If you’re remodeling for the first time, you might need a crash course in construction lingo. Words like allowances, millwork, lead time, and punch list come to mind. You’ll hear them from the beginning of your relationship with your builder to the end, so make sure you know what they mean. A misunderstanding could be costly. Let’s talk about allowances first, then we’ll address a few others in future posts. Allowances have nothing to do with earning money for doing chores. They have everything to do with being a placeholder for certain items necessary for the remodeling effort.
Allowances are dollar amounts that will go against labor or materials, or both, for phases of work that have not yet been selected or designed. For example, you may see a line item called: Millwork: all cabinets and accessories. Next to it there might be a dollar figure like $4,000 (M). This means that your builder has allowed $4,000 toward the purchase and delivery of millwork (cabinets) and the accessories, (crown, knobs, features). Once you choose your cabinets and accessories, the cost is computed against the budgeted amount, or the allowance. If the actual cost of the millwork is $3,942, the builder will subtract that cost from the allocated allowance. The equation looks like this: $4,000-$3,942=$58. You would receive a $58 credit that can be used elsewhere on your job. Normally, allowance additions or credits are figured on the net increase or decrease.
Contract allowances are most often used for plumbing fixtures, lighting accessories, cabinetry, shingles, siding, tile and finished flooring. They are chosen by the client and provide a budget from which the client can work. Sometimes they include the cost of installation by the builder – if it is not specified, then it is not included. Read the fine print carefully and make sure you and your custom remodeler are on the same page and are making the same allowances.