After The Deposit

If you decide that you want a house built by a builder you will normally be given a budget price and asked to pay a deposit.

What happens next?

These are the steps that follow in progressing to a full contract:

1. Survey

A survey of your site need to be completed if one hasn’t already been done.

This will allow the builder to work out if there is any additional excavation, or fill required over the standard allowance.

2. Soil Test

A Soil test needs to be done.

From this the builder will work out if there is change in foundation requirements, over the standard allowance.

3. Initial Meetings With Builder

This has two parts

Initial Contractual Discussions

      • Being informed of the cost implications of the survey and soil investigation
      • Making any changes to layout and elevations
      • Agree the position on the Block.

Selection  (sometimes called Gallery.)

Items selected typically include:

          • Bricks
          • Roof tiles
          • Heating and cooling
          • Electrical fit out
          • Floor tiles
          • Wall tiles
          • Kitchen units
          • Oven and hob
          • Bathroom and toilet fittings
          • Paint colours.

NB. Sometimes Builders do this meeting after Signing of Contract when it is normally called Pre-start

Much more information is included in my  Selection Guide 

4. Finalisation meeting with Builder

This will be to sign the Contract Documents.

Before the meeting:

        • All the details should be confirmed together with the final price.
        • The council approvals should have been obtained.

You need to make sure that all the changes you want are included both in the words of the specification and in the drawings. My advice would be to ask for the contract documents a few days before the meeting so you have plenty of time to check them.

 

You then have to wait until the builder is ready to start Construction which hopefully won’t be too long.

 

For similar posts see Selection and Contract Documentation

Understanding Contracts – Liquidated Damages

There is the opportunity in the standard new house building contracts to be compensated if the building takes longer than the agreed ‘Contract Period‘.

This is called ‘Liquidated Damages’.

The basis of the ‘Damages’ that the builder is likely to be subject to are typically a week’s rent for each week the contract is delayed.

If the liquidated damages are large it will act an an incentive for the builder to complete on time. (See: Contract Period, to find out what delays are acceptable)

The amount of damages is set before the contract is signed and should be a reasonable estimate of the actual ‘Damages’ that will affect you.

How Much?

Typically the builder will suggest an amount which, unless you object, will be the figure that appears in the contract.

For our last building contract which was for a contract period of 9 months the Liquidated Damages was set at $250/week.

I have heard that now that some builders are offering very short build periods. . . . but they want to minimise the financial risks of any delays. (One way of reducing the risk is to offer minimal Liquidated Damages amounts like $1/week so there is no penalty for finishing late. This means there early finish offer is meaningless)

Alternative Amounts

There is nothing to stop you objecting to the builders amount and suggesting a higher, but still reasonable figure.

The builder however may say that due to the increased financial risk the overall price of the house to you will go up.

I think the best approach to get a quality house is for a reasonable contract period rather than go for a fast build.

You should then look for a liquidated damages amount around the equivalent to a weeks rent where you are living..

Whatever you decide make sure you look at the Liquidated Damages amount before you sign the contract.

 

For similar posts see Contract Documents

 

How Much Should Stage (Progress) Payments Be

When you contract someone to build a new house you are required to make regular payment as each STAGE is completed. . . . But how much?

Well builders want to get paid as soon as possible so they will want the early payments to be as big as possible.

You as the purchaser need to make sure you aren’t paying for work that’s yet to be done. (See this link: If The Builder Goes Bust) You will need enough money to finish the house!

A good guide to what’s fair is found in a Victorian Government Act which lay down the following percentages of the full contract price:

    1. Deposit 5%
    2. Base 10% – (Check on this link to find  what you get; Base )
    3. Frame 15% – (link at: Frame 15)
    4. Lock Up 35% – (link at :Lock Up)
    5. Fixing 25% – (link at Fixing 25%)
    6. Completion 10% – (link at: Completion)

In Victoria many builders will ask you to sign an agreement accepting that the above payment levels don’t apply and the percentages will be similar to those shown below.

In other Australian states where there is no Act controlling the amount of progress payments then the builder is more likely to want the following values of progress payments.

    1. Deposit 5%
    2. Base 20%
    3. Frame 20%
    4. Lock Up 25%
    5. Fixing 20%
    6. Completion 10%

Think very carefully before you accept these different payments, as it increases your level of risk if things go wrong.

Before you make each progress payment, you need to check the work comprising the stage is:

    • Complete
    • Meets your contract requirements
    • Meets the building regulations

If you are not confident checking the work it may be worthwhile using an independent building consultant to check everything before you make progress payments.

If you want to check yourself you may find this link: PCI Guide useful

Whatever happens do not pay any money in advance of when the contract requires it.

 

For more information about when Progress Payments are made see Construction Stages

For similar posts see this link: Contract Documents

 

Contract Documents – Order Of Importance

Of course the contract documents are the most important thing when organising the building of a new house.

However not many people realise that some parts of the contract document are more ‘important’ than others.

All three of these parts of the contract are normally bound together and presented for signing.

The order of importance are:

    1. The Conditions of Contract. Usually either HIA or Master Builders Conditions.
    2. The Specification. Which details in words what is included and the quality.
    3. The Plans. Shows in diagram form what the house looks like and how the various structural elements are assembled.

As long as their are no inconsistencies the order of importance doesn’t matter. However if there is an an inconsistency then the more important document is the one that counts in law.

For Example.

Say you had asked for windows to be double glazed. Although the plans may have been changed to show double glazing the builders standard specification which is based on single glazing may have been inserted in the documents by mistake. The builder then installs single glazed windows. Legally  they could leave those windows in without reducing the price.

Although most builders would rectify such an error its well worth checking through all the documents thoroughly before you sign.

Don’t let the builder rush you…….take the documents home and spend a few hours looking through them!

Have you had problems with your contract documents ?

 

For similar posts see Contract Documents

 

No Rush To Sign

I hear a lot of people saying the builder has tried to get them to sign the contract at the selection meeting.

They also worry about whether they can change anything.

Don’t Rush

It’s not as though the builder is going to start the next day.

They have got to get the building permits, and then start planning.

It can easily take a couple of months before anything happens on site.and then there is build period of several months.

So what’s a few days extra while you take the contract home and check it?

Can You Change ?

When the Builder gives you the contract to sign what they are doing is making an offer to build your house for a quoted price.

There is nothing to stop you making a counter offer of what you expect them to do for the money.

Both parties are equal in a negotiation to arrive at the final contents of the contract.

The builder has an advantage as they will be Theremuch more experienced than you.

You can even the playing field by taking the time to study the contract and check the specification against what has been previously agreed.

Establish the Rules For The Build

If you quickly sign the Builder may think they will be able to bully you to their advantage during the build.

Taking you time tells them you aren’t going to be pushed around.

 

You can read this post to see what you should be checking Contract Signing

Contract Security Clauses

Did you realise that there are clauses about a ‘Security Account’ in a Standard Building Contract?

No mortgage?

If you aren’t planning on a mortgage because

  • You are downsizing, or
  • Got a house loss  insurance payout, or
  • Getting a bank loan. or
  • Received an inheritance, or
  • Won the Lotto

The builder is likely to require money to be deposited in a Security Account.

Money deposited in the Security Account is to cover the cost of the build, and is  released to the builder when Progress Payments are due.

As the Security Account will have large sums of money depositedmake sure that all interest is payable to you.

 

If You Have a Mortgage

If you have an approval from your mortgage provider the builder normally is happy to accept the approval as adequate security.

 

 

 

 

Do You Need A Lawyer?

I hear a lot of people suggesting they get a lawyer to review their house building contract.

I”m not that sure that is a great idea, and its going to cost a fair bit of money.

Issues using a lawyer

  • Contract law a specialised area so your local lawyer may not have the expertise.
  • Builders tend to use either the HIA, or Master Builders, Standard Contract and most are unwilling to negotiate changes.
  • Although a lot of people feel the Standard Contract favour the builder I have managed a lot of contracts and my view is that they are reasonably fair to both parties.
  • A key consideration in contracts is that the drawings and specification match what you want, and I’m not sure a lawyer is the most appropriate person to advise you on that.
  • Standard Contracts are in ‘Plain English’ so don’t be afraid to read through yourself.
  • Generally you first port of call in a dispute will be the Fair Trading Department of your State

What does need checking?

  • Any Special Conditions that vary the Standard Contract. The Builder has a duty to point these out.
  • The Payments Schedule is fair.
  • The builder’s registration and Insurances are in place.
  • The drawing and specification correctly record all your requirements.

Alternative sources of advise

If you don’t feel happy checking the documents yourself I know that many independent building inspection services offer pre-contract reviews.

As these companies check on builders every day that are well experienced in what can go wrong with a contract.

They may also be able to give you an assessment of your builders quality standards.

I would expect to to pay up to $700 for a review.

 

This is a general opinion only and not to be considered legal advice

Why You Might Not Find A Builder Rating

Can’t find a quality rating for your builder?

Perhaps you should check your contract before you sign it.

Apparently some builders require customers to sign a contract that: ‘Prohibits them from publishing anything about the builder without the builders express permission.’

That could include sending a rating to a ratings website, or commenting on an internet forum.

It seems to me that any builder that has a clause like this has something to hide on the quality front.

You have been warned.

Want to find out more then check out the story at this link : Sydney Morning Herald

Update

Perth Home Builder 101 Residential removes “Unfair” clause banning customers from writing unapproved reviews
The Deputy Chair of the ACCC, who brought forward this case said “Consumers should be free to have their say about their experience with a business and must not face penalties for doing so.”

Obtaining Quotes 2

I recently posted about using ‘Get Quotes Services’.

As a follow up here is my experiences with 2 different companies we asked for quotes from, for our air conditioning. ( We did contact 3 companies but only 2 responded)

Staycool Heating and Air Conditioning

Following a google search we found this company only a few km away.

We visited their industrial unit and talked with their representative about units and decided that Daikin Units with a high star rating are what we required.

The representative made a booking to come out to our house and talk to my wife.

The representative discussed the locations respectfully with my wife. He mentioned that  a couple of shrubs would need to be removed and asked whether the old box air conditioners would need to be removed and whether we wanted the holes fixing. My wife told him the shrubs would be removed by me and as long as the old units were removed I would repair the holes.

He returned to his office and later that day we received a detailed quote including model numbers of the units.

The Advert From The Newspaper

We also found an advert in the paper saying:

Air conditioners supplied and fitted, ask for seniors discount, with a mobile number,

So we thought we would give that a go.

The representative called round, had a cursory look around and handed my wife a handwritten quote basically just Saying “2 Daiken  air condition units” and a price, which was less than Staycool.

My wife said he treated her like ‘The Little Woman’ who wouldn’t know anything.

When I got back I phoned him and asked if the units were of the required star rating which he verbally confirmed.

I then asked for a written quote containing the model numbers, to which I still haven’t had a reply. . . . obviously customers who want written accurate details are too hard.

Summary

Here are some thoughts about getting quotes

If you are getting quotes make sure the quotes are on the same basis. . .  For instance the same model number, or a convincing reason why a different model is being offered.

Make sure the quote is detailed for example:

  • Model Number
  • Location of Units
  • Additional Work/Work by Owner

Remember accepting a quote is really accepting a contract. . . . Verbal information about a quote ‘Isn’t worth the paper it isn’t written on.

If you are getting work done and there is a problem it is much easier if you know the address of the supplier.

Finally

We used Staycool who turned up at the agreed time, did a fast and neat installation, and even lent me a nail gun to make a temporary patch of the holes where the old air conditioners were removed.

 

Disclosure: I have not been paid, received a discount, or any got any other benefit from Staycool for writing this post.

Obtaining Quotes 1

I recently moved into a new house and wanted both solar power and reverse cycle split air conditioning so I decided to try a couple of those ‘We will get you quotes’ services with mixed results.

Solar Quotes – Reasonable Outcome

What was good about the service

  • Great site with absolutely lots of free unbiased general information for anyone thinking about solar power.
  • Lots of references from customers on the contractors that ‘Solar Quotes’ recommend.
  • Lots of information on the various solar panels and inverters including quality ranking.
  • Ability to communicate with the owners of the site and ask questions.

What was disappointing

  • I only received a single quote rather than the three I was expecting. . . . We live in Dandenong not a rural area!

Overall

The quote I received from the Solar Quotes Company ( Essential Solar ) was less than the quote from the company that installed a system in my last house, for comparable quality. so I used Essential Solar

Melbourne Air Conditing Quotes – Hopeless

What was good

Nothing.

What Was Disappointing

  • Poor website with very little information about selecting units or any sort of references.
  • In spite of sending my details twice I did not receive any contact from companies wanting to quote.
  • No way to communicate by email, or phone, with the owners of the site to resolve the problems.

Some Final Thoughts

All these ‘We will get you quotes’ sites rely on the company that gets the work paying them a finders fee. . . . This means that good companies that mainly rely on word of mouth may not use these service.

Without publishing reviews of customers on the web site how will you know those providing quotes are capable of providing a quality job rather than just competing on price.