@Martin - This seems wild, why do we have a contract price for anything if he can "adjust" his cost at will.

@Martin, I value your insight and have another question. The contract said the bid price only changes regarding change orders requested by me. And the spec sheet states, the builder guarantees his bid price under all circumstances with the exception of requested change orders by me. What does this wording "guarantee" if not the pricing... Thank you for your time and experience.

@Martin - And the builder is calling the price change in labor a "change order" and trying to charge me an extra 20% for the "change order". The tile is the same tile we wanted in July 2020. Same for the septic and counter top...

Have you visited a construction lawyer yet? The one who created the contract would be a good start.

@Designer Kitchen and Bath - the contract was created by the builder, it is not signed or watermarked by an attorney.

Obviously you just out that the contract does not include "allowances" in the guaranteed total and the actual definition of an allowance is open to change depending on the actual cost so yes you have to pay.

These days if you end up at $20k over, I would say you are doing pretty well .... unless you had specified every single item by brand & model #, but even that does not guarantee that the subs aren't raising their rates.

Building is a luxury, expensive and with several unknown components, so should not be attempted without a fair amount of saved money to cover the unknown components.

If you had been reading these forums before signing a large contract you would have heard all these things before and either delayed building or at least have been prepared for the extra expenses.

Is this your lot with a custom build or a lot owned by the builder?

You need to meet with the builder asap and have a serious conversation about current costs and projections for the rest of the build and what your financials will support.

@millworkman - The contracted bid price is stated on top of all three forms: The contract, the spec sheet, and the allowance page, all have the BID PRICE written on them. Why list the bid price on the allowance page and guarantee the bid price on the contract and spec sheet... if it doesn't include the allowances. What a mess...

Paying for an attorney review on the front end should have been done. Since you do not understand your contract, it’s still a worthwhile expense to have it reviewed and explained. It will not change the reality of allowances being included, but you may begin to understand them.

@chispa We signed out contract in August of 2020. The builder told us if waited another week prices would go up. That signing now "locked us in".

@Designer Kitchen and Bath Do I have to use his sub that is not honoring his price or can I find my own person or company?

@Martin It is a custom house on my land that I own. I cant turn it into a spec home. I have a fund for extras but it isn't $20,000...

This seems to have been an issue for some time. But you have not visited a lawyer, or created a plan of attack. You can’t ignore the overages that are piling up. What’s your plan to pay for them if you don’t have the cash? You need to develop a plan, or you may not end up with a completed home, or it may get a lien on it. Or worse.

When I built my house, i too had a fixed price contract with allowances for certain items. Those items are not part of the fixed price. So say your tile countertop allowance is $10,000 but you find a slab that costs $12,000. You have to pay the difference and yes, the builder can add his profit onto the extra $2000. That's how allowances work.

AmberMist, I totally see your confusion......I agree with you that it does not seem like a change order if the contract had an allowance and the builder tells you and you find a product that is what was discussed in that allowance! A change order to me is a change in the scope of work or materials, not a change in the cost that the builder missed the mark on! ((Construction costs are way high and changing day to day in this building boom we are having during covid, so it may be surprising to him as well)).

It sounds like your builder is not doing a good job of communicating that the allowance he gave included install, and that is more than expected, so if you want to stay in the total allowance for labor and materials, you need to choose less expensive materials. He should be able to tell you that before the material is decided upon so you know the total before it is done.

There may be wording in the contract that the builder gets a x % markup on total costs as his profit, so he is just sticking to that and calling it a change order? But in this case it is actual cost, so he adds the % to the top of that?

SInce it was not clear to you, and the costs truly are more than the builder expected (The install costs were what you were relying on their expertise to estimate correctly, dang it.) ..............there needs to be more communication. If he bid for example 10,000$ for tile including labor and materials, he needs to let you know before the job is done that labor is more than expected so you can see if you can use less expensive materials to hit the bid price.

Maybe there could be communication and compromise. If the contract says "install allowance" indeed you are the one paying the higher install costs not him. And if that is the case, there needs to be communication to be able to balance that with material costs.

Maybe since it is going over and the "install allowance" was not made more clear by him, maybe he would compromise to not add his markup on the overages since you are already over budget and it was not explained before you went 20k over.

If he is using install allowance, are there by chance any items that went under his allowance that you should be getting credit on?

Look up "install allowance" and "construction allowances" online to read more. I just spent time reading about them and it seems these are standard construction terms. You are lucky if it is only a few things that went over his allowances with prices as high as they are!

I am sorry for the distress. Better to have the job done well and cost more than have the builder find cheap labor that hits his underestimates...................more skilled laborers are in higher demand and have raised their prices.

Good luck! Try not to stress too much. There will be a way to work this out, even if it means leaving some things less finished than you had planned.

I think her point was that the contract included installation and that the allowance part was for materials only. But now hes claiming labor is an allowance, too.

@cpartist I agree if I chose something different or more extravagant, the cost difference would be on me. There is no change occurring. This is the same tile, countertop, and septic from the beginning contract discussions and bid.

Was the allowance just for the tile itself or was the allowance for tile and installation?

We had a fixed price contract. The tile allowance was strictly just for the product. If we chose something more expensive than that was on us to pay the difference. There was nothing in the contract that mentioned installation allowance. We did not have an allowance for septic. Contract just stated the specifics of the system. We did have a price for drilling of our well. The price got us to so many drilled feet and if they needed to drill further then that would be on us.

You mention the builder gave you the breakdown of the tile allowance. What was it broken down to? So much for tile and so much for installation?

OP wrote that the contract states "The builder put "installed amount allowances" for tile, countertops, and septic."

So that does state that actual install costs are on the owner if they go over the install allowance listed. I am assuming it said material and install allowance on those items, and just materials allowance on other items?

@vinmarks @lafdr the contract did not state that allowances were installation and materials, neither did the allowance sheet. There was a third document sent one month after the contract was signed and construction had already began, he called it his spec sheet. This third document said allowances included installation and labor. All three documents (contract, allowance sheet, spec sheet) include the same “bid price”. The contract and spec sheet both state the bid price is subject to change orders. The spec sheet actually goes as far to say the builder “guarantees the bid price under all circumstances unless the client request a change order”. When he sent me to purchase my tile in November he wrote out the tile labor break down of each type of tile. Example: Flooring $4.5 = $1.5 tile and $3 labor. I was instructed to buy my tile and not go over $1.5. That they would find an installer. And that is what I did, I purchased all my tile as instructed by him in November and did not go over my limit set by him.

The spec sheet provided one month after the contract was signed and after construction began, seemed to primarily talk about things like, the type of interior doors he uses, the type of windows he uses, the brand of paint he uses, the time line he guarantees (btw was supposed to be completed by 3/31), his price guarantee, it is more detailed that the contract.

It also list the allowances that match the allowances sheet amounts and states that allowances for tile include materials and installation.

I'm not an attorney and I didn't stay at a Holiday Inn Express last night, but a spec sheet provided some time after your contract was entered into doesn't sound like a contract document to me. You'll be well served to consult with an attorney licensed in your state whose practice includes construction contracts.

So your allowance for tile did include labor. In November he broke it down to you as tile and labor. If labor was included in that allowance and labor has gone up then you would be responsible for that.

This probably won’t be the last of the price jumps and as others have stated you will need to have money to cover those things.

We are also in the middle of a build and have seen some of this also. Tile was the worst. What we found out was that if we chose a standard 6x6 tile in a stacked pattern the cost was covered. ANY other size or layout incurred additional labor costs. One additional install quote was for thousands more! Obviously a tricky tile which we didn't go with. But labor for bricked subway still added $4 a foot. After seeing some of the tile complaints on Houzz I'm glad they are using a great installer but wish this had been explained upfront so I could have made decisions easier. I think it's clear to those who deal with this every day but not to people who build once or twice in their lives.

Let's look at this situation outside of the contract terms. We're in a rising value environment for homes. Every day your new home is rising in value. Part of that rise is do to the higher costs of material and labor. You are benefitting from the higher value of your asset. Paying the cost of part of that rise is logical. You're getting all the benefit. I'd be negotiating with the builder on one point. I'd want to pay his price without markup for the cost increases.

At the end of the day you will end up paying one way or the other. Only you can decide if this is the hill you want to die on. Remember they still need to finish your home.

I did not realize that the "install allowances" was not in the original contract, I had quoted what you posted about "install allowances" earlier. It seems to me, as others are saying, that the original contract is the deal, not a sheet given later during the build. But you have a lot invested in this project and the builder and it seems the way forward is to try to talk it out and compromise. You have the contract that does not state build allowances, but there is also a sheet given only one month into the build with install allowances listed. I agree with comments that it is worth consulting an attorney to find out the legal basis of whether the "install allowance" is enforceable since it was given to you early in the build, but not with the original contract..............But you can try to come to an agreement with the builder without the expense of attorneys. It could help to find out the law, since that could affect your willingness to pay and/or compromise. It is to your advantage to be on good terms with the builder. You do not want him to make up the 20k by cutting corners from here on out. I am sorry for the stress. I DO totally see your point that install allowances is a surprise, and I do not agree with the builder calling the higher costs "change orders" Good luck! You will have a beautiful new home when this is all done.

The relationship with the builder is crumbling. After we caught him not paying subs and we were threatened with a lien. Several other dishonest situations have been experienced. I really wondering if I can move on without the builder and finish the project on my own. What is the point in having a builder and a contract if his prices are no longer valid. He has told me if I don't like the new pricing to shop bids for tile installation and septic... I might as well be doing all the leg work myself and saving my builder fees. I have 5 draws left and he has $5,000 in builder fees to collect. Tile, Countertops, Septic, Install Plumbing fixtures, Install Electric Fixtures...

More effort on your part to GC the remaining. You'll benefit if you can put in the time. Use the internet and YouTube to familiarize yourself with the remaining segments. We did it and saved alot.

You need a construction lawyer NOW.

A few points...

Without seeing the contract it is difficult to determine whether your original contract was a materials or an installed materials allowance.

Despite what people often seem to think, the presence of actual bids complicate matters. Bids can, and usually do, become firm commitments and so who can increase prices and who is responsible for those price increases can be nuanced.

It is a very messy time for construction contracts.

I was talking to a builder today and he said it is close to impossible to do an accurate bid/proposal right now. Said he has a project with a metal roof and the roofing quote was only good for three (3) days. That is crazy! How can you even do a fixed price right now, for contracts that take weeks/months to finalize and builds that will take up to a year to complete?

This all sounds awful. I’m sorry you are dealing with a builder that is struggling. These are terrible times to build. We even had a hard time and that was before COVID when it came to our relationship with our builder. We didn’t see eye to eye on quality and so he basically passed on the GC part to me. He did finish up our build and we did pay him everything that was owed to him. He tried to push his final draw. But I did withhold the funds until he finished up I had a gut feeling he wouldn’t come back to finish. Long story short, our house has a build warranty that he explained to me I have called him on a couple warranty items and he says he will come out but he hasn’t and I don’t believe he ever will.

My advice to you is to try your best to talk to your builder and put yourself in their shoes. Explain you want the job finished but you also have a limited amount of funds and try to figure out a plan to resolve this mess. I just saw your mold post and that makes things even tougher. I would take a bleach water solution and spray the mold be sure to wear a good mask. Try to get that HVAC set ASAP. If you continue with paint and too much humidity you may end up with a bigger mess like cracked drywall, ruined cabinetry, warped flooring etc.... This looks like a result of the builder rushing stages so they have enough money to pay subs. Or it could be him not being able to secure an HVAC company. Good luck

I would not do anything intended to or remove the mold; you risk spreading the mold spores and endangering your health. I would get the relative humidity below a point that will support mold growth in both the living and (unvented) attic spaces. Since mold is established, I suggest you aim to get the relative humidity below 50% If you can't get the HVAC up and running, I'd rent some heavy-duty dehumidifiers and run them 24/7