Tips to Stay Within your Building Allowance

Monday, August 31st, 2009 | Custom Home Construction, Financing, General Contractors

Custom home by Brock Builders

Whether building a new home from a stock plan or working with a custom home architect, staying in budget is what homeowners aim for most. Although most general contractors will provide a building allowance, not all builders explain what is covered in the construction budget and leave many homeowners confused about what they are actually allowed to choose for their home. Settling for the cheapest bottom line and not comparing allowances from builder to builder often leaves the homeowner with a higher price tag in the end, or less than satisfactory products and finishes in the home. With a few simple steps and questions however, building a house on a budget is not as hard as it seems.

While the term budget can often sound restricting, in new home terms it is meant to identify the bottom line, or implied total cost of building your home. A construction allowance shows more than just the final cost. It should include several components that allow homeowner and builder to agree on the number at the bottom and the products in the end result. Many new homeowners make the tragic error of wanting one number on the receipt but don’t understand how the building allowance works. Before signing on the dotted line, consider the following points:

Don’t buy more house than you can afford.
While this may seem obvious, several new homeowners find themselves building a larger home than they can afford only to run out of money for allowances. If your entire construction budget is spent on the dwelling itself, there is typically not much money left over for upgrades or high-end products and the homeowners are left unsatisfied. Too much house often equals too little money for the finishing touches.

Talk with your builder about your wants before signing any contracts.
A good builder or general contractor will listen to your wants and needs before creating the new home allowance. Discuss what you envision the home will look like. Remember, adding a couple of square feet here and there or switching tile for hardwoods can translate to thousands of dollars in unforeseen upgrades.

Visit wholesalers to see if your choices are available.
You may prefer granite countertops, but your building allowance only calls for laminate. Often times in the construction budget breakdown, the builder’s preferred vendors or stores are available for you to visit and make sure for yourself that the products you anticipate wanting in your new home are in fact part of what you’re paying for upfront.

Spend money now on the products that will cost more to install later.
Products such as tile work, hardwoods, fireplace surrounds and cabinetry can be expensive to upgrade, however they are even more expensive to install at a later date. There are hidden costs in removing, stripping, replacing all of these products, not to mention costs for installation. It makes sense to spend the money now to have them done, rather than pay someone later. After the move in, less costly items such as light fixtures, towel bars, and drawer pulls can be upgraded and installed as time and money permit.

Remember, the most important thing when trying to stay within your new home allowance is to do as much research upfront and talk with your builder about the types of products you envision in the home. Simple conversations in the beginning can result in thousands of dollars saved in the end.

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