Custom-designed home process query

[Perp]

After finally winning our dispute with our insurer - only took a bit over 2 years to get a settlement from the Jan 2011 floods - we're about to embark on a demolish and re-build process. We've selected a builder that we're happy with, and they've presented us with what they call a "compliance package", but seems to basically be a contract for beginning this process.

It includes geotechnical testing, contour surveys, drawing up plans (various levels of detail, through to working drawings), applying to Council for building approval, selection of finishes, cost estimate, etc. (And a bunch of other undoubtedly government-mandated steps such as OH&S Plans etc.)

From what we understand, we pay for all these steps to be done, then once all those steps are completed, they put the drawings etc. out to tender to their subbies, and if we're happy with the price, then we sign a contract for the build itself.

The quoted amount for all the initial steps outlined is around 5% of total contract value.

Is this typical? We've never done this before and have no idea. It's not a problem for us and we trust the builder, just want to make sure we're not forgetting to ask important questions, etc.

 

[Aaron Sice]

seems pretty straight forward - you're paying someone to project manage the situation.

5% including all fees and charges? hard to gauge. further q's needed to ask, like >

is the 5% just project management or does it include all lodgment costs?
are you building in a commission from the chosen builder?
who is doing the design work? is it a collaborative process?

an architect will charge 4.5% of total project cost including project management but excl lodgment fees.

 

[Ausprop]

so you are going to rebuild in an area that has flooded?
will anyone insure you again? or will it be up on stilts?

 

[Perp]

is the 5% just project management or does it include all lodgment costs?

This fee covers these steps:

• Site inspections & analysis
• Registered Plan
• Sewer and drainage plan
• Wind classification & report
• Soil test, classification & assessment report
• Contour survey plan
• Preliminary drawings for review
• Prepare a Preliminary Estimate
• Working Drawings (Ready for Building Approval)
• Energy Efficiency Certification
• Safe design report
• Engineer Design & Certification
• Appointment with our Selections Consultant
• Preparation of the Contract and Specifications
• Lodge Plans and Assessments for Building Approval

This seems like a "pre-contract". Initially, there's no commitment to anything beyond going through the above steps. Then, as I understand it, they draw up a contract for the build. They emphasise that the overall project estimate they've already given us includes the above, i.e. the build contract would be reduced by this amount and should be ~95% of the project budget.

so you are going to rebuild in an area that has flooded?
will anyone insure you again? or will it be up on stilts?

We've looked at repairing, rebuilding here, selling as land, selling as unrepaired house, rebuilding elsewhere, buying existing elsewhere, and all combinations thereof. Financially, the best option would be to sell the unrepaired house and buy an existing house elsewhere. But in terms of quality of life, we've wanted to build for a long time, we love the area, and there's very little land available in the area with similar amenity unless we spend several hundred $K more. So if we're going to build, building where we are is the best option, and that's what we've decided to do.

The new house will be on very big stilts, yes!

In any case - something I didn't realise until going through this debacle - home insurers have to continue to provide you with insurance, once they've accepted your custom at the outset. As I understand the insurance laws, unlike car insurance, home insurers can't drop you due to claims history (barring fraud etc.). They can't drop you for being a victim of a natural disaster; it's up to them to assess that risk *before* they accept your custom.

They can however put up the area's premiums. After our first claim in '09, our premium dropped about 10%. This year, it's trebled. But I believe that's true of our whole suburb (or postcode?); again, they can't penalise an individual for claims history, but they can "reassess the risk of an area".

As we're going up well above the 100-year-flood level, we will shop around and may consider forgoing flood cover.

 

[Aaron Sice]

sounds pretty reasonable.

i mean the reality is those costs might only come to 2 or 3 percent total - but 2-3% for someone else to manage and collate it? i dunno - sounds good!