The devil is in the allowances details. Contracts get written like this because there is such a wide range of costs for things other than the basic shell of the house. For instance, 'trim' may be the smallest, cheapest bit of board, or six inch baseboards and four inch door and window casings with a wide ceiling moulding. Windows also come in a big range of quality and cost. Same with cabinetry, fixtures, etc.

Amen to both comments above. My builder has relationships with certain vendors, and I found they've been able to get better prices for me than I was finding on my own, including internet searches. We rewrote the contract to allow me to use specific vendors I wanted, but using many of theirs. A big issue was plumbing--I can get it cheaper, but their plumber marks it up, but stand behind it. Many of the referrals I talked to said if they had an issue, the vendor was there, and didn't charge anything. I like the balance we've struck--things like tile and lights are up to me to go wherever. I get a credit for anything not used, and it's subtracted at the end. Real life--I'm going way over on the allowances (our choice) and have only been under on a couple. And that's even with getting quotes up front.

I agree that allowance budgets are generally meant to look good...but may not be.

If you already have a distrust of the 'general' deal, are you sure you want to go through with this? When I built homes, I kept very, very meticulous and transparent records so people could figure out that yes; when you go under budget on the kitchen, and then 30K over by adding a pool...that was you.

Allowances are there to trap the unknowing into signing an unrealistic contract. They base the number on the lowest possible builder grade merchandise, like a 5K allowance for a whole house of cabinetry when it should be 10x that.

This is why you specify the exact products you want used rather than do allowances. Sure, it makes that 300K home into a 400K home by the time you do all of your add ins, but would you rather have 100K with of change orders (with the additional change order fees on top) or actually KNOW that you were designing a 400K home?

I really appreciate the responses.

Estimates for a 2350 sf home:

Builder A has 18k specified for cabinets, 5k for granite, 2k for garage doors, etc., Builder B just has their standard cabinets listed in their estimate, along with windows, fixtures, flooring, etc. No mention of cost of each.

Builder A came in approx. 25k over builder B in overall cost. In an attempt to compare apples to apples I'm going to all of the suppliers for builder B to take a look at what they consider standard, and get price quotes from each supplier concerning the "standard materials" used by builder B.

I've talked with several people who have built with Builder A and B and all seemed pleased with their overall experience.

I hope I'm headed in the right direction.

No one's standards will be the same. As mentioned above you need to either specify what you want down to screwed or nailed and or have a list of exactly what the builder will supply you with including part and or model numbers. Your house, your dollars, others seeming pleased is great and all but at the end of the day if the "allowances" are incorrect (and they usually are for a reason) you pay not the other people who are pleased. As mentioned above the devil is in the details and the more detailed the better chance you have to come in on or near budget. Builders give low allowances on purpose too a) make the house seem less expensive than it actually will be and b) to smack you with change order charges (not all charge for this however).

We just finished building couple of months ago. We did have allowance in our contract. However, here is the catch - before finalizing the contract, our builder asked us to go to the vendors and do our selections. We did that, and our allowance was based on our selection which worked out fine. We changed few things and went over the budget in cabinets (because we added some cabinets) and were under budget in landscaping. At the end we ended up writing our builder a check - we were about 2% over budget. From my experience, I will say, allowance works when you have made all the selection and got a quote from vendor. At that point, you can put the final selection in the contract. Putting allowance in the contract gives you the chance of making changes during the time of purchase without incurring a change order (depending on your contract). Also, just to be clear we did not have allowance for things like, trim, brick, concrete etc. Allowance was for stuff like - plumbing fixtures, lighting, cabinets, hardware...etc. It is a good idea, to check with all the vendors to see what they are offering. Also, as someone suggested, you can do things like "owner provided, builder installed. No extra fee for installing items per plan." Most items have manufacturers warranty - if you buy a delta faucet from a authorized internet site (not craigslist) it will have delta's lifetime warranty. Same goes for appliances. If it were me, I would not pay cash for septic and well. I would suggest that approach for appliances, that way you can shop during sale, and will be able to get rebates. Light and some of the plumbing fixture is another area where you can do your own shopping. Just make sure to check warranty information and return policy.

Construction projects always go better when everyone's expectations are aligned. Allowances--even "good faith" allowances-- are a potential source of misalignment which produces "friction." The best way to avoid surprises is to test the validity of cost allowances by making selections before you go to contract as lakeviewgirl described.

Allowances are often misused but they can work out if done well. The OP's $25,000 allowance total is unlikely to become $125,000 so the example above is exaggerated.

The basic dilemma is that homeowners and builders both like to postpone certain kinds of design decisions in order to start the project more quickly and they want to take advantage of the "free" design services that cabinet, tile and plumbing fixture suppliers might offer.

To reduce the risk of unanticipated costs I recommend that owners ask for quantities to be estimated, the installation to be included in the base contract price with only material costs in the allowances. Then negotiate the markup % on allowance overruns or eliminate it altogether. The contractor might not feel he needs to add a full markup for a higher grade of cabinets or plumbing fixtures. He should have been properly compensated in the base contract. Of course, if additional work is involved, the owner should pay it.

At any rate the owner should be involved in the writing of this part of the contract.