Maybe I'm missing something, but it sounds like you need a new builder (or a different contract type). My contract is fixed-fee and there is no mark-up on anything (I actually get the builder's discount on appliances, plumbing, etc or a straight pass-through on subcontracted tasks). When I've exceeded an allowance, I write a check for the overage (I exceeded my appliance budget by $10k-ish. So, I wrote a check for $10k). I don't understand why your builder is charging you 25%. Seems to me to be a way for the builder to underbid the project and get more money from you because the initial estimate to build is too low.

you wrote, . . .for cabinets the allowance is about $30-35 and with that we would likely be able to do cabinets for kitchen but not bathrooms. Or I could just plug a cheap fridge and electric range with hood for the inspection and then build the actual kitchen cabinetry and proper appliances later on.

That seems like a lot of extra effort (and money) plus I'd prefer to have the builder install and provide a warranty.

It seems to me your approach might be more expensive. How much of this work needs to be in your mortgage?

Allowances should be for material choices you haven't made yet; include the installaion and quantities in your base contract. You can reduce your risk by selecting as much of the materials as possible now.

A Cost Plus contract is always going to have the transparent builder markup attached. There is no real Fixed Fee contract, with the builder profit as opaque, in the current build climate. Even Fixed Fees will have you paying for overages.

And you’re not understanding how funding a build works if you think that an appraisal of a laundry sink and a fridge will appraise high enough to satisfy the appraisal needed to meet your loan requirements. Your result has to be valuable enough that the bank can repossess and sell if you default.

You would need to be a full cash only build to do any weird cost cutting like you're talking about. No bank would touch it. Got 900K in the bank, earmarked for building?

It sounds like you're at odds with the current supply climate. You may be better served by being your own builder. The massively extra effort required will save you a lot of money. The challenges will seem overwhelming. Break every segment of the build process apart. Learn and familiarize yourself as if you were doing the actual work. Be prepared to do it if necessary. Never give up. Luckily you have the forums and YouTube.

"You may be better served by being your own builder."

You'll be even better served if you can hang out your shingle as a remodeler and get paid for providing that service to others. That way you'll make your mistakes in their homes instead of the one you intend to live in.

Thanks for all your comments!

Mortgage should not be a problem. Land value is high and we paid for It in full. Also we have other assets so I believe I can have enough flexibility.

Now the builder will own the design of the house by contract so I cannot simply change builder without getting another architect. Silly me not reading carefully the design contract. So I saved few thousands dollars for design but I cannot asks bids to multiple builders. Builder will charge overages even if I specify everything in the design phase because they gave me a target price for the house that is in the design contract. Being my own builder is not an option, not enough time and energy left.

Maybe I can install only cabinets under countertop and install upper cabinets later. That should be simple enough and might allow to stay within allowances. For electrical fixture faucets etc I can also easily cut costs and replace them later on by myself.

@Charles Ross Homes not sure I got your comment. Are you trying to say that being my builder is not a realistic option?

As already suggested, make all selections & incorporate into your budget & contract now. This will save schedule delays & most surprise expenses.

Make perfect sense what you are trying to do

But I would get rid of ALL allowances and replace with real prices . Instead of estimating the cabinets with $xxx / lf get the total price and submit it as part of your contract.

To get the Certificate of Occupancy you need flooring, one coat of wall primer, electrical [outlets, switches], kitchen cabinets, heat, one sink and one toilet. You do not need any appliances.

Home Automation and Security, Hardware - be very careful about those. You do not want to get stuck with some overpriced contract for 5 years and have some obsolete hardware. PASS.

Add prewire instead.

Decorative Electrical Fixtures - NO, in my book. If you must, specify the exact fixtures and get full and correct prices including cost of installation.

Front Door - get the real quote for your front door. No allowance.

Plumbing Fixtures - again remove allowances. If they lock you to just one particular supply house with the insane prices - you will be crying here.

BT

@Mauro Zammarano,

My comment was made tongue in cheek. That said, lots' of folks try the owner/builder route only to find it was more complicated, required more decisions, much more onsite coordination and took longer to complete than they expected. If you're retired, want the life experience of being your own general contractor, can afford to correct mistakes as you go and afterwards, and don't care if it takes longer then go for it. If you're employed, in most cases you'll be better off to keep your day job, pay and benefits, and hire an experienced home builder. That's especially true in the current environment of myriad supply logistics issues.

@Charles Ross Homes

Ok thank you! I just wanted to be sure I got it right. I agree, I am not becoming a builder anytime soon with a full-time job and a 10 months baby to take care of.

"But I would get rid of ALL allowances and replace with real prices"

Not an option according to the builder but I did not sign a contract yet so I guess there will be some compromising going on

We did the owner builder route after extensive research and prep. It can be done. You can save a ton of money and end up with higher quality product for every segment. You can't start as a remodeler. Because you'd be liable for your mistakes. And you'd likely not care as much as you would making a product for yourself. And you'd need to be licensed. In my state you have the freedom to do work on your own home without being licensed. You do have to pull permits and make inspections. The OP doesn't impress me as a diy individual, though. Not yet. Afterall, everyone prefers to save money.

Construction allowances should be avoided. Go into into the project with a clear idea of what your finished project will look like. Make all the material selections before accepting his bid and signing the build contract.

How much do you owe this builder now? You could probably buy out the plans, then find a new builder who you like or one that is a little more transparent to you. I just built a home, (no builder) I finished last September, it went well but took a little longer than I expected, 12 months. I think I could have saved a little time but we did the finish labor, hung the cabinets and laid the vinyl flooring. I probably wouldn’t do any of the labor again, I would sub it all out. I found most of my subs on the job sites, I would check out large nice homes under construction and speak to the subs, I got my excavator, foundation, framer, drywaller, stucco, brick, electrician, roofer, flatwork cement, tile work and insulation from job sites. I had 2-3 bids on each part of the process, the only thing I didn’t bid out was the plumbing, I used a friend. I even bid out the lumber package to multiple suppliers. Windows, flooring, light fixtures, and appliances my wife and daughter chose, again we got bids and shopped sales also. Acting as the general on your home is not a full time job but it will require that you put some effort into the project, you must manage the timeline and assume there will be changes in the schedule. The city building department will help to keep you safe, that’s one of the reasons for their inspections. As an owner builder you will probably get a higher quality home for less cost,

The fact that the builder won't let you specify materials in order to get rid of allowances is a bad sign. The subs and suppliers are probably his relatives. I wish you luck.