Spellcasters can try to create magical items, although the process varies depending on whether you are a divine or arcane caster.

Prerequisite: Craft magic arms and armor/rod/staff/wand/wondrous item feat. Epic feats are required if you want to create epic items. Also, you need to be at least lvl 12 in order to create a magical item (arcane casters also need to be able to cast Permanency or have access to a Permanency scroll).

The Drawing Board

First, you must design your item and assign properties to it. These properties bestow a Success Penalty, and is calculated this way:

Base chance for succeeding: 5% pr. caster level + 1% pr. INT (arcane) or WIS (divine) modifier.

Level restrictions on placing magical bonuses into items:
+1 at lvl 12, and another bonus every 2 levels. Beyond +5 you need Craft Epic feat, and bonuses beyond 10+ only work against a a certain subtype (such as dragons, undead, giants, etc.)

Magical bonuses mean the following:
Weapons: Hit and damage
Armors: AC
Items: Either hit, damage or AC, and the bonus is halved (round up), even though the penalty cost is paid in full. This means that a lvl 20 caster can only make a +3 item, and the Success Penalty is 25%.

Success Penalty:
Pr. magical bonus: 5%
Spell castable once a day: 1% pr. spell level
Spell castable more than once a day: half the original cost (round up) pr. additional use
Spell castable at will: original cost X5
Spell permanent: original cost X5
Abilities, feats and proficiencies: DMs decision, but usually around 5%-10%.
Other: DMs decision

It is also possible to pick abilities from Signature Weapons/Armors/Items (see Creating Signature Relics), and the Success Penalty will be calculated this way:
1-3: 10%
4-6: 20%
7-9: 30%
10-12: 40%
13-15: 50%
16-18: 60%
19-20: 70%
However, you can only assign lvl 10+ abilities to Epic creation.

Note: If the Success Penalty adds up to 100% or more, the item will be epic (and you need the Craft Epic feat in order to make it)

Once you know what your item will look like, you must hand it over to the DM, so that he can find out what kind of components etc. might be needed. A Robe of Flying might require the feather of a phoenix or maybe the imagination of a truly free man. The first item typically requires a straightforward assignment while the latter typically means more research, or maybe a ingenious solution which might or might not be right. Once the DM has decided what is needed to create the item, your Research Period begins.

The Research Period
This is where you spend time learning about what the DM has decided you will need. The amount of time requires is determined by the Success Penalty:
1 day pr. Penalty %.
An arcane caster will spend time in his library (which must be worth at least 1k gold pr. Penalty %).
A divine caster will spend this time in prayer.

Calculating the Cost
The material cost is 2k gold pr. 1% Success Penalty.
An arcane caster needs a lab, and he will reduce the worth of the lab accordingly.
A divine caster needs to make offerings to his deity equal to the gold cost.

Gathering the Necessary Materials
Depending on what the DM decides, this can be anything from a mundane task to an epic quest. But what you absolutely need, is a Mastercraft weapon, armor or item.

The Crafting Ritual
A divine caster will spend a night in prayer.
An arcane caster will spend a night crafting, and his process is a bit more advanced. The final ritual requires him to cast Enchant an Item on the Mastercraft weapon/armor/item he wants to enchant. He follows up by placing his various abilities on the item (If the item is going to have spell-like abilities, he needs to be able to cast these spells himself. This also applies for divine casters). Finally, he casts Permanency on the item, draining him permanently of 1 CON.
The divine caster’s night in prayer is so strenous that he, too, is drained permanently of 1 CON.

Final Notes:
Only (demi)gods can make Relics, and Artifacts create themselves on rare occasions where a wizard is trying to create a magical item Even though a divine caster cannot create artifacts, his deity might choose to bestow him with an intelligent item, an item with an alignment or a Relic. So the following rolls need to be made for those praying for items as well. If the success roll fails, it means that his deity chooses not to bestow him with any creation at all.

Probability chance of item turning intelligent: 1% pr. power/ability and magical bonus. The intelligence will be the same as the caster’s.
Probability chance of item having an alignment: 5% pr. bonus if intelligent. The alignment will be the same as the caster’s, and the item will only work for those who have the same general alignment (good, neutral or evil). Also, if the caster is good or evil, those of opposite alignments will take 1d4 damage pr. spell lvl of the caster if they touch the item.
Probability chance of item turning into an artifact and gaining additional powers: 5% if having an alignment

There are 3 separate rolls to be made after the item is successfully created, so rolling would be like this:
Success roll: Success Chance minus Success Penalty, a roll of 96-00 creates a cursed item
Intelligence roll if item is successfully created (also if it is cursed)
Alignment roll if item is intelligent
Artifact roll if item has an alignment

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