Allowance Math: What Your Bid's Allowances Actually Buy

When a bid lands on my desk, the allowances are the first place I look. Not because they're usually wrong. It's because the allowances are where the bid stops being a price and starts being a placeholder, and most people don't do the math on them until they're standing in a tile showroom.

An allowance is a dollar amount the builder carries for something you haven't picked yet: lighting, plumbing fixtures, tile, appliances, hardware. When you make the selection, you pay the difference if you go over. Simple enough. The math is where it gets interesting.

One allowance, worked through

Say the bid carries tile for the primary bath at $12 per square foot for 240 square feet. You find the tile you want, and it's $28 per square foot. Here's what happens, with illustrative numbers and a 15% markup on the overage:

Primary bath tile	Amount
Allowance carried: 240 sf at $12	$2,880
Your selection: 240 sf at $28	$6,720
Overage	$3,840
Builder markup on the overage, 15%	$576
Added to your contract	$4,416

That's one room. And it can go further than the table shows, because a few details the bid may not mention change the answer.

The details that change the math

Material only, or installed? Most tile allowances cover material. If you pick a large-format tile or a herringbone pattern, the labor goes up too, and that's a change order on top of the allowance overage. A lighting allowance that covers fixtures only doesn't cover the extra electrician time for a heavy chandelier that needs blocking in the ceiling.

Square feet installed, or square feet purchased? Tile gets bought with extra for cuts and breakage. If the allowance is figured on the installed area and you pay for the purchased quantity, the overage is bigger than the price difference suggests.

Is there a markup, and on what? Some contracts add the builder's markup to the full overage, some to the full selection, some to neither. Ask, and get the answer in writing. It's a small percentage on one allowance and real money across all of them.

What happens if you come in under? If you pick a $9 tile against a $12 allowance, does the difference come back to you? Does the markup come back with it? A complete contract says how allowances get reconciled in both directions.

Across the whole house

One overage is easy to absorb. The trouble is that it rarely happens once. Here's a set of allowances for a custom home, with what someone might actually pick. Illustrative numbers again, same 15% markup.

Allowance	In the bid	Selected	Overage
Lighting fixtures	$12,000	$19,500	$7,500
Plumbing fixtures	$18,000	$26,000	$8,000
Tile material	$9,000	$15,500	$6,500
Appliances	$25,000	$38,000	$13,000
Door and cabinet hardware	$3,000	$5,200	$2,200
Total	$67,000	$104,200	$37,200
Markup on overages, 15%			$5,580
Added to your contract			$42,780

None of those selections is extravagant on its own. Together they add $42,780 to a bid you may have chosen because it was the lowest. If another builder had carried realistic allowances from the start, their higher number might have been the cheaper house.

How to check your allowances before you sign

The easiest test is to go shopping with the bid in hand. Not to buy anything, just to see what each allowance gets you. Visit a lighting showroom with the lighting number and a list of fixtures from your plans. Price out the faucets and the shower valve you actually want. Ask a tile supplier what $12 a square foot looks like.

If you're still in design, set the allowance amounts yourself and send them to every builder. That way the allowances can't make one bid look cheaper than another, and the numbers are yours, based on what you've actually seen.

Questions worth asking:

• What does each allowance assume, in quantity and unit price?
• Is it material only, or material and installation?
• Is tile figured on installed area or purchased quantity?
• What markup applies to overages, and is anything credited back if I come in under?
• When do selections have to be made for each allowance to hold the schedule?