Constructing a new Home and its Risks!

Hi All,

A family member of mine is going to start the construction of their new home in the coming months. They have thus far shortlisted about 3 builders and going through the technical due diligence etc.

I know that there is also a commercial risk to projects like this, e.g. the company goes bust, legal action etc. I also know from experiences from friends that some of these builders don’t build to spec and don’t turn up for work causing delays and so on even though it is all stipulated in their contract.

I was wondering what was the best way to protect oneself against such risks? I find it also difficult to analyse these companies are many are private and their accounting books are not open to public.

Any tips/thoughts would be greatly appreciated. Thanks.
 
We are currently building with one of the major builders and to this point (touch wood) I have been pleasantly surprised with their performance to date.

I am not sure what you can do to protect yourself apart from your own due diligence, internet searches, feedback from other customers, etc.

What we did learn is you need to allow at least 50% on top of the quoted price to finish the house (things like the slab are not included in the base price).

Plus the larger the house, and the more changes you make, the more expensive and complicated the process can get. Ours is a pretty basic 4 bed single story house which, apart from some initial gripes through the contract stage (which invovled a number of changes and additional costs we were not advised of), I have been very happy with my dealings with them.

Even to the point that they have refunded over $6.5k due to the soil tests coming back better than expected, and hence the slab was cheaper.

Unfortunately though as I have read it can depend upon what area you build in, who your supervisor is, etc. etc.
 
Get your solicitor, to put a liquidated damages clause in and get them to sign it. This will make sure that any days they over budget and time it comes out of there pocket.

Builders get real funny about this because it puts them in a very vunerable position if you have to take them to court.

And don't forget there is always the 10% contingency and the variation work.

To stay safe always have about $20k to $30k extra, because builders can't help it if materials go up, for us sands are going up every month at least by 75c to $1, we just had a $5 increase on blue metal (used for your inground plumbing).
 
Get your solicitor, to put a liquidated damages clause in and get them to sign it. This will make sure that any days they over budget and time it comes out of there pocket.

Builders get real funny about this because it puts them in a very vunerable position if you have to take them to court.

And don't forget there is always the 10% contingency and the variation work.

To stay safe always have about $20k to $30k extra, because builders can't help it if materials go up, for us sands are going up every month at least by 75c to $1, we just had a $5 increase on blue metal (used for your inground plumbing).

If you go the LD route expect the builder to put in the same if they finish it early.

Where are you Lupo ? in WA we cant pass on price increases when it is a residential contract ?
 
Well you have to be realistic with the timing, that comes down to the customers common sense.

In Sydney there's a seperate variation contract that builder should give you, because otherwise you or he can be out of pocket for materials going up.

Because I'll tell you now as an example, if you get 6 ton Sydney sand, 35 builders cement, 10 clay and some bycol, this amount of product has just gone up in a total of $350+ more to pay for the same product.

And that is not in our power to change the prices because it comes from the people that make it, eg Boral, Austral Bricks and so forth. So if there's a builder thats not giving you a contingency of 10 or 15 percent be very wary of them.

I can build you a 2 story house brick veneer on a 400sqm block for $200k, yes that quote will hold, will the materials be the same price next month? Maybe, maybe not, thats where your contingency comes in, this is why some shonky builders go broke and have no financial knowledge on whats happening around them, and if this happens builder goes bust and your house wont be finished, some people think the quote is suspended in some paradox where the world stops and inflation ceases to exist.

Not the case.
 
We are currently building with one of the major builders and to this point (touch wood) I have been pleasantly surprised with their performance to date.

I am not sure what you can do to protect yourself apart from your own due diligence, internet searches, feedback from other customers, etc.

What we did learn is you need to allow at least 50% on top of the quoted price to finish the house (things like the slab are not included in the base price).

Plus the larger the house, and the more changes you make, the more expensive and complicated the process can get. Ours is a pretty basic 4 bed single story house which, apart from some initial gripes through the contract stage (which invovled a number of changes and additional costs we were not advised of), I have been very happy with my dealings with them.

Even to the point that they have refunded over $6.5k due to the soil tests coming back better than expected, and hence the slab was cheaper.

Unfortunately though as I have read it can depend upon what area you build in, who your supervisor is, etc. etc.

WoW!

50% on top of the quoted price is a big margin of safety
 
It all depends on who the builder is. We built a large house in 2009 with Allcastle Homes.
Here are few costings:
Base price - 232K
Site cost - 31K
Council - 13K
Variations - 60K (it is a lot but we did change a lot- see attached)

Finally their tender price came to 351.3K. However, only increased to 356.6K at the end.
 

Attachments

  • Variations.pdf
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