What are building allowances for new construction?

For new developments, builders may choose to include allowances in construction contracts. Allowances help to establish clear expectations about costs, as they allocate funds to particular areas throughout the construction process.

If your builder offers allowances, it enables you the right to provide a product or service. This cost is deducted from the total amount you owe the contractor. For example, if the price of the home is $400,000, and the builder gives you a $20,000 allowance for flooring, the amount paid to the builder is lowered to $380,000.

Providing allowances gives future residents flexibility to customize their home and contractors clear guidelines from which to move forward. Some of the usual allowances in residential construction include:

  • Appliances
  • Flooring
  • Plumbing fixtures
  • Kitchen countertops
  • Cabinetry
  • Light fixtures
  • Door hardware

In addition to providing customization for new construction, allowances can help you stay on budget. Each allowance is its own budget, helping you pick finishes you want while staying true to your maximum overall cost.

By working with tenants or owners throughout the process of the build, builders provide information about allowance options, as well as the pros and cons of choice for cabinetry, flooring, countertops, or any other selections that may be available. Also, if you go above the mini-budget in one area of the house or condominium, you can get back on track by cutting back somewhere else.  

If you know you want to be involved in choosing finishes for a new home, start working with the builder or general contractor as soon as possible. This will allow you to learn about the options you have, review the allowance for each, and make decisions without feeling rushed. If a build is almost complete, the general contractor will have to begin making choices so the job is not delayed, which would cost time and money.

General Contractors, Subcontractors, Builders: Who should I hire?

When constructing a new home, deciding who to hire can be a time-consuming process. You want to be sure you hire someone who is trustworthy, does quality work, and sticks to budgets and timelines. But who exactly do you need?

General Contractors

General contractors (GC) can be an individual or an entire company, and oversee the entire construction site. They are hired for both residential and commercial projects. The first responsibility of a GC is to make an estimate of the entire project including the cost of materials, labor, and any subcontractors that will be needed. From there, a project manager will oversee the project, communicate with the homeowner, ensure materials are ordered and delivered on time, and oversee subcontractors. A big benefit to hiring a general contractor is they already have built a pool of subcontractors they trust. In addition, subcontractors will often consider projects for a contractor as a priority over a job for a homeowner. To learn about Horton Group as a general contractor, click here.

Subcontractors

Subcontractors are typically skilled in one specific trade, such as tile, drywall, insulation, or roofing. Subcontractors fill their contract directly with the contractor, so you do not need to worry about hiring each different subcontractor if you have a general contractor. If you are only updating one part of a room, such as installing new tile flooring, you may want to hire a subcontractor to complete the job.

Builders

A builder, like a general contractor, will see the project through from start to finish. The difference is that a builder often has a crew to complete the construction work, from foundation to roof, subcontracting only for specialists like electricians and plumbers. They also manage the project and communicate with the homeowner throughout the process.

No matter who you hire, you are entrusting another person or company to carry out your vision. Be sure to communicate your vision, budget, and timeline clearly so the outcome is what you want.

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