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Tempted To Take the Lowest Bid to Build?....Why that would be a huge mistake as opposed to huge savings.

 architecture and design by Abbi Williams/ The Reserve Lake Keowee

Now that you have bid your houseplans.... are you tempted to take the lowest bid on your custom home build? Here's why that's a huge mistake as opposed to huge savings. 

 

First of all, you might wonder how it's possible to get such a wide range of estimates for the exact set of custom home plans. If all the builders are bidding the same set of plans, on the same lot why is there a such a range in the cost to build. Mistakenly homeowners believe that builders with higher bids or estimates are simply making more money or overcharging for the exact same build compared to builders with a lower bid...... and that's just not the case folks. In my experience it is due to two factors.

 

1. Some builder are more thorough in including ALL costs associated with the home. Items such as landscaping are often left out completely because there was no landscape plan at the time of the bid. But reputable builders will still include an appropriate amount of money based of a percentage of the cost of the home even without the homeowner asking or proper documentation.

2. The second and most important factor that leads to the huge range of bids/estimates is the amount of money the builder gives for allowances. Its simple folks….. an allowance is a lump sum of money ear marked for homeowners to make selections for a category of the build such as tile, appliances, plumbing fixtures etc. And listen very VERY carefully to my next statement. When you compare bids… if a builder is giving you lower allowances than another builder it simply means you have less money to spend on those selections. So lower allowances mean you have less money to build your home with. You re not saving any money and your builder isn't more cost effective! You simply have smaller budgets for making selections!!

 

Most homeowners struggle with the concept of home bids and allowances. The questions I get most often is “Abbi, can the home really be built for this?!?!” “Why is this builder so much higher than the other builders??” Well more than likely its because if you compare the selection allowances for each line item you will see that the builders with the higher overall cost to build have given you larger allowances than the builders with smallest cost to build. And the term allowances simply means that you have an amount budgeted to make your selections from. Larger allowances for finishes and selections means you can buy nicer more often more desirable finishes for your home!! You did not save money by going with the lowest bid. You simply have less money to make selections with.

 

Yes there are other factors that come into play with the overall bid such as of labor cost variation among subcontractors and company overhead but most often it is the differences in allowances for client selections that make up the huge cost differences among bids. Most builders give clients lump sum allowances on appliances, flooring, plumbing, lighting, countertops, cabinets etc. And their are contractors that will butcher the bid of a home by giving incredibly unrealistic allowances for a home.  Regardless of how many Pintrest pages or Houzz images you have shown your builder the line item allowances are the homeowners resposibility to manage at the end of the day.

 

Here is a great example, Builder A gives you an allowance of $22,000 for tile material and Builder B gives you $12,000 for tile material allowance. Its simple folks…. Builder A is giving you $10,000 MORE money to select your tile material. That is the difference between authenitc marble tile and ceramic tile.  When you see a difference in budget allowances know that you are not getting marble tile with both those cost...the money will only go so far.

 

So before you take the lowest bid…. You need to understand WHY the bid is lower. You re simply getting less money to build the home with! I don't care if your builder says his/her prices are lower because they do “volume pricing” building 20 houses a year. Ignore them completely…. and look at the allowances you are give to build the house. That is the number one reason there is a huge range in cost for the bids on the same houseplans.  If you want to better understand if the allowances are adequate for meeting your expectation you will simply need to start making preliminary selections with vendors and showroom to better understand just how far your dollar will go for the allowances in the home. A little time spent on the front end understanding your selections and their cost will save you huge heartache on the back end. Happy building folks!!

 

 

 

 

 

 


 

 

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