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Contractor Allowances and their Pitfalls
Specify all Aspects of Your Home Construction
Project
to Avoid Contractor Allowances
By: Mark J. Donovan
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Contractor allowances are commonly
used in contractor bids. Contractor allowances provide a mechanism for
allocating funds in a contractor bid for undefined building materials, such as
flooring, lighting, cabinets and bathroom fixtures. On the surface contractor
allowances sound like a reasonable and innocuous solution to a new home
construction project, however they can be fraught with pitfalls, particularly to
the home buyer or homeowner.
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The rational for contractor
allowances is that during the bidding process of a home construction
project, home buyers or homeowners have not made final decisions on certain
aspects of the project, such as kitchen cabinets, lighting, and flooring. To
enable the bid selection and construction project to move forward
contractors frequently allocate funds in their proposals for these types of
items. Unfortunately, more often than not the funds allocated by contractors
for these types of items turn out to be woefully inadequate and either the
homeowner has to settle for lower quality items or spend additional monies. |
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A typical example of this unfortunate
situation is with flooring allocations. When I was purchasing my first
semi-custom home years ago I fell into the trap of accepting a contractor
allowance for flooring. The flooring allowance was for a set dollar amount per
square foot and specified a particular flooring supplier. On the surface the
allowance sounded low to me and I raised this concern with the contractor. He
explained to me that that I was receiving his contractor discount at this
particular flooring supplier and that I was actually getting a good deal. |
I wound up accepting his
explanation and signing his construction contract without even visiting the
flooring supplier first. This was a big mistake. When it came time in the
construction process to make my flooring selections I discovered that my
contractor's flooring supplier had limited flooring options that I was not
particularly satisfied with. I raised this issue with my contractor and he
retorted that I could use another flooring supplier if I preferred. The problem
with this response was that the flooring allowance was a low fixed dollar amount
that was tied to a contractor discount with this one particular flooring
supplier. Choosing to go to another flooring supplier would have forced me to
spend even more for the same poor quality flooring. So in the end, I wound up
sticking with the contractor’s recommended flooring supplier and spent more than
the budgeted flooring allowance to get something that I was less than fully
satisfied with.
To avoid the pitfalls of contractor
allowances home buyers and homeowners should make every effort to specify in
their request for quote to contractors, all aspects of their home construction
project. By specifying all aspects of their project home buyers/homeowners can
avoid the entire concept of contractor allowances.
What this means is that homeowners
need to first visit the lighting, cabinet and home improvement stores and
identify the specific items they want to include in their home construction
project before providing request for quotes to contractors. By going through
this process, before submitting request for quotes to contractors, homeowners
can obtain more accurate bids that are easier to compare. In addition,
contractors benefit by knowing up front exactly what the homeowner wants.
It is important to note that
homeowners are not the only ones susceptible to contractor allowance pitfalls.
Contractors frequently get caught in contractor allowance traps. For example,
when a contractor completes his rough-in framing and then finds out afterwards
that the homeowner has decided upon a larger than planned bathtub, he has to
redo his work. In the end, the homeowner winds up paying for the contractor’s
redo efforts, however the contractor sometimes ends up paying a price by
slipping complete dates and potentially losing customers that are awaiting his
services down the road.
So instead of going down the path of
contractor allowances, the homeowner should visit their local home improvement
stores and generate a list of all the construction materials he or she wants in their
home construction project. By specifying all of the home construction
requirements to prospective contractors more accurate bids will be obtained that
are easier to compare. And most importantly, the homeowner will get the finished
home or home addition that he or she is looking for.
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