Up-Front Home Prices vs. Allowances
WHY YOU SHOULD AVOID BUILDER ALLOWANCES AT ALL COSTS
New home builders that use allowance pricing could learn an important business lesson from 11-year-old Charlotte McCourt.
Charlotte, a New Jersey Girl Scout, is serious about honesty, especially with customer service.
In a letter she wrote, “I would like to tell you about the cookies themselves, for some of the descriptions, I’m afraid, use false advertising . . . I love being honest with my clients.”
Charlotte rated each cookie on a scale of 1 to 10.
She began, “Savannah Smiles are like sweet lemon wedges with just the right balance of sweet and sour. This cookie gets a 7 for its divine taste.” And she ended with the Toffee-tastic, giving it a 1 for being “A bleak, flavorless, gluten-free wasteland. It is as flavorless as dirt.”
The letter went viral, and her candid sales pitch paid off with record breaking cookie sales. Charlotte credits her selling success to truth in advertising.
HONESTY IS THE BEST BUSINESS POLICY
Have you ever seen an ad promising a great deal only to discover the price isn’t real or the product isn’t what you expected?
That’s frustrating when it involves simple items such as cookies. Now imagine this happening with something as significant as your dream home.
Unfortunately, many new home builders offer very low prices just to attract your business. These enticing prices are often filled with home allowances.
WHAT ARE BUILDER ALLOWANCES?
Allowances are estimated line item dollar amounts your builder gives you to purchase items or services for your home. Common allowances include:
- Kitchen Appliances
Home builders include allowance pricing to streamline the bidding process for themselves and get the building process moving. But buyers must beware: That low, enticing home quote is missing critical details and giving you an inaccurate starting price.
ALLOWANCE PRICING IS INCOMPLETE PRICING
A builder that uses allowances asks you what you’d like in your new home. It’s important to note that the value assigned is an estimate, not a real number you can rely on.
The underlying problem is builders usually set allowances so low that it’s virtually impossible to stay within budget.
Consider an appliance allowance as an example.
Your builder gives you a $1500 kitchen appliance allowance.
When it’s time to pick out your appliances, you go to the store and discover the amount the builder gave you isn’t enough to cover the nicer products you want for your new home.
What if what you want costs more than the allowance the builder gave you?
You have two choices: Settle for lower quality appliances to get close to your budget. Or pay extra money for the nicer, higher-grade appliances you really want.
Now imagine this scenario with multiple allowances for cabinets, lighting, flooring, and plumbing fixtures. It’s easy to see how unexpected out-of-pocket costs accumulate. So that low price you thought you were paying for your new home ends up not being the final price after all.
Typically by the time you realize the allowances do not cover your selections, the financing is already approved and you need to come up with the money from savings.
HOW CAN YOU AVOID GETTING HOOKED BY ALLOWANCE PRICING?
Before you sign any contracts, ask the builders if they use allowances for the home to be constructed. And if they say yes, keep searching until you can get an honest, complete price. That being said, an allowance or budget for the site development to prepare the lot for the home is typically used since the exact costs are not known until the work is completed.
In conclusion, a lot of people ask us “What’s the difference between home prices that include allowance pricing and home prices that don’t use allowances?”
The answer is simple: Builder allowances are a misleading sales tactic and should be avoided. Allowance pricing creates confusion and may make you go over your budget. Never accept allowances as standard. You have a better option.
UP-FRONT PRICING: HOW WE DO IT
Our pricing process is straightforward: We sit down with you and help you identify what you want in your home. Based on your list, we generate a final price that we will honor.
BENEFITS OF GETTING AN UP-FRONT PRICE
- Get exact pricing for your new home without any hidden costs.
- A real price with real numbers that you can budget for and compare to others.
- Understand the high-quality materials used in your home.
- The Fine Line Homes 5 Star Product Program separates us from our competitors.
Building with Fine Line Homes was a really good experience. They were extremely responsive to our questions and changes that we wanted to make along the way. Other people warned us against building because cost can easily escalate, but Fine Line came right in at the price quoted. Their showroom made it easy to pick out finishes in the price category shown. They make it affordable for a young couple to build a home. Michael and Nicole Baker
CHECK OUT OUR VIDEO: THE DANGERS OF ALLOWANCE PRICING
If you have any questions about the home building process, please contact one of Fine Line Homes’ friendly housing consultants.
To get a firsthand view of the products and processes we use, please visit one of our five conveniently located Design Centers/Model Homes in Harrisburg, Lewisburg, Hazleton, Sayre, and State College. We look forward to meeting you.