Contract Allowances For Custom Homes

One of the most important stages of the custom home building process with the Cogdill family is the review of budgets. After discussing your needs, we’ll get to work producing a preliminary construction drawing and a letter of intent. The documents will be provided to you so that you can review the layout as well as an initial budget.

To make budgeting more authentic and transparent, we allocate allowance amounts against different areas of construction work. In custom home building, allowances for the following seven pieces of construction work are included:

  • Land clearing and fill dirt
  • Landscaping and exterior concrete
  • Cabinets and countertops
  • Flooring and ceramic tile
  • Appliances
  • Security and Technology Systems
  • Electrical Fixtures

A clear understanding of contract allowances will help you in reviewing the preliminary budget and moving to the next stage of custom home construction.

What is a contract allowance?

As tempting as the word “allowance” sounds, a contract allowance is nothing even remotely similar to the allowances you received as a kid, or even an adult. In the construction business, an allowance in the contract refers to the dollar limit or monetary value that is allocated to a specific item of construction work.

For instance, the dollar value of a painting job, indicated in the contract is an allowance. Architects, designers, engineers and contractors include allowances for work like plumbing, light-fixing, painting and so on. The allowance serves as a guideline. It tells you the amount that the final cost of your house “allows” to be spent on, say, painting or flooring.

Why is a contract allowance included?

Contract allowances are included to provide you a representational preliminary budget for the whole house. Allowances help in assigning an upper limit to funds designated for pieces of work that are difficult to specify with exact details or sufficient particularity. They are a flexible method of incorporating items in the contract that have not been specified, designed or chosen.

Say the latest catalog for cabinets and countertops hasn’t arrived yet. So we cannot omit the cost of cabinets and countertops from the budget we send you for review. A cabinet and countertop allowance allows us to proceed with general budgeting without waiting indefinitely for the catalog to arrive.

This also proves helpful in cases where you haven’t made a choice about, say, the kind of appliances you’d like in the kitchen or how you’d want to furnish your house. Allowances help us continue with general construction and you have the time to make a choice at your convenience.

How flexible are the allowances?

It’s your house and must therefore be your choice. Our contract allowances allow you to exercise maximum freedom of choice. Should you want to spend more on an item, than the allowance budget, no problem! We have you covered.

While you can always change your selection and opt for something that fits the allowance, we also provide you the option of paying the coverage directly to the vendor of the line item, at our cost. You can also have the allowance increased to the amount you want to spend and then include the difference in the total loan amount.

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