Can I save on my modular home costs by doing my own [foundation, lighting, garage, etc]?
You can save money on modular home costs if you want to do some of the work yourself or contract it out to a family member or friend. In the building industry, this is often referred to as a builder allowance.
What is a builder allowance?
A builder allowance is a special reduction to your modular home costs, offered by your general contractor in exchange for outside materials or labor supplied by you. Here are two examples of how this might work.
Option 1 – YES, if you would like to purchase outright and install your own light fixtures for cash out of pocket, your modular home builder may give you a credit for eliminating the standard fixtures from the home.
Option 2 – YES, you receive a credit for not getting the standard fixtures, and then put an allowance in the contract for fixtures based on how much you anticipate spending on them. Then your buider can reimburse you, out of the loan proceeds, for what you spend.
Option 1 – YES, if you would like to install your foundation for cash out of pocket, that item can be left off the contract and you can handle it (eg: “foundation by customer”).
Option 2 – YES, you can put an allowance in the contract for the foundation that is based on how much you anticipate spending on it. Then your builder can reimburse you, out of the loan proceeds, for what you spend.
Typically, if the buyer is paying cash for the item, then it is usually left off the contract and replaced with something like “foundation by the customer,” however, if there’s a bank involved, your quote should still include the cost of a foundation. The buyer would then pay for the item(s) outright and the cost would be deducted from the final accounting, OR the buyer is reimbursed for out of pocket costs from the loan.
How do builder allowances benefit you?
Not every general contractor offers builder allowances. While they come with benefits, they can also inhibit the building process. Consider the following list of pros and cons regarding builder allowances.
- Allowances enable you to purchase appliances, flooring, etc. that are on sale. When you are relying on a contractor, you are handing over the responsibility of the cost. Purchasing materials at good prices and then receiving an allowance can potentially lower the cost of your modular home in a significant way.
- With builder allowances, you can use appliances you already own. In other words, if you instead of spending thousands of dollars on a new washer and dryer, you can use the ones you might already own. This can also add up to save you money on your custom home.
- Instead of making decisions upfront, builder allowances enable you to make more detailed choices at the tail end of the project. For instance, you might want to see the majority of the house completed before deciding on color schemes, light fixtures, etc.
Installed allowances offer the potential of clashing on the work site. Hiring an extra crew to perform labor alongside the original crew might cause problems if they can’t work together.
- Delayed delivery of materials can cause a delay in the overall project. This is typically a general contractor’s greatest protest against builder allowances.
- It is possible that you will lose money in the process if you end up paying more than the allowance you receive.
What else should you know about allowances?
Check with your contractor before assuming that they offer builder allowances. If your modular home builder does permit allowances, ensure that you know exactly how much they allot.
If you have questions about how you might save on your modular home costs, call Next Modular today. We serve homeowners living within 70 miles of Goshen, Indiana.