Browse Forums Building A New House 1 Apr 17, 2009 4:14 pm Hi All, Just want to know what you all think about Project Builders charging an arm and a leg for variations...esp anyone who has built with Allcastle. I wont go into a blow-by-blow description of each of the examples we have found but it's making us extremely nervous about going forward. We have our Selection appt at the end of the month and a couple of weeks ago I contacted their Head Office to find out who their suppliers were so I could actually see some alternatives to the standard fixtures and fittings. To our horror we discovered, for example, the taps which we were quoted $370 each as an upgrade retail for only $90!!! We now have example after example of this type of thing. Some prices we have been quoted are 85% higher than retail. In addition there seems no formula to the way in which these margins are calculated. To be fair, we realise builders make profit this way and some margin is to be expected, but in many cases we have found the mark ups are completely outrageous. Before we take this up with them I would love to know what you think and what if anything we can do...and if anyone says 'lay back and enjoy it' I will scream!!!!! Built a (highly) modified Allcastle Maxworth 38.7 in Sydney. Re: Variations and Profiteering 2Apr 17, 2009 4:23 pm Hi pixilated, We found the same thing as you did, so to let the builder know that we knew our prices, my opening statement was always : I have priced ....... and it's $.... can you match the price, or we can buy them ourselves and we will coordinate with the Project manager when they are needed for installation. That seemed to work, I found the next item quoted was a lot cheaper because, basically, they want to get a cut on the variations and a little is better than nothing so they might agree to a lower price. I think they try their luck and if they see you are on the ball they will backtrack. Good luck T. Re: Variations and Profiteering 3Apr 17, 2009 6:39 pm A builder should never charge more than the retail price for an upgrade item. For a start, they are normally substituting, so saving the cost of the non-upgrade item. Secondly, the builder would get the part for much less than retail, so their "profit" can come from the difference. Demolition August 2009, Construction Started September 2009, Completed December 2010 Re: Variations and Profiteering 4Apr 17, 2009 8:00 pm Thanks for the feedback. In NSW, builders (and any reseller for that matter) can charge whatever they like since there is no maximum price. This means they can indeed charge more than 'retail'...sad but true It's really a matter of what we do from here knowing the practice seems widespread (moreso than we ever thought!) Built a (highly) modified Allcastle Maxworth 38.7 in Sydney. Re: Variations and Profiteering 5Apr 18, 2009 9:11 am we were told it was standard practice that if a client wanted a differing item that was not part of the builders regular price they would charge 25% on top of the price of the item. That's the standard profit markup. Re: Variations and Profiteering 6Apr 18, 2009 9:24 am We are figuring in any of our upgrades we should not pay more than retail - this means that builder gets the difference between trade and retail price AND the cost back of whatever we are substituting - sure we could haggle less with retailer and get better price but then would not be covered by builders insurance and more of a hassle for us to have our own insurance - so this is how we are approaching pricing with builder. But we have not upgraded much eg our door handles rrp $50 each - replacing handles that are rrp $20 each, builder charging us $50 each to upgrade, so they are making at least $30 a handle by a rough estimate but then with our basins RRP of our upgrade is $269 but the standard rrp $99 but they are only charging us $100 upgrade cost. Our approach was to cost everything by retail and be sure we were not paying more and in some cases it was less we are ok so far.........so don't lay back and enjoy but figure out what you can be comfortable with Re: Variations and Profiteering 7Apr 18, 2009 10:05 am Casa2 A builder should never charge more than the retail price for an upgrade item. For a start, they are normally substituting, so saving the cost of the non-upgrade item. Secondly, the builder would get the part for much less than retail, so their "profit" can come from the difference. The opportunity to stuff up increases by a factor of 10 when builders work outside the box. The price hike has 3 reasons, firstly to discourage rampant customisation by home buyers, secondly to pay for stuff ups as changes take some special looking after, and thirdly to increase profit. With insufficient margin they would prefer not to do it. Ed "ECOECO" At 'EcoEco', we design windows, we design the best windows, we do it for you, so that when you’re happy we are happy. Tel. 1800 326 326 Re: Variations and Profiteering 8Apr 18, 2009 10:09 am It's can get pretty complicated. I'm not going with a particular formula as such. But simply by pricing things and going with what I felt comfortable with when the price came back from the builder. Overall, PD haven't been too bad going by the idea above (Casa2, bluesteel) of not paying more than retail of the upgrade item. We picked one door that cost nearly $900 but we are only getting charged $500 to upgrade. And our entry doors cost 2k retail but we are being charged around $1400 upgrade so I'm feeling happy. The overall consensus seems to be that the project builders have a pretty low margin on their base price, but a massive margin on their upgrades. The way we selected what we would and wouldn't do was to prioritise in this order. If it couldn't be done after handover. (major structural) If it would be very difficult to do after handover. (minor structural, kitchen configuration, etc) If it would be a PITA to do after handover. (cavity sliding doors, changing cupboards to drawers, etc) Easy to do after handover. (adding overheads, benches, light fittings,etc) The other major issue is: If the builder does it and there's something wrong... it's the builder's problem. We took that into consideration with a lot of our decisions. After we looked into it, most things we just got the builder to do. For example, it cost us 2k to have concrete added to our alfresco and portico (about 30m2, or just over 3sq). We could probably get it done cheaper after handover, but not much cheaper. This way it's poured with the slab, if there's problems with it, the builder has to fix it, etc, etc. The other thing is keep your eye on the bigger picture, the overall cost. Some upgrades will be reasonable, even cheap, others will be completely outrageous. Try not to get hung up too much on the individual cost of things and keep an eye on the overall cost. As long as you remain comfortable with this, and believe you are getting value for money for the entire build, it makes it easier to accept the sometimes ******* pricing. This helped me come to terms with my tiling cost.... almost! I leave you to fend for yourself, figure things out yourself. Terrence Malick Re: Variations and Profiteering 9Apr 18, 2009 10:14 am I agree with Jo. Just don't forget, when you ask for an upgrade that you get to take out the cost of the original item before you substitute a new item. So moving from a stacker door to a bifold would be...
Ed "ECOECO" At 'EcoEco', we design windows, we design the best windows, we do it for you, so that when you’re happy we are happy. Tel. 1800 326 326 Re: Variations and Profiteering 10Apr 18, 2009 10:34 pm Thank you to all of you for your constructive and wonderful feedback I wish I could make sense of the formula the builder is using because it seems quite ad hoc. There is no "standard 25%" markup -- it's all over the place. As for not paying more than retail..it's clear in some instances we will be and in NSW this is allowed as there is no legislation re maximum prices. Joles..I totally agree with you on project builders' "low margins on base price and massive margins on upgrades". That is certainly what the builder appears to be doing. Like you, we have prioritised what's acceptable and not. For instance we are paying for increased ceiling heights over the standard simply because this can't be changed once the house is built. Doh! I can also see a great deal of sense in what you say about not getting hung up on the individual items but they do add up. Some things are clearly errors such as being quoted to upgrade the kitchen tap to a mixer ($270) when the standard inclusion in the kitchen is a mixer!!! Just goes to show you have to check, double-check and then re-check absolutely everything. Thanks again to all for the reassuring words. Pix Built a (highly) modified Allcastle Maxworth 38.7 in Sydney. Re: Variations and Profiteering 11Apr 19, 2009 5:30 am We are going on the theory of be happy with your final build cost. Try to not ponder on all of the upgrades etc as you will just end up disaapointed in their profiting. Agree with Ed on reasons they don't want you to upgrade but at the end of the day it is your house and don't be swayed off doing it if you can afford. Casa, if only they never charged more than retail, then many of us would have at least a good indication of who much a variation will be. Some of their quotes are way over and like many have said, no real formula. We have some really good examples in our contract of the builders do a nice little earner but as unhappy about it as I am, our overall build cost plus the cost of the land is very good value. Built 36sq Plantation "Retreat" on 4460m2 at Spring Mountain, Qld In Living and landscaping.. >>> ... http://retreatspring.blogspot.com Re: Variations and Profiteering 12Apr 19, 2009 8:36 am Pixelated Thank you to all of you for your constructive and wonderful feedback I wish I could make sense of the formula the builder is using because it seems quite ad hoc. There is no "standard 25%" markup -- it's all over the place. They all have a formula. The difference in price is down to: -
2) Reimbursement value of the item deleted 3) Actual cost to the builder for materials (which is way different to retail as retailers discount differently to builders - so one one product might have a discount to builders of 40% and another 10%) Ed "ECOECO" At 'EcoEco', we design windows, we design the best windows, we do it for you, so that when you’re happy we are happy. Tel. 1800 326 326 Re: Variations and Profiteering 13Apr 19, 2009 10:56 am The error after error we have already picked up in their pricing (which they have acknowledged) indicates, to us at least, that there's an element of: a. Oversight and carelessness -- which makes me suspect the 'ad hoc' element to pricing; b. An attitude of 'How much are these people willing to pay?' and 'How much can we get away with?' ; c. Nuisance factor -- that is, 'Let's price this widget outrageously because then we won't have to bother with it' I'd like to think there is indeed another element to builder's pricing which is a little more scientific or organised than what I've outlined above but sometimes I'm not so sure Pix Built a (highly) modified Allcastle Maxworth 38.7 in Sydney. Re: Variations and Profiteering 14Apr 19, 2009 11:41 am I asked my builder how much would it cost to upgrade from the oval basins in the bathrooms to square ones. He replied back in my email saying "square basins with pixer taps $290 each". I'm really new at all this kind of stuff, but the way I am thinking is that the orginal basins were already accounted for in the house price. Do you think the $290 quoted is the difference between the original price and the upgrade price or am I paying 100% for the new basins all over again?? Or is my thinking totally way off?? I had in my head that it might be an extra $100-150 per basin, but not $290 per basin. What do you think?? Deposits paid 29/4/09 Land settlement 12/08/09 Build contract signed 24/08/09 Colours done 28/09/09 BLOG-http://www.eljaysbuild.blogspot.com/ Re: Variations and Profiteering 15Apr 19, 2009 12:10 pm Eljay, It was this very thing that got us checking and double checking everything. We asked who the builders' suppliers were and that's when we were able to work out, based on RETAIL prices, that things were not quite right and there was no 'method to the madness'!! The way it's been explained to us by the builder is that if you upgrade from a standard item, say a vanity, then you pay the difference between the cost of the original item and the cost of the new item. You are right to suggest that the cost of the original or standard item is included in the house cost. For example, after we began pricing things we found the difference in price between the standard vanity and their upgrade was $13 (retail) yet we were being asked to pay hundreds of dollars .. Why????? Both are supplied by the same company, indeed the upgrade is purchased regularly as a standard in some of the builder's other homes. It seems to us that this is either a mistake or an outrageous ripoff. There is no extra labour involved, the builder is dealing with the same supplier for both items and it's neither here nor there for the builder to order a vanity with matt doors vs polyurethane .. they've told us that. This is just one example. It goes on and on and on -- so I won't bore you!! Others on this thread have suggested focussing on the big picture, that is, rather than stressing out over what appears to be blatant price gouging the overall cost of the house is the most important. That's the advice I think is the most sound and what I intend to do. However, when I discover prices that seem wrong or outrageous I am certainly going to question them. Pix Built a (highly) modified Allcastle Maxworth 38.7 in Sydney. Re: Variations and Profiteering 16Apr 19, 2009 12:43 pm Pix, Another possible reason is that builders get massive discounts for some items put onto their standard spec. So, widget X retailing for $100 is available to the builder at $10 coz it's on their standard spec, whilst widget Y retailing for $100 is available to the builder at $80 coz it's not in their standard spec. Feature tiles is one great example that springs into mind. By buying in bulk, tiling company can reduce their price by heaps. As Ed said, the headache factor for the builder also comes into play. For example, I'm sure if you wanted to paint each room a different colour, it'll cost you a fair bit even if each different paint colour costs the same. However, I'm not going to dispute that some profiteering do go on in the building industry (but they're not the only one). Chris Re: Variations and Profiteering 17Apr 19, 2009 2:13 pm I can understand some points from both sides. BUT if it were just a few dollars and not hundreds I wouldn't worry about it. Why should we have to pay twice for something like the basins?? I could be using that money to go towards upgrading the tiles or bricks. Can you say to the builder to take off the cost of the sinks, basins, tapware etc and go out and source them yourself?? Surely that would save a few hundred dollars?? I'd much prefer to use that money towards something substantial such as a different catagory of brick or the plumbing to hook up the water tank. I might pose this question to the builder I'm thinking about next weekend and see what he says. Deposits paid 29/4/09 Land settlement 12/08/09 Build contract signed 24/08/09 Colours done 28/09/09 BLOG-http://www.eljaysbuild.blogspot.com/ Re: Variations and Profiteering 18Apr 22, 2009 4:46 pm Hi, A good friend of mine built with Allcastle and they have been so so happy. She found their pricing to be more then reasonable and to be honest she believes she saved over $150,000 if she had of gone to another builder. They also get a huge resale price for their homes, i think they got the record house price in Epping last year for the owner who was very happy. I am sure if you shopped around for each item with any builder and you went and paid cash to the supplier and cash for the tradesmen to install you may get some things cheaper, however from what i have heard they are an honest company and it is the overall price you pay at the end that matters. It seems very clear to me that your contract states that a security account does NOT need to be established so the answer to the builder is NO. If in doubt find a contract… 1 8505 The fastest thing a builder will do is bank your cheque, those systems work perfectly with lightning speed, everything else is slow burn. Just the way it is. 1 8706 Can someone please offer some advice? Im DESPERATE. Because I'm completely and utterly exhausted. How long are variations taking with other companies at the moment? We… 0 18466 |