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.

WordPress.com.

Up ↑