What are Builder Allowances?
Builder Allowances are a set amount of money for individual products that you have not yet picked out. They are included in your contract before selecting the items, and they help in putting together a total price to build your home. If any of the items cost more than what is in the allowance, your house will end up costing more than the contracted price because you will have to pay the difference.
Builder allowances are frequently used in the planning stages for custom homes and common ones your contract may cover are:
- Light and plumbing fixtures
- Flooring and wall coverings
The Pitfalls of Allowances
It’s often difficult to specify ahead of time every single material that will go into your custom home. While your goal should be to have the most detailed contract possible, a custom home involves many more choices than a semi-custom or spec one does. Your builder, then, will include allowances in the contract for some of these items.
The amount of each allowance is based on the total price of your home, your budget, and your specific needs.
A problem can occur if your builder tries to present an affordable bid, by setting allowances so low, it can become impossible for you to choose the materials you want at the prices quoted.
What You Can Do
Your builder bases allowance figures on what he or she feels will be adequate, but it is up to you, the homeowner, to investigate the cost of each one. In other words, you need to at least “window shop” for your materials before signing the contract.
Whether you visit actual showrooms or conduct research online, do your homework to get an idea of how much the items you want, such as cabinets and flooring, should cost. Then, compare those figures with what your builder has allotted in the bid. Other options you may want to consider:
- Pre-select as many items as possible before your plans and specifications are finalized
- Keep change orders and project delays to a minimum by knowing ahead of time what items you’re likely to choose
- One of the greatest advantages to using the design/build model is that the entire team works together from day one. Talk to your builder about what you want before they develop the allowances so that upgrades are kept to a minimum.
- Spend your money up front on products that will cost more down the road. Tile, cabinetry, and hardwoods, etc. are very expensive to upgrade. Other items, like towel bars and light fixtures can always be upgraded later for far less money.
Builder allowances, if handled properly during the planning stages, do not have to wreak havoc on your construction project. As long as you have clear, honest communication with your builder, and a financial reserve in place to cover any small unexpected expenses; builder allowances will not get in the way of building your dream home.
At Abbey Design Center, we want the process of building your new custom home to be a fun and rewarding experience. Contact us today to learn more about builder allowances and our custom home design/build process.