Tim,
I'm currently getting a house built by a custom home builder. I've run into a very serious situation with my builder. Fortunately, he has agreed to see things my way although he doesn't agree with me and I'd like your opinion.
The situation is as follows:
My wife and I set most of our allowances in our specification before we went out for bids. This was to ensure the allowances were set to purchased what we wanted. Of course all the allowance money was included in the cost of the construction of the home. Additionally there is a clause in the contract that says if we go over any allowance that includes material, labor or any related extra expense, that we are charged an extra 10% for that expense for "over-head". Not a problem so far!! What has happened is that we have actually spent less on several allowance items and extra money was left over. Since we had this extra money, we wanted to get apply it to another areas, however, our builder FIRST wants to charge us 10% on the extra expenses THEN subtract our extra allowance money. This seems so wrong on so many levels. Essentially, we are getting punished twice for moving extra allowance money.
Example: We had 1,500.00 left over from plumbing allowance and wanted to apply a stain on our cabinets. Our builder said that the labor and materials for the extra stain was $1500.00. We thought GREAT!!! We want stain!! So he first charges us and extra $150.00 then subtracts the $1500.00. So basically we're getting charged twice on the money we saved.
Your thoughts? Thanks and Best Regards,
Gary Feltner
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Gary,
Your builder is a DOLT. It is obvious he did not do well in math classes in school. Perhaps he never graduated and that explains it! His logic is so flawed I don't know where to start.
First, let's imagine you hit every allowance perfectly. He would receive the money he deserved. So let's also imagine you just adjusted the values of the allowances at the *beginning* of the job but the grand total never changed. Once again, he gets the money he deserves. That is what you are doing as the job progresses - adjusting the allowances but not the grand total.
In my opinion you made a huge mistake by injecting allowances into the contract. Allowances create problems for all sorts of reason. I have written extensively about them at my website. I'll give one quick example. Let's say you put in $350 allowance for a front door lock set. Because a specific model has yet to be chosen, your builder assumes it will be one that will fit a standard round hole bore and that the door will come pre-drilled. But you and your wife decide on a $500 Baldwin full-mortise lock set. Your builder tells you: "Not only do you owe me $150 more plus my overhead and profit, but you also are going to be charged an extra $275 in finish carpentry fees to install the complicated lock set." It would be fair for him to say this. If you didn't want to pay the extra money, then he would tell you to stay within your allowance.
See what can happen? Had you specified the Baldwin lock set from the beginning, there would be no surprises. If the builder complained and tried to charge you extra to install it, you would win as you could say, "It was clear on the plans what we wanted and the contract between you and I says you will install all things specified on the plans. You bid $XXX,XXX.xx for the whole job and we expect to see that lock set installed when we move in."
Tim Carter
www.askthebuilder.com
http://premium.askthebuilder.com
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