February 2, 2016 | Newsletter

Controlling Allowances

Congratulations to Merlin’s Safe Field Team!!!

We just reported to OSHA – 37,364 hours injury-free for 2015.  Zero construction accidents! It is a true testament to our field crew’s commitment to SAFETY.  Great job team!

Building Success 101


Q: Do builders and remodelers guarantee their work?


A: The answer is that the pros do. The warranty should clearly define what is and what is not covered, and the warranty period. And it should be in writing. A verbal promise to correct any problems that come up is as valuable as the paper it’s written on, which is to say it has no value at all. If it’s not in writing, it’s not real.

 

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Controlling Allowances

Strict allowance policies benefit homeowners as much as builders.

Why does the Merlin Contracting team and other builders prefer that the homeowners choose every single item that will go into the house before they break ground? It’s not just for the builder’s convenience. A choice postponed may end up being made at a time when the homeowners are feeling a lot of construction stress. Decisions made under stress raise the chance of buyer’s remorse.
But the reality is that some people have a difficult time choosing finishes like flooring, light fixtures, tile, and carpet before the house has at least been framed and they can walk through the spaces. Allowances are a necessary concession to that reality. They let the homeowners choose a limited number of products after the project is underway, while still keeping the job on schedule and on within budget.
It’s useful to think of an allowance like a Visa gift card. Say, for instance, that the builder and homeowners agree on a $40,000 allowance for kitchen cabinets and countertops. The homeowners can spend that money any way they want. They may want mid-range solid surface countertops and ornate cabinets with intricate moldings, or they may opt for plainer, less expensive cabinets and marble surfaces. They just need to stay within the allotted $40,000.
Like a gift card, an allowance will have an expiration date. That’s the date by which choices have to be made. But there’s an important difference: if someone doesn’t use a gift card on time, they lose the money; if the homeowner doesn’t make allowance choices on time, the money will still be there, but the delay will throw off the job schedule and may raise the final cost.
Because of their potential to be nebulous, Merlin prefers to limit allowances to as few line items as possible. These vary by builder, but common ones are lighting, plumbing fixtures, exterior doors, ceramic tile, and carpet. During the planning stage, Merlin will suggest an amount that makes sense given the budget for the overall home. Homeowners who want to spend more—or less—on these items need to tell the builder at this point.
Merlin’s team has found that finding the best price and most efficient way to manage these purchases is through buying from regular suppliers and contracting the installation by Merlin’s select group of trade partners. For one thing, Merlin’s team or the builder can’t be confident in the quality of unfamiliar products from unfamiliar vendors. For another, the use of an established team of suppliers and installers is crucial to controlling costs. It eliminates situations like the customer who chooses carpet from a supplier unfamiliar to the builder, only to find out that it is European carpet in metric sizes that will leave a lot of unwanted waste (that the homeowner has to pay for) and that takes 20 weeks to get, while the house will be done in five weeks.
When choosing multiple items like faucets and light fixtures, a budget-conscious customer will match styles. Using a different faucet style in every bath raises costs; keeping the fixtures consistent brings more purchasing power.
The bottom line is that a well-defined allowance policy benefits the homeowners as well as the builder by controlling costs, keeping the job on schedule, and reducing unwanted stress for everyone. People who have built homes in the past usually understand this, which is why they generally prefer to work with a builder with a clear policy.

 

Warm Regards,

Steve Jones & Bart Jones
Merlin Contracting and
Developing, llc

6408 Arville Street
Las Vegas, NV 89118

(702) 257-8102 – Phone
(702) 257-8105 – Fax

www.merlincontracting.com
www.remodelmyhomelasvegas.com
bjones@merlincontracting.com
sjones@merlincontracting.com

Copyright 2016. All rights reserved.

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