No we did not experience this as line items were not allowances but actual quotes and selected items. We did have overages on labour and if costs changed but many things didn’t change at all as were specked and well chosen. We were about 15% over our total build budget due to excavation costs and lumber mostly.

Allowances on new builds can be notoriously low. So it's easy to run over an allowance in the best of times

Supply chain issues have driven building costs up substantially.

It is very possible you haven't been ripped off at all. Of course, it is just as possible that you have been, and would have been in more "normal" times, ripped off.

I am glad I am not building right now....

In regards to profit or loss the market is different everywhere. I often hear people say you don’t get back the costs on a new build on this forum but that’s not our experience. Our value now 3.5 years later is significantly more than our costs including lot but we have zero plans to sell.

WestCoast, I do think the market has been vastly different in 2021 to present as compared to 3.5 years ago though. I would be in the money too if I’d taken this project on in 2019.

Kaykaybee depends where you live. Here in Vancouver nothing has slowed down since 2008. Prices just keep on climbing.

Did you check that any of your allowances were reasonable? Did you get quotes for anything or just trust the builder?

Yes we did check on items that it was possible to do so. As you know, can’t check everything. Anyway, I am most interested in knowing how the recent supply chain issues and lumber has affected more recent construction. Comparing prior to the pandemic isn’t helpful.

You can actually check most. A proper budget should be based on actual quotes and specked materials vs allowances and guesses. A builder who updates changes in a timely manner can also help your to adjust elsewhere. Communication is key.

And a builder might base on a quote when the project starts and then lumber goes up by 100% while you’re getting permits but it obviously couldn’t be known that would happen at the start, right? What I’m saying is your building environment was pretty different than mine, would you not agree?

There are a lot of things about allowances that get repeated on this site until they are accepted as gospel. However, like many other things there is some nuance there.

People building homes often exceed allowances, however, that doesn't mean any excess is the client's responsibility. Broadly speaking there are two types of allowances, (1) allowances for work that can't be estimated and (2) allowances using placeholders rather than specific items. The latter (allowances for flooring, cabinets, fixtures, etc.), must be reasonable and suitable. In other words an allowance for tile must be sufficient to provide some tile that is generally suitable for the overall build quality.

So if your builder has an allowance for $5 per square foot for tile and installation and you say, we will use whatever tile you specified. Then he has to find tile that costs $5 per square foot installed. So while your allowances can indeed be low, they can't be unreasonably low.

Having said that, there is a world between being right and convincing your builder you are right. So this may well be an academic discussion if the fight is not worth having.

Bry911 totally agree. For example I went over budget on tile and am ok with that. And the builder’s sqft price allowance could be met, I just wanted what I wanted. For us we knew we would take a hit on lumber bc the market changed drastically from our first sit down w builder to when it was time to buy. We ended up being shocked by other items such as electric, siding, and even the stairs and railings. I guess what I’m trying to figure out is if other folks are seeing this too. We had several quotes for all the items so could discern if we were within the so-called market value before purchasing.

Adding on to that - I’m to parse what is price increase due to the pandemic etc.

I’m not building a home, but we are trying to finish a renovation, and yes. Inflation has impacted all prices. We’re having to do a lot more ourselves and be pretty choosy about the materials and furnishings now. We did a basement remodel in early 2020 and felt it was far more affordable than trying to do this renovation on the first floor now.

There’s also a pretty good discussion from people who are actually building a home right now going on here that might interest you: https://www.houzz.com/discussions/6250947/april-2022-building-a-home

Costs go up. That’s inevitable. 50% increases on allowances tells me the allowances weren’t accurate. They weren’t made pre pandemic so should have been adjusted. Nothing has gone up 100%. Even if you got actual quotes six months ago they might fluctuate but no way it’s by 50%. And that’s my point, small shifts happen. But to essentially be 50% off is not normal ever

We spent the last year building and moved in in Jan. It was a custom home with a cost plus contract. Our builder was way off on some of the "allowances". Some of those we caught at the beginning and had him increase those line items, but others caught up with us later.

Materials/goods that used to only have one yearly price adjustment, are now adjusted daily/weekly/monthly. Windows is a good example of this.

Have you seen the price of diesel lately? Shipping rates change hourly now.

Hard to get employees, so employers are paying more to get new people and to keep the good workers. All of these add up and increases the cost of building a new home.

When talking to my builder he said that he will not take on any fixed price projects right now. He can't predict what will happen with pricing and isn't willing to take on the risk of losing large sums of money.

As far as cost and value, the RE market in my area went crazy and we could sell the house for $1 mill more than what we built it for. The land cost nearly tripled in the last 18 months. We thought we would be way overspending for the older/existing neighborhood by building new, but it ended up that others overspent even more by buying 20-30 year old homes that need updating/improvements/maintenance and turning around and spending even more money to do the needed updates. And that is if you can find a house to buy with the record low inventory.

An allowance should only include installation when its not possible to determine that cost. In general, when a quantity is not yet known, its best to choose a quantity and adjust it later.

Too late now, but my strong advice is just don't do allowances. Put all of your choices, down to the exact model numbers, into the specifications for the build and have the builder give you a quote on what you actually want. Allowances are the root of much evil in the building process!

It is very likely, as others have pointed out, that builders will be reluctant to quote a fixed price in times of great fluidity of prices. I'm sure there are ways to accomodate that in a contract. Starting with a solid estimate for the exact materials you actually want will still be a more realistic starting point even if unanticipated real price increases throw you a curve.

In my experience, getting quotes will only provide a ballpark estimate in this environment unless an order is placed and paid for immediately. Our overall cost looks like it will end up about 30% - 35% above the total expected in 12/2020.

The problems our builder is experiencing are far more due to labor shortages than supply chain issues. One of more frustrating things, for me at least, is that trades will only show up for a couple of hours several times a week as they rotate through jobs in order to try to placate all of the local custom builders whose business they don't want to lose. They over commit and then take forever to complete their part of the build. I've lost count of how many times our builder has had to reschedule subs based on the failure of others to complete prerequisite work.

I am heard stories of extremely high lumbar and electrical costs during the pandemic from people building homes in my city within the last year or so. I have heard that multi million dollar projects have been halted while new estimates and budgets are drawn up because costs have increased so dramatically. Add to that a labor shortage and I could see costs going up significantly. Some of the homes in my neighborhood (8 million dollars +) are taking a very long time to complete and I can't help but wonder if some of it is because changes are being made in design due to increased costs. I know supply chain issues are also a real problem still.

OP, did you incur an additional penalty for exceeding the allowance? If so, this is one of the biggest scams builders pull. Or, are you on cost-plus where allowances are completely meaningless and useless?

This is common in fixed-price builds: If you are under the allowance, you get the diff $ back. If you are over, you pay the diff + as much as 50% penalty. Why not just make every allowance $1M?

Cabinets have gone up 10%-25% since last fall....for the brands I carry.

You, unfortunately, are building at a bad time. Everything is expensive, not available, or back ordered.

I'm more concerned about why are you calling your builder "crappy"?

Judianna20 it’s the frustration of building during a bad time I suppose. But seeing comments here and on some of the other boards it’s clear I’m not alone in dealing w price increases on many different line items. That’s really what I came to try and figure out.

Strategery no thank goodness no penalties. No freaking way. I would never have entered into such an agreement.

To avoid confusion, its a good practice to list Unit Prices (and any quantity limitations) separate from Allowances in a Stipulated Sum contract.

A good format for a residential project can be found in AIA Docuemnt A110.

Allowances are like placeholders. With me in the kitchen industry....you pay for ultimately what your final selections are. If an estimate has an allowance of $350 for hardware and you select hardware that costs $250, I invoice you for $250. Same if you go over. It is very time consuming to get everything estimated perfectly....especially for builders. Some are now charging for estimates. Allowances are like ballparked prices. what you DO have to watch for is low ball allowances.