When looking to build a home, it is important to understand all the nuances involved. A production house, for instance, is one where the model is repeated several times in the same community and within the builder’s other properties. This provides an opportunity to look for other places to purchase things such as carpeting and to bring appliances or other items from an old home into the new space.
How Allowances Work
If a builder is inclined to do so, the company will offer what is called an allowance. This is an amount for what it might otherwise cost to provide a product or service. The allowance is subtracted from the total contract price. When a person signs up to purchase a home for $325,000 for instance, the builder may provide a $10,000 allowance if appliances are purchased on one’s own, which brings the final price down to $315,000.
Allowances are not upgrades, chosen from a list of builder-provided choices. A better refrigerator and better flooring are good examples. Credits for an amount the builder would have paid for the item is a more way to look at allowances.
Challenges with Allowances
Builders do not always provide allowances and others may limit what allowances are provided. Scheduling is one way builders limit allowances. If countertops, for example, are purchased elsewhere and come in late, the whole job is thrown off schedule. If one item does not show up until after installers have left, the people need to come back to finish the job on their time schedule.
Another frequent problem with allowances is that the item purchased may be broken or damaged. Sometimes parts are missing or it is the wrong color. If items are scratched, dented, or not in acceptable condition, this may make more work for the fitters in the house who have to make room for a piece that is different in size or shape than originally planned. Returns and replacements are also a pain not only to the home buyer but the builder, as well, who must wait for delays to the final closing.
Different builders price allowances differently, so particular attention must be paid. Some give a straight dollar-for-dollar discount while others may only give a certain percentage of original cost. Say a $10,000 allowance is provided for tiling the builder does not provide. If $8,000 is for rebate, then $2,000 is for overhead and profit, the individual no longer sees that last bit of money. If tile costs more than $2,000, there may be additional charges incurred for the builder to install the tile. It is important to know all the costs up front.
To avoid some of the above challenges, make choices early. Give the builder breathing room to have correct specifications and have plenty of time for ordering. Make sure to understand the pricing policy and how it is written into the sales contract. This will make room for any last minute surprises and don’t be afraid to ask questions.
If you’re ready to build a custom home of your dreams, call Brookstone Homes. We will disclose all the information you need to make the best decision before and during the home building process. Call us to find out how to get started.