Make Sure You READ Your Contract!!

I know plenty of people that have a habit of just skimming over the details just so they can sign the "bottom line" and get it all started.
This could be a fatal mistake!!!
We are going out today to sign our contract but I have read through it and can not see anything that gives me a "out" if our finance is not approved. I phoned the sales rep and he confirmed.. "No, the 5% deposit is NOT refundable as we start using it for items such as council approval".
Hmm.. either way I would have thought they would do NOTHING until the land is titled and they have access to it. I have instructed them that I want a "Hold" put on it and nothing else is to be done until such time as our finance has been approved. If the bank says no, then I want my deposit back.
They are using a HIA contract but from what I can see they have modified it.

Your title made me laugh & you're totally right. I read through ours and asked the sales guy a ton of questions - he commented that he didn't know anybody that had actually read through it.

Our soil testing, footings report, master plan, site plan and council application were all done before the title was issued. (though the council wouldn't actually look at it until the title was issued) The deposit we paid was $2,200, so a lot less than 5%, just make sure you're 100% comfortable you'll get finance I guess!

3 hours today to sign our contract lol.
That was 3 hours sitting at the sales reps desk going through almost every item.
Its kind of funny when you ask a rep certain questions and they "believe" the answer they have is true and correct.. Like the issue about using our deposit for such things as council approval. Interesting, because you won't be going to council until the land is titled pmsl.
Anyhow.. we got quite a few changes to be made and also had extra conditions even written onto our deposit receipt.
Basically.. there is to be NO spending of funds until such time as I can provide unconditional finance.
The way it should be anyhow.. some builders seem to think they are above us and can do what they want.

We paid nothing, not even a deposit, until our first progress payment which was floor slab complete.

Obviously if we pulled out we would be liable for soil tests, council development application, slab, etc...

Standard HIA contract. Our 4 progress payments equal the total cost of build.

My husband read the contract several times and spent hours on the Internet reading clauses, explanations, etc...

Lynne

Who are you building with LynneB?
Not many do the "no deposit" thing anymore.

My admin guy was surprised we read our mba contract and also surprised with some of the questions i asked. He acted as if no one has read it either. I honestly dont think he has read it.

Robinson & Fuller Homes

There a long running local family business where the owners are also the tradesman (i.e. builder, carpenter & plumber).

My husband also liked their progress payments stages & percentages.
Floor slab complete 15%
Roof frame complete 25%
Close up complete 25%
Practical completion 35%

Any issue we've had has been rectified with zero hassles. Our bank was late paying the close up complete payment and they didn't hassle us at all. Obviously they wanted payment, but that didn't stop them continuing working on our house.

Lynne

Might be a Dubbo thing - Brett Harvey is the same. Not a cent until after slab.

From memory with allworth it was $1600 down then nothing till slab completion.

Didn't you pay a deposit with PH prior to this contract roomeat? Surely after that experience you realised most volume builders deal this way of locking you into deposits?

We like one of the guys above paid nothing until plans we signed off spec was 100% done and plans were sent to council we had 10 months of back and forth plan amendments and spec amendments and we were all aware that if we backed out for any reason it was doable however would pay a gratuities for the work already done on plans and specs being it was a one off custom design.

We held off signing the contract until we had finance.

You could do the same not pay deposit and wait until you have full approval but if bank finance you know you won't get approval until council signed plans are produced.

we paid cash for first few stages while bank did their thibg after we were approved to stop delays

Yeah aware of how it's done from previous experience, but even PH didn't expect what Clarendon do lol.
Either way I made sure my deposit was safe until finance is approved.

A bit of a catch 22 situation. You won't get unconditional finance until the lender has a fixed price building contract, council approved plans, specs, etc. For that to happen, the builder needs to do the plans, soil tests, and normally will require some funds from you. So while it may not be the 5% or so deposit, some money will most likely be spent.

Cheers

Tom

Yes that's correct.
And I was happy to accept that. Have previously paid first 2 deposits totalling $3000 and that covered everything such as soil test and plans.
But... The 3rd deposit which totalled $6000 was also according to Clarendon non refundable.
THAT is a crock of 5hit. They can't hold money like that and use the excuse that it will be used for council approval (which is NOT needed for finance) and other things.
These steps can't be taken until the land has been titled, which, won't happen until finance is approved.
Yes, it is a catch 22, but not a issue that should be of any concern from the clients side.
If my finance was not approved and a builder tried to hold my deposit on grounds that they used it for tasks that couldn't have been done I reckon I would have a good chance of winning that in court.

Maybe double check with your bank about that anz required us to have council approved (certifier) plans before they would unconditionally fund the loan. They would do the full pre approvals and everything with plan and spec but would draw up loan docs until council approved plan was submitted.

How can you have council approved plans without a block of land to put it on?
The land cant be titled until its paid for, which in turn requires a loan lol.

then you can't get finance until you have the land, you need presumably finance on the land then the house, why commit to a builder before you own the land??

Each time ive built ive found the land then the builder not the other way around?

I have the land held on a deposit pending finance.
Im not about to "buy" land if I cant build a house on it.
No different to house and land packages. Your buying both together not one first.
To be honest, Ive never heard of it done any other way. Every house my dad has built under finance has been pending that finance. He's never had council approval done prior.

So you reckon the bank will draw a construction loan for you before you have council approval to build that house? I think you will find this wont work. You will get land approval and finance after they do the land valuation and you fix any possible deposit or LMI issues then you can get what finance you need lined up pre-approval and again a valuation this time on the house you have speced up and plan on your block again fix any LMI issue if valuation comes in lower, but they will not 100% approve your construction loan and draw it until the council approves the plans, this usally requires your first progress payment the 'deposit' to be paid to the builder to put all applicaitons in this covers the specificaiton paper work, contracts and plan drawing, engineer reports and soil tests etc once the plans are approved the bank can start drawing down the loan and that is 100% finance approved...

I guess what you are saying is you want bank to say 100% we will lend the money which they can do after you have the plans and spec locked in and the house and land valued together but the bank will always approve that pending the council approval so either way the deposit will come before the absolute final bank approval...

I think you will find it is the other way around. The land is titled and then the loan settles (in Victoria that is normally 2 weeks before settlement).


Depends on how the house and land is packaged. If its off the plan, then there is only one loan similar to buying an established property, and that is at the end of the process after the property has been built. Here the developer would have already incorporated all their costs for plans, drawings, test, etc into the final sale price, and sold the property at a fixed price.

If its buy land, then build, its two different loans. First for the land, then for the construction of the house. You need approval for the land, and then a further loan approval for the construction (which can only be fully approved with council plans, etc). You can get away with a construction pre-approval subject to condition such as valuation, contract, plans, etc.

Cheers

Tom

Which bank? Lol
Spoke with my broker yesterday and asked about this need to put the cart before the horse.. His answer was ummm.... Yeah lol
No. I do not need council approval for loan approval, no I do not need land titled or settled before loan approval. I DO however need contracts for land and builder (which I have) and also construction plans (which I also have albeit not the completed final version). What I have given them is all they need. They will now have the house valued and give me a yes or no. Simple as that.
Yes.. There is some merit to what you have explained but... It's nothing that affects the outcome of my yes or no to finance.
I get approval, builder gets balance of deposit as does developer. Builder gets plans certifier approved and they go to bank for their records and so they can make any minor adjustments if needed.
I'm no banker and I don't claim to know all there is to know about banks or how they function, this is what has been explained to me by my broker, who I trust.