Allowances vs Selections - How They Affect Your Project Cost

A timely way for a contractor to get a proposal or contract back to a potential client is pricing many of the materials or finishes as Allowances. When a contractor and homeowner are busy and can't spend a lot of time working together on the details for the project using allowances helps them reach the start date quicker. Unfortunately if the client hasn’t been guided and informed on the importance of making selections on light fixtures,door hardware, plumbing fixtures, cabinets, tile or other materials and finishes the project price reflected using allowances may lead to some surprises during production. Based on allowance pricing, the customer may deem one contractor a better deal over another depending on what each contractor allocated in his proposal or contract for the above finishes. It is important to understand that a contract with allowances may fluctuate or creep up in cost based on material or finish decisions made after the contract is signed.

If your contractor isn't effectively communicating this to you before the project begins it may contribute to one of the big “disconnects” that many homeowners hear about being overcharged or their project price ballooning. Here is an example: If the contractor pricing your new master suite addition establishes an allowance of $100 for the new toilet being installed in your bathroom renovation, which is reflected in your contract as "install new white toilet & toilet seat" and it is ordered and installed only to have you arrive home one evening to find that the toilet installed is not what you expected, now your project is delayed and you don't understand how this happened. You now need to select and order the toilet you want, which may cost much more than what was purchased and you now owe for the overage. The installation process also has to re-occur which will add to the cost overrun. The $100 dollar allowance now became a $300 - $400 selection during production which  

If this scenario occurs across the wide spectrum of product and material allowances in the project you can see how this can really drive the project cost skyward. Homeowners usually aren't too pleased when they are presented with a Change Order for the many overages that can total thousands of dollars which they may or may not be able to afford.  This makes for an unsatisfying remodeling experience. 

A way to minimize this is event is to ensure that selections are made for cabinets, flooring, counter tops, plumbing fixtures, appliances, stone, lighting, before the start of the project.  The prices of your selected items can be reflected into the contract for the project providing you a truer price for your project. Selections can now be ordered in a timely manner reducing project delays, installation challenges, and most of all reducing cost overruns. Starting a project with selections vs allowances will reduce stress, minimize cost overruns and keep the project on schedule. This approach may produce a higher project cost upfront but you can now begin to work closely with your contractor to value engineer some of the details and selections in the project to get the cost to something that fits closer to your budget.

Make sure you understand your contractor's process for designing and pricing your project.  You have worked hard for your money and you want to ensure that you receive the quality products and finishes that meet your needs and fit your home. Using allowances can be helpful if they are managed correctly upfront. Engaging your contractor early on to determine the budget ranges you wish to utilize for products and materials to be selected can help you get a feel for the project cost before you start if you don't have time to make selections before an established start date. At least here you understand upfront that you will incur change orders for any overages or receive a credit based on the product selections you make against the allowances you agreed upon. 

Working with a NARI Atlanta design build professional will help you understand the allowances vs selections pricing models and guide you in what works best to suit your particular needs.  NARI Atlanta professionals work hard to ensure that their clients have the best possible remodeling experience.