What Are Allowances?

The idea of producing a custom home is a foreign one to most people. The real estate market is an already complex animal to deal with, and adding the customization factors of building a home can make it feel more difficult. That’s why, when determining the budget of a custom home, we use the idea of “allowances” within a budget to give you the most accurate estimates of how much your custom home will eventually cost you.

A budget “allowance” is a common term used in most payment plans, usually referring to how portions of a larger budget are being used individually. In custom home design, an allowance is how much money is being spent on one particular portion of the construction.

For example, a contractor quotes your custom home at $500,000 dollars. That isn’t just a rough number that they think they can build you a house for. Rather, it is a complex budget with each portion of the construction accurately mapped out and priced. Each of these portions has an individual “allowance” that adds up to the total cost. 

Allowances are an important part of building a home. Some businesses try to be more competitive by lowering costs. This sounds great at first, but understand that a lower cost means smaller individual allowances. Say you want hardwood flooring, but your contract has a smaller allowance for floors–this could force you into a flooring option that you don’t prefer. 

Building your custom home is an exciting experience, but it can be overwhelming as well –especially when trying to understand and stick to your budget. Managing allowances is important, and every home building company has a different way they use, manage, and charge for allowances. We hope your newfound understanding of custom housing allowances will help you during your home building process. 

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