Episode 17: Selections & Allowances

When building your custom home there are two key components that require special attention to ensure your build stays on track-these are Selections and Allowances.

Your input is critical to help your builder establish a budget and timeline that meet your expectations.  The building of a custom home involves many decisions that only you as the owner of the home can answer to get the desired outcome.  Working with your architect and interior designer can help shape your plan, but you are the one who will live in your new home and you are the one who should set the stage by providing feedback to your team as to what will make your home a truly special place for you and your family to live.

Typically, your team will ask general questions as to the style of home that fits your needs such as modern, contemporary, transitional, traditional.  Maybe you like French Country or Mediterranean or a blend of styles that is unique to your personality.  They should provide visual images, perhaps a Pinterest board showing homes that have the look and feel that fit your style with images of the front of homes, kitchens, bathrooms, living rooms, lighting, appliances and plumbing fixtures.    With this information, your team can craft a design tailored that is unique to you.

So what now, this is a good time to refresh our conversation on an earlier episode, a concept called “Design to Budget”     In the many years I have been building, I have yet to meet any clients that did not have a budget.  Even the most extravagant homes need guardrails to keep budget creep from stressing out our clients and this is why establishing a reasonable budget from the very beginning of the design process is essential to ensure the team provides a design with finishes that meet your financial needs as well as your esthetic vibe.  It’s like a dance between you, your architect, interior designer, and your builder.  There will be give and take and priorities must be established.   The basic elements of your home such as style, size, volume, amount of glass and general structure are established by your architect, then finish details come into play.  Ultimately your budget will determine the level of finishes of each component of your home.  This is where selections and allowances comes in.

Your input helps your builder create a realistic budget allowing you to achieve the look and feel of your dream home.  Armed with your ultimate spending requirements and the priorities you have established, your builder should create a realistic budget with allowances that match your style and wallet.  Within the budget are what we refer to as allowances, basically a piggybank for key items you will select for during your build.  For instance, if you want all high end appliances and you are building a 10,000 square foot home with a large kitchen, a summer kitchen, and two laundry rooms, the builder should consult with their appliance vendor and create a list of typical appliances used for homes of this magnitude which may be $100,000 and use this amount as the allowance budget.  When the owner shops for their appliance, this budget should be used as a guideline for the total appliance spend.   Similar methodology should be used for plumbing fixtures, cabinets and countertops, flooring, etc.   Each allowance becomes a line item in the overall budget along with historical costs for construction such as windows, the structure, framing and sheetrock, the electric, plumbing and HVAC systems, etc. creating a total budget for the home.   This total budget is established early in the design process will evolve as the details become clearer and owner selections are made.  Keeping all parties informed at regular intervals is key to the success of the project and an essential tool for owners to feel in control of their build.  

Now let’s address when selections should be made and how a seasoned builder will help the owner’s keep the job on track.   At Landmark, we have developed a Selection Schedule.   This is essentially a list of all items that need to be selected and when the owner should start each selection as well as the deadline needed for selections to be made to keep construction flowing.  This selection schedule is created by taking the CPM or critical path schedule we use to manage the job and work backwards to determine the timing of each selection ensuring we provide owner’s with adequate timelines to choose finishes from their home. 

Let’s take a real life example to illustrate the process.   On a recent custom build our client was armed with the selection schedule and reasonable allowances established within their budget.   The first items up for selections were the appliances and cabinets as there is critical information needed for the electricians, plumbers and framers.   The owner, along with their designer met with Eric from our preferred appliance vendor who is very knowledgeable about the latest trends in technology and design.  Eric took them to the appropriate “isle” in his extensive showroom keeping their selections in line with their overall budget of $105,000.   Once all items were selected, the total including delivery, installation and tax came to $98,400.  Leaving an excess of $7,600.  What happens to this additional money in the budget?   At Landmark, we adjust the overall budget with a change order in this case reducing the budget by the $7,600.    However, on the same build, the owners second stop on the selections tour was with Glen, one of our cabinet vendors and they created their dream kitchen along with designs for bathrooms, a bar and utility room cabinetry.  The budget was $375,000.   The designer used the inspiration imagery board to create a magnificent design with leaded glass doors, hi gloss enamel paint with natural wood accents and fine accent lighting.   The total cost for the cabinets came to $415,000, $40,000 over the budgeted allowance.   The owner now had to decide if the overage made economic sense or if they needed to pair back some of the high-end finishes.  Ultimately, they were able to reduce the cabinet package to $395,000 and the budget was adjusted up $20,000 with a corresponding change order to reconcile the overall cost of the home.   You can see how the selection process creates a series of see-saw iterations of cost over time, but with timely budget updates they were able to keep within their budget goals as the selection process continued with plumbing fixtures, counter tops, and flooring.

As the budget police we often sight the “big-eye” syndrome when owners begin to stray too far from their goal and advise our clients with options to keep them withing their goals.  However, there are many instances where the owner is okay with adds to their budgets and making value decisions they believe will improve the quality of their home.

It should be every builder’s goal to give the owners the necessary tools for them to make informed decisions in a timely manner, giving them reasonable selection deadlines and keeping them informed of their budget every step of the way.  These tools keep the stress level down and allow for an organized and enjoyable building process and ultimately create an amazing home our owners can enjoy for years to come.

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I am Rick Bell, your host of the Insider’s Guide to Custom Homes.  Thank you for listening. Let’s build your masterpiece – the Landmark way. Stay tuned, and enjoy the journey!