Browse Forums General Discussion 1 Feb 23, 2010 8:45 pm We will be building our house soon and we are in the fortunate position to be able to pay for it in entirety by cash. Would this be a wise thing to do? Obviously we still would be signing a contract outlining everything etc. What are the pros and cons of paying with cash? Re: Pay with cash? 2Feb 23, 2010 9:04 pm naddis01 We will be building our house soon and we are in the fortunate position to be able to pay for it in entirety by cash. Would this be a wise thing to do? Obviously we still would be signing a contract outlining everything etc. What are the pros and cons of paying with cash? My concern would be it may give the builder a reason to add extra charges etc, and he wont feel bad about it. I always like to plan devels advocate and if i was in your position I would be holding my cards to my chest about what you may have or not have. This would be an even greater concern if you didnt know too much about building and what all the different stages are and what should be done in each of these stages. At least through a bank they may want to check these stages are complete. However this would means you would have to get the banks involved which may add additional costs. Re: Pay with cash? 3Feb 23, 2010 9:19 pm First thing to do is get a home owners warranty. Second is make sure that the builder gives you an invoice for each payment. Keep the payments small and regular. Maybe a little bit each week or at stages, but break up the payments into about 25 stages. Make sure you can trust the builder, get references. You can get a good discount, I should know as I am a builder. Good luck Re: Pay with cash? 4Feb 23, 2010 9:25 pm Do you mean pay with "cash", or pay outright with your own funds? I wouldn't be paying for a house with "cash" as such. Our house thread: https://forum.homeone.com.au/viewtopic.php?f=31&t=18335 Re: Pay with cash? 5Feb 23, 2010 9:29 pm borg My concern would be it may give the builder a reason to add extra charges etc, and he wont feel bad about it. I always like to plan devels advocate and if i was in your position I would be holding my cards to my chest about what you may have or not have. This would be an even greater concern if you didnt know too much about building and what all the different stages are and what should be done in each of these stages. At least through a bank they may want to check these stages are complete. However this would means you would have to get the banks involved which may add additional costs. I will be getting the price locked in before we build. I have an uncle that is a builder so I will be getting him to look over the contract before we sign anything. I would prefer not to be getting a bank involved if possible. anthonybaz First thing to do is get a home owners warranty. Second is make sure that the builder gives you an invoice for each payment. Keep the payments small and regular. Maybe a little bit each week or at stages, but break up the payments into about 25 stages. Make sure you can trust the builder, get references. You can get a good discount, I should know as I am a builder. Good luck I will be insisting on an invoice for each payment. What % discount do you think would be possible? GSK Do you mean pay with "cash", or pay outright with your own funds? I wouldn't be paying for a house with "cash" as such. Either "cash" or pay outright with my own funds. As I said I will be insisting on invoices for each payment, so do you envisage a problem with that? Re: Pay with cash? 6Feb 23, 2010 9:36 pm Quote: What % discount do you think would be possible? sorry, probably not any - I mean, there is no advantage to the builder is there - builders always get 'cash' - well, direct funds, Im sure you didnt literally mean hundreds of thousands of $$$ in actual notes - its just that the bank usually pays it and you pay the bank back. the actual outcome for the builder is the same. Im not sure about this 25 payments idea - I would be paying the standard progress payments as they are due, generally around 6 of them, and keeping your money in the bank as long as possible earning interest for you. Re: Pay with cash? 7Feb 23, 2010 9:44 pm Helyn Quote: What % discount do you think would be possible? sorry, probably not any - I mean, there is no advantage to the builder is there - builders always get 'cash' - well, direct funds, Im sure you didnt literally mean hundreds of thousands of $$$ in actual notes - its just that the bank usually pays it and you pay the bank back. the actual outcome for the builder is the same. Im not sure about this 25 payments idea - I would be paying the standard progress payments as they are due, generally around 6 of them, and keeping your money in the bank as long as possible earning interest for you. My parents paid $100k of their reno with cash & this gave them a substancial discount, about $40k on a $500k reno, ultimately the builder wrote off some of his 'labour costs' off for cash, obviously it went in his pocket and more money stayed in my parents pockets so win/win. Personally if you can do it go for it, I'd be very surprised if you didn't get a good discount. I do agree with Helyn about doing the normal progress payments though, but I'm sure all that would be set out in your contract anyway, good luck ____________________________ Bec ____________________________ Building our Balinese Resort Inspired Dream Home Blog ~ http://hagarshouse.blogspot.com/ Re: Pay with cash? 8Feb 23, 2010 9:46 pm Helyn Quote: What % discount do you think would be possible? sorry, probably not any - I mean, there is no advantage to the builder is there - builders always get 'cash' - well, direct funds, Im sure you didnt literally mean hundreds of thousands of $$$ in actual notes - its just that the bank usually pays it and you pay the bank back. the actual outcome for the builder is the same. Im not sure about this 25 payments idea - I would be paying the standard progress payments as they are due, generally around 6 of them, and keeping your money in the bank as long as possible earning interest for you. Well that was what I was thinking Re a discount. The only way I could see the builder getting a benefit was if they were to do something dodge (which I don't condone and certainly wouldn't be asking them to do) but that is a little hard when I would insist on invoices. Re: Pay with cash? 9Feb 24, 2010 9:26 am BecH Helyn Quote: What % discount do you think would be possible? sorry, probably not any - I mean, there is no advantage to the builder is there - builders always get 'cash' - well, direct funds, Im sure you didnt literally mean hundreds of thousands of $$$ in actual notes - its just that the bank usually pays it and you pay the bank back. the actual outcome for the builder is the same. Im not sure about this 25 payments idea - I would be paying the standard progress payments as they are due, generally around 6 of them, and keeping your money in the bank as long as possible earning interest for you. My parents paid $100k of their reno with cash & this gave them a substancial discount, about $40k on a $500k reno, ultimately the builder wrote off some of his 'labour costs' off for cash, obviously it went in his pocket and more money stayed in my parents pockets so win/win. Personally if you can do it go for it, I'd be very surprised if you didn't get a good discount. I do agree with Helyn about doing the normal progress payments though, but I'm sure all that would be set out in your contract anyway, good luck That works fine providing the build or reno goes to plan. If it doesn't you have no paper trail of ever paying them that amount of money. When you're talking about something so high in value, I certainly wouldn't be paying in cash and people should be aware of the risks. If you decide to pay in actual cash, then you need something written from the builder to acknowledge that you have paid. Our house thread: https://forum.homeone.com.au/viewtopic.php?f=31&t=18335 Re: Pay with cash? 10Feb 24, 2010 9:40 am If you have your own cash why dont your go owner build. More peopple would go owner build if they had the money. The first step to owner building is getting the $$$, which can be very diffult when going through a bank. I wasnt aware you where trying to achieve a discount by paying cash. Re: Pay with cash? 11Feb 24, 2010 10:49 am Quote: Well that was what I was thinking Re a discount. The only way I could see the builder getting a benefit was if they were to do something dodge (which I don't condone and certainly wouldn't be asking them to do) but that is a little hard when I would insist on invoices. Exactly. I cannot see why you would get a discount for cash? I mean when you pay a builder you can give cash, bank cheque, direct deposit...it makes no difference to the builder....why would he give a discount for cash? UNLESS he was going to do something crooked....like keep it off his books. Now if he does that, and gets caught...YOU can be joined in that action and be in a fair amount of trouble yourself. Pay by something that has an audit trail. Get receipts for everything. Re: Pay with cash? 12Feb 24, 2010 11:35 am couldnt help but say I AM SO BLOODY JEALOUS OF YOU!!! I couldnt think of anything better than no mortgage! WOW...thats awesome and I wish it were me Re: Pay with cash? 13Feb 24, 2010 1:29 pm Melrich UNLESS he was going to do something crooked....like keep it off his books. Now if he does that, and gets caught...YOU can be joined in that action and be in a fair amount of trouble yourself. Pay by something that has an audit trail. Get receipts for everything. As far as I know it's not illegal to pay for something with cash, can't think of anyone going to jail for paying cash Ultimately it's up to the builder how he wants to show it, my parents got reciepts from the builder even for the cash payments so I can't see there being a problem. Cash payments are not that uncommon in various building trades and it doen't mean someone is doing something 'crooked', I'm surprised people think it's such a big deal really. Maybe cause I'm not in a metro area, but I would find it hard to believe that it only happens with crooked tradies in metro areas. The reality is sometimes people are looking to save money and it can be a win win, my hubby is a tradie and he does cash from time to time if someone has asked to, particlarly if the person has brought their own materials & he is just supplying labour *SHRUGS*, I guess if it makes you uncomfortable than don't ____________________________ Bec ____________________________ Building our Balinese Resort Inspired Dream Home Blog ~ http://hagarshouse.blogspot.com/ Re: Pay with cash? 14Feb 24, 2010 1:40 pm It would be priceless to see the expression on the sales consultant's face at a major builder when you ask "how much for cash?" It may be achieveable to get a discount with a smaller private builder, but I don't think the big players would offer you much. Some people don't have time to do the job right the first time, but seem to have plenty of time to fix their mistakes. Build Thread Re: Pay with cash? 15Feb 24, 2010 3:40 pm Quote: As far as I know it's not illegal to pay for something with cash, can't think of anyone going to jail for paying cash Ultimately it's up to the builder how he wants to show it, Of course it is not. That's what I said, get receipts. It's not about paying in cash, it's about getting a discount for paying in cash. Best I can see, there are 3 ways to pay a builder, 1. Cash 2. Direct credit from one bank account to another 3. Bank cheque or cleared cheque What incentive is there for a builder to give you a discount for cash? There is none, all payment methods are immediate or close enough to immediate. The only reason a discount would be applicable to cash would be if he is not going to put it through his bank and books. Now that is his choice. But if you do not have appropriate receipts and you pay cash, you CAN be held party to any tax issues that arise. It is up to the builder to do the right thing but you also have responsibilities in theransaction and the tax office CAN go after you. So the question to me is not can you pay with cash, of course you can. The question is , why are you getting a discount for cash? Re: Pay with cash? 16Feb 24, 2010 4:33 pm Are you building with a project (volume) builder, or with a small more approachable one? I guess that's where the difference will be, if any. Volume builders don't care if their account is credited from your own personal account or via your mortgage. Either way, it's always paid. Secondly, volume builders will have the typical several large progress payments. They are hard to change via negotiations (but good luck trying) and therefore they go into the contract pretty much with no change from what the builder wants. So, I'd say that there is not much room for maneuver with volume builders. They have software systems which expect certain process flow. Anything that is out of ordinary and cannot be processed simply, cheaply and quickly on their "mass production line" would be inconvenient and therefore possibly more costly to them. Don't have experience with small builders, but I guess they could be more flexible. They are still bound by the applicable standard building contract (eg. HIA), but maybe their application of it can be significantly modified and still be OK under the law. My signature is distracting people from my wise posts ... Re: Pay with cash? 17Feb 24, 2010 6:19 pm Hi, Its the builder again. You can pay cash and if the builder does not put it on his records and the ATO go after him I can not see how they can go after you. You paid him a certain amount and he gave you an invoice. End of story. It's like any payment if someone does not want to declare it that is there problem and has nothing to do with you. They might just ring and ask if you paid him but that would be about it. He will only give you a discount if he is not going to put in on his books or declare only a small portion. I said to make small payments because if you give him a deposit and a large payment at stage 1 then something unpleasant happens you could lose a bit of money. Good luck Re: Pay with cash? 18Feb 24, 2010 8:34 pm What about the scenario where the builder wants proof of funds? They will want a guarantee that once you have entered into a contract with them, that you use the money for the build, not going to use the funds for buying nice cars and boats. With a mortgage and lender involved, the bank approves x amount, and then draws the progress payments. If you have cash, and the builder wants proof of funds, I suppose you could give them a copy of a bank statement, but their is still no guarantee that those funds are released/spent in another way. Still not in. Don't ask!? Re: Pay with cash? 19Feb 24, 2010 9:11 pm bel What about the scenario where the builder wants proof of funds? They will want a guarantee that once you have entered into a contract with them, that you use the money for the build, not going to use the funds for buying nice cars and boats. With a mortgage and lender involved, the bank approves x amount, and then draws the progress payments. If you have cash, and the builder wants proof of funds, I suppose you could give them a copy of a bank statement, but their is still no guarantee that those funds are released/spent in another way. I guess this varies from builder to builder. Ours asked for a statement that our finances "were in order". So I sent them a letter saying I had made appropriate financial arrangements to meet the progress payments as they became due. They accepted this and didn't ask for anything more. Re: Pay with cash? 20Feb 24, 2010 9:45 pm Wow, some interesting debate has been going on today. Basically like I said I will not ask for a discount and want receipts for everything. We were thinking that we would not go owner builder as we want to know exactly how much $$$$ we will be up for before we start. We have set ourselves a budget that we dont want to go over. makoby couldnt help but say I AM SO BLOODY JEALOUS OF YOU!!! I couldnt think of anything better than no mortgage! WOW...thats awesome and I wish it were me Yes as I said we are fortunate to be in this position, but if you knew the circumstances you wouldnt be as jealous. Richo It would be priceless to see the expression on the sales consultant's face at a major builder when you ask "how much for cash?" It may be achieveable to get a discount with a smaller private builder, but I don't think the big players would offer you much. We have mentioned that we could pay with cash to one builder and it was priceless. I had to pick his jaw up off the floor. Hi Mofflepop, I would recommend finding a building designer to prepare plans, they should design to your specified budget. The benefit is you can tender the project out… 9 20410 |