Surprises That Could Inflate Your Custom Home Cost.

Make allowances for extra

Early in the design process, your builder should work with you to create an estimated line-item budget for your home. Each item (landscaping, appliances, flooring, etc.) should be listed separately with a corresponding dollar amount (allowance). The line-item budget should make sense to you, and the numbers should be in line with the general caliber of work you’ve seen in other homes this builder has completed.

Significance of Allowances

Interestingly, an allowance (or budget) can be your friend or it can be your worst enemy. Good, honest, quality builders may lose jobs to the competition because they establish a realistic allowance that truly reflects the scope of the entire job. Conversely, many builders will establish low allowances that are insufficient to build the home with the quality expected. Sometimes builders will “exclude” necessary items like driveways, finish grading, landscaping, and retaining walls. Be wary of a budget that seems too good to be true. You could be talking to an unscrupulous builder who says whatever he has to say to get your business.

Reasons for Allowances in Construction

Allowances are established by builders because selections are not always made prior to the commencement of building a new home. If a builder provides an estimate for a new home and purposely or unknowingly lists allowances that are not sufficient for the quality expected, the initial bid can be tens of thousands, if not hundreds of thousands, less than an honest builder’s proposal.

Honest Communication Helps

The last thing anyone needs is to be in the middle of construction with insufficient allowances to complete the home. A good, quality builder will put a lot of effort into listening to what a homeowner values and then designing a complete home package to meet those needs. He will try to establish budgets (allowances) that allow the homeowners to select items that are in line with the level of quality they want for their home.

Navigating Challenges in Budgeting

One of the biggest challenges for a homeowner and a builder is to identify a sufficient allowance and how all those numbers and allowances play into an overall budget. A major key to a successful project is to take the desired overall budget, consider the needs and wants of the homeowner, and create and execute a home that the homeowner will be happy with for years to come.

Surveying Home Owner’s Preferences

After listening to the needs of the homeowners, a builder will establish allowances that are appropriate for that home. Your builder should survey you to see what types of things are important to you before finalizing the estimate and signing a building contract. This will allow you to get a sense as to whether the allowances are sufficient. If the allowances are not sufficient, you either have to raise the overall budget or reduce allowances or features in other parts of the home. It’s important to do this before construction begins. If determining allowances happens after construction begins, it leaves room for misunderstanding and frustration.

Know what your allowances will buy for your new home before you sign a contract.

-Sean Sullivan