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Real Estate New Construction Building Allowances

Beware of allowances and pricey upgrades when looking at specifications by architects, designers and contractors when remodeling or considering a new construction home. Standard features and specifications should be included any construction contract. If you’re considering a mid-priced home or remodel, mid-priced appliances, cabinets, flooring, lighting, plumbing, and windows should be standard, not an upgrade or an allowance.

-An allowance is a monetary value attached to an item of work in a new or remodeled home. If a contract stipulates $1,000 for kitchen countertops, any amount over that, comes out of your pocket as an extra. So, if you decide you want granite countertops, and the allowance is for $1,000, which is for Formica, the difference is your expense. These overages can add up quickly in either remodeling or new home. Allowances can be deceiving if you are not armed with knowledge of what specific home features cost. The largest culprit of low-balled allowances is in the lighting category. Do some comparison-shopping and create a spreadsheet before talking with a builder or contractor for everything from appliances to fireplace mantels. I prefer working with new home- builders and remodeling contractors who don’t feature low prices just to turn around and say almost everything is an upgrade or exceeds unrealistic allowances.

- Upgrades are a profit center for new homebuilders. The pedestal sink you see in a model home could be an upgrade from the standard vanity with cultured marble top. Even sink faucets and door hardware can be extras. Sometimes the fireplace is standard, but a mantel and hearth are upgrades. When visiting sales enters, always ask if the model is finished with standard or upgrades. A follow up question when comparing the lure of advertised prices to what you see in a model home is; “how much is this home as we see it?” You might be surprised at the spread between advertised and actual pricing.

- Standard features should be well defined in sales materials and contracts to purchase. Brand, model number, size, color, finish, and an equal alternative should specify every feature in case the original specification is now discontinued.

Owner / Builder Programs - Buyers Beware!

The Build-It-Yourself industry is a growing sector of new home sales. Many people love the thought of saving thousands of dollars by not hiring a Builder. However, there are a few secrets the Build-It-Yourself industry are not telling potential DIY Builders.

As a Building Consultant and Inspector, I've set through several of these courses just to see what this sector is pushing on unsuspecting consumers.

Here are just a few things the Build-It-Yourself companies either don't tell you or are not completely open and honest about.

  1. "You can get the same discounts from vendors just like Builders do." I'd say this is one of the biggest marketing ploys these companies use and it's not true, at least not as far as honest Builders are concerned. You see, Builders have a network of sub-contractors and vendors they use. These subcontractors and vendors give them huge discounts if they keep using their companies. These same vendors and sub-contractors are not going to give you the same discounts even though they tell the Build-It-Yourself company they will. And how will you know if you're really getting that discount? You won't! You're a one time shot where a Builder is repeat business for them.
  2. "Builders gouge you on everything, our list of sub-contractors and vendors are the same one Builders use" Again, not entirely true. Many of the better Builders have certain sub-contractors and vendors they will only use. These are the sub contractors that charge more for their work and do not work for just anyone. Many of these type of subs will not work for you or me because they do not know us and because they charge twice as much as the sub on the BIY company list.
  3. "We screen all sub-contractors and vendors on our list." Well, yeah, to an extent. You see, most of those sub-contractors and vendors have to pay to be on the "Preferred List" of the BIY companies. If you don't pay, you fail the "screening" process. I've been on several of these list and the only screening I'm aware of was my ability to pay their fees.
  4. "You'll be in complete control of the building process" To some extent yes, but more than likely the answer is "only as much as the subs want you to be." What they don't tell you is that if you have a problem with a sub not showing up or doing less than ideal work, you've got to deal with it. A quality Builder has the pull to get things done where you don't. It all goes back to the Builder choosing quality subs and those subs wanting to keep the Builder happy to they'll continue to use their services.

Before jumping into the BIY game, make sure you know the real score. You may save a little bit of money or you may not. I meet with consumers every week that have tried to build their own homes and quickly were overwhelmed by the process or the sub contractors. It's not as easy as it looks and more than likely it will cost you more than what you originally budgeted for if not careful.

Donald Lawson is a Professional Real Estate Inspector licensed in Texas (#5824) and Oklahoma (#454). He currently owns and operates Houston Home Inspections, a home inspection firm in Houston Texas. You can also get a feel of the Houston Real Estate market by visiting Houston Real Estate

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