Problem with progress payment

onlyhope · Apr 28, 2022 8:28 pm

I’m now starting to get worried my broker made a mistake or misunderstood what I asked him to do.

I’ve got a construction loan worth 600K with a house initially costing 450K with 100K of upgrades and 50K left over for landscaping. The 100K of upgrades includes flooring, kitchen, rendering etc which when we applied for the loan was told to the broker (as many of the upgrades involved third parties but involved the builder).

He said everything was good etc and we signed the papers. We checked the unconditional approval and he applied for the loan of 450K for the house and the remaining 150K to be released on quotes/invoices at the stage. We told him the quotes were all part of the builder and only the landscaping was a seperate party and he said yes that’s no problem and not to worry.

So last week the builder asked for 20% the entire amount (so 20% of 550K) and the bank has refused to pay the progress payment as the contract says 20% of 450K). He said he will get back to me but I think my broker has screwed us. Can anyone let me know what to expect or if they have been in a similar situation and what happened? This is with the Commonwealth bank.

StructuralBIMGuy · Apr 29, 2022 10:51 am

onlyhope

I’m now starting to get worried ......

If you withdraw or have the agreement cancelled you could stand to loose a lot of money, get legal advice also its sounds like you may not have the funds to fight the builder

onlyhope

So last week the builder asked for 20% the entire amount (so 20% of 550K) and the bank has refused to pay the progress payment as the contract says 20% of 450K).

Hard to say but builders are suffering financial stress and cash flow problems, most will get you pay more up front and hope to trade out of there difficulties.. chances are trades, material suppliers and banks have an idea on how the builder is travelling. The signs are trades leave building sites, leave messages on your site (for social media) and don't even turn up, suppliers put builders on 7 days accounts or worse stagger supply, banks with tighten credit for those owners building with insolvent builders,etc,etc

onlyhope

He said he will get back to me but I think my broker has screwed us. Can anyone let me know what to expect or if they have been in a similar situation and what happened? This is with the Commonwealth bank.

If you pull out the broker will loose his lucrative commission, if you continue he will probably get paid less. ( take a hair cut. Humour) Unfortunately you bare all the risk and will pay through the nose by way of building variations.
Again you will need legal advice as to which way to go.
OT, as things get progressively worse it will become very clear as to which way you need to proceed
Cheers
Chris

building-expert · Apr 29, 2022 5:25 pm

What state are you in?
It seems your progress payments on the building contract were not properly formulated. What stage is 20% for?

onlyhope · Apr 29, 2022 6:19 pm

Hi mate I am in NSW and it’s for the first payment (Slab) - the broker got back to me and said the bank is reevaluating the loan but there’s no need to at this stage resubmit the whole application so someone from the bank visited the site and called the builder. Will find out the situation on Monday but he says it happens commonly these days and not to worry.

The loan amount was not stretched in anyway and I can easily borrow more if I wanted to

StructuralBIMGuy · Apr 30, 2022 11:19 am

onlyhope

The loan amount was not stretched in anyway and I can easily borrow more if I wanted to

And that's what they will want you to do, by way of post contract variations and banks don't want a part of it.
As soon as you capitulate, then you become a soft target for cash advancements that help fund their other projects and increase their profits all in the name of Covid, Supply chain problems, Trade & material shortages, Ukraine war, Fuel cost increases, hyper inflation, what else is there ahead in the Gouging Pipeline (humour).
OT What you need to be able to do is scrutinize Quantities and Price increases, make informed decisions, you can't honestly do that unless you own the drawings, data/proofs, etc.
Goodluck

WillCallaghan · May 02, 2022 9:44 pm

onlyhope

I’ve got a construction loan worth 600K with a house initially costing 450K with 100K of upgrades and 50K left over for landscaping. The 100K of upgrades includes flooring, kitchen, rendering etc which when we applied for the loan was told to the broker (as many of the upgrades involved third parties but involved the builder).

He said everything was good etc and we signed the papers. We checked the unconditional approval and he applied for the loan of 450K for the house and the remaining 150K to be released on quotes/invoices at the stage. We told him the quotes were all part of the builder and only the landscaping was a seperate party and he said yes that’s no problem and not to worry.

So last week the builder asked for 20% the entire amount (so 20% of 550K) and the bank has refused to pay the progress payment as the contract says 20% of 450K). He said he will get back to me but I think my broker has screwed us. Can anyone let me know what to expect or if they have been in a similar situation and what happened? This is with the Commonwealth bank.

Hi,
First post here.
I’m a quantity surveyor and prepare Progress Payments for builders everyday.
The $150k you mentioned: was that noted in the contract as Provisional Sums or Prime Costs?

If so, the bank should have known the loan was for the full $550k - otherwise, they would have said to you where are you getting the extra $150k from?

Also, 20% for the slab seems high. Unless of course your house has a big footprint.
Slab claim is typically 10-15%

A lot of builders are ‘front-loading’ their State Payments to get as much money as possible early in the build.