Upfront costs reasonable? Home warranty, CC and other report

Hi all,
We are commencing our custom build in Sydney and have been asked to pay upfront costs of approximately $20k to cover:
- home warranty $7.5k
- construction certificate $3.5k
- geotech and engineering reports
- driveway and roadway applications through council
- dilapidation reports


Does this sound reasonable? I don’t have a benchmark to compare so any thoughts would be appreciated !

Thank you!

When I see builders going back to clients like this
I wonder if are they insolvent?
What do I do if my builder is Insolvent?

When you say 'upfront costs' do you actually mean a deposit after signing a contract?

Hi Houselog

everything other than then home warranty ( now HBCF - home building compensation fund) sounds correct.

My understanding, and I could be wrong is that the builder is allowed to get a 5% deposit from you but you can not pay a cent more until they have given you a HBCF certificate.

So if your contract is $500,000, they are able to take $25,000 from you, and then they get the certificate then you pay another $25,000.

That excludes the bonds and other fees you pay to council though.

I hope that helps a little.

Also, there is an HBCF calculator on Icares website which is a good guide. You need to add around $1500 to the figure it spits out though as the insurance broker needs to be paid

Cheers

Simeon

Correct, it’s the bulk of the deposit!

Hi Simeon,

Thanks for your input and suggesting the icare calculator - the premium calculator came out to $7k! If this is the same thing as the warranty charge then it’s not far off.
You’re Correct, the 5% deposit was approx $35k, but as we are not obligated to pay it until we get the insurance certificate, we have opted to pay for any cost that is required in prep for the demolition and build process.
I guess $20k may be reasonable then!

No problem at all.

Yes that is the correct insurance so it sounds like you have a very good builder who is only charging you his costs.

Good luck with your build

Simeon

We just paid the whole 5% upon contract signing (not even sure we had an option to pay just their costs).

Thanks for responding Strannik!
I think the default is to pay the 5% deposit. But we double checked the HIA contract and it says you don't actually have to pay the 5% deposit until the warranty insurance is in force and the certificate of insurance is in place. So we just paid for any items that needed to be done to get this process going

makes sense. i just figured that i'll do my part as fast as I can, so that the ball is in builder's court and this cannot be used as excuse for delays/cost increases. the interest we would've saved on it is just pocket change in the grand scheme of things.

Instead of the builder asking you for your bank a/c details and whether you have sufficient funds?
Maybe you should be asking the builder the same question , find out how many projects he has on the go that have stalled
LOL, I don't have enough money in my builders a/c to pay for the indemnity Insurance policy (humour)
should be of great concern to you... seriously find another Builder
Cheers
Chris

Thanks for your comment, interesting point raised! I'm not sure if it is just NSW, but I did enquire other builders and they all asked for 5% deposit as well on signing of contract