Brothers’ historically low cancellation rate (averaging roughly 2–3%) is partially attributed to the emotional attachment created by the design studio process. For a builder doing 200 homes a year, cutting cancellation rates from 15% to 10% avoids 10 lost sales, their associated remarketing costs, and the community momentum disruption that follows.
The trend favors builders who invest in the upgrade experience. Tri Pointe Homes confirming that buyers prefer design studio incentive dollars over rate buydowns, Ashton Woods describing design studios as strategic margin drivers, and Meritage Homes rebuilding their selection process from the ground up all signal that the best builders treat this as a primary revenue lever, not a back-office function.
Using the segment-specific ranges established above and the disclosed data points as anchors, we can estimate the total upgrade revenue pool across public builders:
| Scenario | Total Revenue (Top 10) | Implied Options Revenue |
|---|---|---|
| Conservative (10% weighted avg.) | ~$120B | $12.0B |
| Mid-range (15% weighted avg.) | ~$120B | $18.0B |
| High (20% weighted avg.) | ~$120B | $24.0B |
Even at the conservative estimate, options and upgrades represent a $12+ billion revenue category among the top 10 public builders alone. Add in the tens of thousands of private builders and the total market is far larger. And unlike base home pricing, which is boxed in by appraisals, comparables, and competitive pressure, upgrade revenue responds directly to how well the builder presents the selection experience.
Limitations: This analysis relies on publicly available disclosures, which vary significantly by builder. Segment benchmark ranges (8–15%, 12–20%, 20–25%) are synthesized from limited data points and should be treated as directional. Toll Brothers’ disclosed figure includes structural options and lot premiums alongside design studio selections; pure design center spend is lower. Lennar’s “Everything’s Included” model is structurally non-comparable. No comprehensive industry survey on upgrade spending has been published since ProBuilder’s 2007 study.
SEC Filings & Earnings Calls
Industry Surveys & Trade Publications
Derived Estimates
Data Not Found
NVR/Ryan Homes, Dream Finders Homes, Century Communities, Smith Douglas, M/I Homes, Taylor Morrison, and Beazer Homes do not disclose upgrade revenue metrics in accessible public filings. NAHB and John Burns Real Estate Consulting likely hold proprietary data not publicly available. The most recent comprehensive industry survey on design center upgrade spending (ProBuilder, 2007) is nearly two decades old.
Data sourced from SEC EDGAR filings, public earnings call transcripts, and investor presentations. All figures represent publicly available information as of March 2026. This analysis is for informational purposes and does not constitute financial advice. Builder-specific figures are based on management disclosures and may not reflect audited breakdowns.
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