Understanding Allowances-Standard Features And Upgrades In Construction Contracts


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Beware of allowances and pricey upgrades when looking at specifications by architects, designers and contractors when remodeling or considering a new construction home. Standard features and specifications should be included any construction contract. If you’re considering a mid-priced home or remodel, mid-priced appliances, cabinets, flooring, lighting, plumbing, and windows should be standard, not an upgrade or an allowance.

-An allowance is a monetary value attached to an item of work in a new or remodeled home. If a contract stipulates $1,000 for kitchen countertops, any amount over that, comes out of your pocket as an extra. So, if you decide you want granite countertops, and the allowance is for $1,000, which is for Formica, the difference is your expense. These overages can add up quickly in either remodeling or new home. Allowances can be deceiving if you are not armed with knowledge of what specific home features cost. The largest culprit of low-balled allowances is in the lighting category. Do some comparison-shopping and create a spreadsheet before talking with a builder or contractor for everything from appliances to fireplace mantels. I prefer working with new home- builders and remodeling contractors who don’t feature low prices just to turn around and say almost everything is an upgrade or exceeds unrealistic allowances.

- Upgrades are a profit center for new homebuilders. The pedestal sink you see in a model home could be an upgrade from the standard vanity with cultured marble top. Even sink faucets and door hardware can be extras. Sometimes the fireplace is standard, but a mantel and hearth are upgrades. When visiting sales enters, always ask if the model is finished with standard or upgrades. A follow up question when comparing the lure of advertised prices to what you see in a model home is; “how much is this home as we see it?” You might be surprised at the spread between advertised and actual pricing.

- Standard features should be well defined in sales materials and contracts to purchase. Brand, model number, size, color, finish, and an equal alternative should specify every feature in case the original specification is now discontinued.

Mark Nash is the author of five real estate books, new for 2007; Real Estate A-Z for Buying & Selling a Home. William J. Sittig, Chief of the Science, Technology and Business Division of The Library of Congress has invited Mark to make a presentation on 1001 Tips for Buying and Selling a Home to the members, public and staff of the Library on March 21, 2007. Nash has been featured on Bloomberg Video-on-Demand, CBS The Early Show, CNN, and The Today Show. He is a syndicated columnist for RealtyTimes.com and reviews books for MyShelf.com and The Midwest Review of Books. To subscribe to his free monthly ezine; Agent to Agent visit: http://www.AgenttoAgentezine.com


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