The goal of a custom home build is to ensure that your needs, wants, and desires are met and are incorporated into your home as much as possible and within budget. One of the concepts that builders created to price out a to-be-built home includes builder allowances, which can be confusing to prospective custom homeowners. Somewhere on your building journey, you will hear the word “allowances” and when you hear that word, you’ll need to be prepared to ask your builder some questions to ensure that you fully understand what is included in your home price and what potential unexpected costs you might incur during your build. 

Below, we will go over what a builder allowance is and how it can impact your custom home building process. At Splittgerber, we are completely transparent in our custom home building process and work closely with clients to ensure that they can fully comprehend each and every step that needs to take place in order to resurrect their dream home! For any questions about our process or about our team, please feel free to reach out today.

What is a Builder Allowance?

An allowance is a specific amount of money included in your construction budget which is allocated to be spent on a specific item or service, the cost of which has not yet be determined. If a home builder uses allowances, it means they are providing a budget for products or services in the project instead of specifying what is included in the price of the new home. Many builders may use this method in an attempt to give homeowners a price quickly and easily but it could result in some confusion and budget problems. Allowances let you and your builder proceed with the project despite the fact that the details aren’t completely fleshed out and they haven’t been properly priced. 

An allowance is just set aside to enable you to create a budget before you go choose something. It is essentially a line item in the budget for work completed by yourself or someone other than the General Contractors, or for items that you will supply or choose yourself.

 

The Two Types of Allowance:

Installed Allowance

An installed allowance assumes that you are providing the excess materials as well as the labor to install them. Therefore, the contractor will take the lack of workload into account when calculating your allowance. Not all contractors are willing to offer this type of allowance, as they will not wish to assume the responsibility of warranting the work of trades with whom they have had no prior association.  

Material Allowance 

A material allowance means that you provide only the materials and not the work. In other words, you purchase the lighting, but your general contractor is still responsible for seeing that the fixtures are installed. You must remember to keep in close communication with your builder, as most choices affect underlying factors in the home, like framing to fit around appliances or reinforcement for a large ceiling fan. 

 

Why You May Want to Consider A Builder Allowance

One advantage to having a builder allowance is that you could save money on some things, provided that you can find materials cheaper elsewhere. However, reputable builders generally already know the best places to buy materials, which means that this advantage may not actually be helpful. Nonetheless, you may like to choose details like colors, finishes, light fixtures, and more once the home is nearing completion. You may also want to buy appliances or other products that have been announced, but not yet released for sale to the public. 

Another reason is that you already own appliances or other fixtures that you’d like to install in your new home, making a builder allowance ideal. The bottom line is that builder allowance is likely the most ideal if you have specific finishes that you want to add to your home.

Why You May Want to Reconsider Your Builder Allowance

Budget and Cost Discrepancies

One of the biggest problems with builder allowances is that it becomes difficult to know the full price of your new home in the beginning. It may also become a problem if the contractor misrepresents what an item or group of items really costs. This could lead to disappointment when the item goes over budget, or when you have to settle for a lower quality item because of budget constraints. Plus, the materials you purchase may cost a lot more than you expected. Because many builders can buy at wholesale prices, you may find that allowance for something like windows isn’t enough to cover the retail cost that you’ll need to pay. 

 

Scheduling Frustration

Scheduling can become a problem when builder allowances are introduced. Most builders have worked with their suppliers for a long time, which means they know how far in advance to order and what to do if the order is wrong or damaged in some way. If the materials that you order come in too late or in the wrong size or color, it can cause major delays, not to mention far more headaches for you and the contractor. 

 

Is There a Solution Around Builder Allowances?

Definitely! When planning out your custom home build, it is helpful to make your selections as early as possible and provide your builder with as much information as you can upfront, as this helps ensure that you can get the features you want within your budget. Eliminating allowances in the process removed frustration and confusion that often accompanies selections. It is best to find a builder who has a proven track record and a process that is simple, enjoyable, and guided.  

The Splittgerber Difference

At Splittgerber Professional Builders in Fort Collins, we’ve spent the last 40+ years fine-tuning a process that makes home building simple and fun. We help homeowners make informed decisions about their finishes and guide them through every step of the process. We work with integrity, transparency, honesty, and excellence in everything we do. We work from the big picture, like what kind of floor plan you want, to the fine details, like what kind of toilet paper holders you have your eye on. We begin by purposefully gathering as much information as we can from our customers in order to design and finish the home that meets their needs and budget. To learn more about our process, or to see our work, simply contact our custom home builders. We look forward to working with you!