What You Need to Know About Builder Allowances

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What You Need to Know About Builder Allowances

 

To allowance or not to allowance? This is one of the many questions that you may face when building a new home. Builder allowances can serve several purposes, including saving you money, allowing you to further customize your home and being able to move ahead on a building project even if certain details aren’t worked out. However, these are ideal situations and your experience with builder allowances may vary. So, let’s take a look at what a builder allowance is, how it affects home price and why some builders don’t allow them.

 

What is a Builder Allowance and How Does It Work?

 

While in the process of building your new home, you realize the builder doesn’t offer the kind of shower you want, not even as a regular, approved upgrade. Or, maybe you see that the shower is available from the builder, but it costs several thousand more than you know you can get it from somewhere else. If you find yourself in either of these situations, a builder allowance could help you get the shower you want for a better price.

 

In either case, you could ask your builder for a builder allowance. If the builder agrees, the cost of the shower is deducted from the home price and then you now have that amount to go find your own contractor and/or supplies for the job. The allowance is not always equal to the price of the shower, but more on that in a minute.

 

How this Looks on Paper: A builder allowance shows up as a line item in the budget and is subtracted from the price of the home. For example, if the house is $300,000 normally and the allowance for the shower is $10,000, then the price of the home will drop to $290,000.

 

How do Builders Calculate Allowances?

 

Not all builders give allowances in the same way. Some will give you an allowance for the same amount as it would have taken them to install the product themselves. In our example above, that would be $10,000 for the shower. Simple, straightforward and if you can legitimately find a cheaper or better shower for this price, then it’s worth your while to take this allowance.

 

However, some builders only give you a percentage of what they would have charged. If this is true, they may only give you a $7,500 allowance on that $10,000 shower. In this case, just to break even on cost, you would have to find a shower for under $7,500. However, if it’s less a cost issue and more just that you want another type of shower, then this difference is less relevant.

 

 

Why Do Some Builders Not Give Builder Allowances?

 

One of the primary reasons a builder doesn’t give allowances or restricts them, is scheduling. If you agree to get your own contractor or supplies, that means your primary builder may easily be held up if materials arrive late or the contractor has a conflict.

Additionally, if you get your own materials, there’s a greater chance a mistake in sizing will be made or that the items will arrive unusable: broken, damaged, the wrong color, etc. You name it, and it can probably go wrong.  This, again, can add to how long the project takes as items will have to be reordered or refitted.

 

Along with the quality of the materials you purchase, there may also be an issue with the quality of the contractor you hire. Your home builder likely has a team of people they use on a regular basis. Not only is your builder aware of this team’s abilities, those workers likely feel more inclined to do a good job since they have an ongoing relationship with your builder. The contractor you pick; however, is a big unknown and if you chose them simply because they’re cheaper, that’s all the more reason to suspect there might be issues.

 

Getting the House you Want for the Price You Need

 

While builder allowances have their place, ultimately, the best way to stay on budget and on schedule and still get the home you want, is by making your choices early. This makes for less surprise delays and easier budgeting.

With Arbor Creek’s customer-focused homebuilding, we help you choose your options early in the process which ensures your home is built faster and on budget without the hassle of builder allowances. To learn more about how you can customize an Arbor Creek home to suit your needs, call us at 1-866-462-6526.

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