Tuesday, August 18, 2009

Cost Over runs because of Allowances

As stated in my last post, people are afraid of going custom because of cost over runs. I previously discussed change orders, so this post will be on cost over runs due to allowances. In a fixed price contract, the costs are fixed to the home owner except for change orders and the items listed as allowances. Allowances are primarily used for items that the home owner will pick out, such as flooring, light fixtures, plumbing fixtures, and countertops. Cost over runs occur when the allowances included at the beginning of the process are not enough to cover the actual costs. To come in low bid, many builders use low allowances so their pricing looks the best. Then they make up for it during the building process, causing cost over runs for you. I have seen where builders will put in $800 for light fixtures. Have you priced a dining room light? It can be over $800, much less the lighting for the rest of the house. Do your homework. Go make selections during the pricing stage to make sure that the allowances are enough to cover what you want. Then it is already included in your original price, and there is no need for cost overages during construction. Again, do your homework, and use a builder that you can trust. Remember, low bid is not always the best.