Summary: Home Builders and Owner Builders use allowances for home building budget items that have not been selected.
Carl, I have heard General Contractors using allowances when a home buyer selects cabinetry, appliances, and fixtures.
Is there a percentage of the cost to build the home allocated to these allowances or do General Contractors make it up as they go? Thanks, Ken
Hi Ken,
Allowances are for budget items not decided upon at the time a General Contractor and a buyer sign a Contract to build, or for an owner builder that hasn't decided on budget items before finalizing their cost to build estimate.
Allowances are a necessary evil.
They not only include the ones you listed, but often others such as: light fixtures, plumbing fixtures, landscaping, wall covering, counter tops, door hardware, to name a few.
You can see some of the items mentioned as a percentage of total cost to build on my "Cost Estimating Explained" page.
A General Contractor may supply these allowance numbers based on what he or she feels is adequate, but it is up to the buyer to investigate the dollar amount of each allowance for each category that has an allowance to see if it is enough money to adequately satisfy their consumer needs.
In other words, the buyer(s) MUST “shop” BEFORE signing the contract.
When you act as your own General Contractor, or owner builder, you too will use allowances for some of these items as it is impossible to make final decisions on everything early in the cost estimating process.
If you have read my book(s) and read www.byoh.com, you know it’s all about shopping BEFORE you make a decision to build.
Shop well, but above all, have fun!
Carl Heldmann
