Price capping costs with PD

stevec · Aug 10, 2007 9:21 pm

Hi all
Hope all is going well in your building process.

I have a querry I thought someone may be able to shed light on for me.

I am building a house and land package with PD in the western region. My title release for the land is NOV 07 but PD could not put me down until a JAN 08 site start. In doing this they have said I must pay a $3000 Price capping allowance to protect me against the house price rising.

Since I signed the sales quote with the old price I have noticed that remarkably the house price went up $3000. What a conisdence I told the sales agaent. I am due to go to Tender and believe I should recieve the price on my sales quote and that this price capping is just a way to give them extra money for nothing.

Anyway my main querry is has anyone else had experience with a price capping charge for a site start after your land is released. I am quite happy for them to start in Novemeber mind you this was PD choice to start in JAN

Any adivse would be great because this $3000 is a total rort in my view as I have not seen others builders do it in the past when I have built.

sneakersss · Aug 13, 2007 10:05 am

I've never heard of the 'price capping' thing you're talking about so can't help you in that department. Unless it forms part of the deposit and they just want you to pay that earlier to secure the price?!

If not, then I think you should receive the price stated on your sales quote. Have you paid your initial $600 deposit yet?

Regarding site start - I don't believe you have a choice on that. They slot and book you in depending on the amount of work they have and how many people are already booked to have a site start on any given month. In our case we signed up mid October '06 and were given a March '07 start.

Also, you might find that your land title release might be delayed (as some people on this forum have experienced) and not exactly happen in Nov.

vanderlay · Aug 13, 2007 10:39 am

Havent heard of this either. Our understanding was that the $600 deposit secures your site start, promotional offer and base price.

vanderlay · Aug 13, 2007 12:03 pm

Check the "procedure of purchase" on the website and in the handouts they give at the displays!

Does say in Stage 1, Week 1 - "Client pays $600 to secure porter davis homes price, site start allocation (& promotion if applicable)"

So the $600 should lock in the price for you!

stevec · Aug 13, 2007 12:45 pm

Thanks guys

I have the followind under house type

Standard house price 211,900
facade upgrade 1700
prcie capping for Janruary 2008 site start 3000

I believe this was put in as they knew the prices were going up $3000 in a few weeks time which it did. My opinion is this is not right and I should tell them to either drop it or I am going elsewhere.

I was going to do this at Tender as by then they have done enoguh work for me to put the pressure on. My tender is in a couple of weeks.

The justified this charge by saying I needed to pay and extra $1000 a month to my site start I dont believe them.

They also said prices can only be guaranteedfor 120 days before site start or else this capping is needed. My opinion is as my land is settling in Nov and they dont want to start to Jan it is not a justified cost

Any advice would be great

stonecutter1309 · Aug 13, 2007 12:51 pm

Steve - you could always threaten with lodging a fair trading complaint.

What they are doing breaches section 52 of the Trade Practices Act - the company is engaged in false and misleading advertising!

vanderlay · Aug 13, 2007 1:14 pm

We signed up and paid our $600 about a year ago (started build in June 07), cancelled as our block had a bad soil test, found another block in november 06, signed up agian, didnt get charged the $600 for the second block and have kept our base price and promotions from the first price we were quoted! I think our base price had gone up about 6k by the time we actually started...

So what they are asking for sounds a bit ridiculous...not sure what to suggest for you though....so does the 3k they want actually go toward your house, or are they asking for 3k on top of the quoted prices??

stevec · Aug 13, 2007 1:24 pm

Thanks for your info this site is a great help

They want $3K on top of the standard price which goes to nothing. They said this was an allowance and only applicable if the price rised and if it did I would pay only a max of $3000 extra. Suprise suprise it did rise by you guessed it $3000 two weeks later.

So I must pay the $3000 extra. I paid the $600 on the old price so this $3K is a CON. If they dont withdraw it I may withdraw and go to someone else.

Would you push the point now or wait until tender which is in two weeks

vanderlay · Aug 13, 2007 1:31 pm

I would push it whenever you feel is best - point out their own procedure documents that say that the $600 secures the price. Are you comfortable with the salesperson? If not wait till tender - you will be dealing with a different person then. Obviously you have maximum leverage right until you sign that tender document!

Maybe what they are saying is something new, cause nothing like that was ever mentioned to us....cause we wouldnt have been at all happy!

stevec · Aug 13, 2007 5:07 pm

This is the reponse PD gave me. I think it is rubbish as my land is due for release in Nov but they are sold out in NOV and can only start in Jan. The land was purchased through PEET but from a PD house and land package with fixed site costs etc.

Please let me know if you have any thoughts. I have given PD to COB tomorrow to scrap the capping as when asked today they could not justify it only saying this is the charge put on by the administration section

The reason why your sales quote has a $3000 price capping included in it is because at the time you purchased the Bridgeport we where selling into a November site start and your land was not due to be ready, therefore going of the information Ricky had he sold you into a January site start which is 3 months ahead of what we where currently selling into and that point in time. It is current Procedure for all sales consultants to include a Price Capping allowance if a clients books into a site start ahead of what we are selling into because our prices may increase by the time we begin construction in that particular month. If the price does not increase we will credit back the client the capping allowance and if the price increases over and above the capping allowance then the client will only pay the allowance and not the full house price increase.

vanderlay · Aug 13, 2007 5:25 pm

stevec

This is the reponse PD gave me. I think it is rubbish as my land is due for release in Nov but they are sold out in NOV and can only start in Jan. The land was purchased through PEET but from a PD house and land package with fixed site costs etc.

Please let me know if you have any thoughts. I have given PD to COB tomorrow to scrap the capping as when asked today they could not justify it only saying this is the charge put on by the administration section

The reason why your sales quote has a $3000 price capping included in it is because at the time you purchased the Bridgeport we where selling into a November site start and your land was not due to be ready, therefore going of the information Ricky had he sold you into a January site start which is 3 months ahead of what we where currently selling into and that point in time. It is current Procedure for all sales consultants to include a Price Capping allowance if a clients books into a site start ahead of what we are selling into because our prices may increase by the time we begin construction in that particular month. If the price does not increase we will credit back the client the capping allowance and if the price increases over and above the capping allowance then the client will only pay the allowance and not the full house price increase.

So it would seem that your sales person has done the wrong thing in your site start date? So why would he have put Jan down if November was still available and you asked for November?

stevec · Aug 13, 2007 5:28 pm

They have come back and said if I start by end of year they will not charge but if my land is delayed past that they will.

I will probably ask my solictor if this is legal.

They are now saying they can do a NOV or DEC site start. My land is due to be released in November but if this is delayed into Jan they will pass on the $3000 cost.

They still cannot justify how they come up with $3000.

vanderlay · Aug 13, 2007 5:42 pm

hmmm...good luck!

I get the feeling that they are currently working with a pretty high level of demand so are not too worried if they lose sales along the way. Seems to be reflected in issues like this and also in the current "promotions" which are nowhere near as good as what they offered when we signed up last year.

Hopefully the high demand is cause they build a good quality house!! Will be able to tell you in about 12 more weeks if this is the case!

kezza · Aug 13, 2007 10:31 pm

We had that issue when we built. Our building company only signed up a certain number of houses each month so they don't overcommit, and so we had to sign up for a month later start. In the quote they gave us they put an allowance of $5000 increase to cover any price rises, but when the contracts and prices came out the house price increased only (?!) $3500. This was 18 months ago when WA building was at its most frenzied.

epiphany · Aug 14, 2007 12:29 am

Sorry...but the explanation they gave you sounds a bit suss. When we signed up with them last year, our land still hadn't been released. We were told the $600 deposit guaranteed (I think the words they used were "locked in") the current promo & price. We didn't have title at the time & were still trying to sort out a soil test...so no way were we ready to build in the month they were selling into. We didn't have title for quite a while afterwards (were waiting on the developer) but didn't have to pay any additional "capping"...the $600 was sufficiant.

The promo (& price) we went with had been offered near the beginning of the year (I forget the exact month...would have to go look it up again). We didn't start building until November.

Bud977 · Aug 14, 2007 8:44 am

stevec

If the price does not increase we will credit back the client the capping allowance and if the price increases over and above the capping allowance then the client will only pay the allowance and not the full house price increase.

How are they going to show if the price really has increased? They would need to record the costs as of the signing date and as of the start date. Are they going to show you their costs. I don't think so.

Casa2 · Aug 14, 2007 9:31 am

kezza

We had that issue when we built. Our building company only signed up a certain number of houses each month so they don't overcommit, and so we had to sign up for a month later start. In the quote they gave us they put an allowance of $5000 increase to cover any price rises, but when the contracts and prices came out the house price increased only (?!) $3500. This was 18 months ago when WA building was at its most frenzied.

A $3500 price rise rise in one month! That's a $42,000 price rise in one year. If you're building a $250,000 house, that's a 17% price ris in one year. I can assure you, house building prices are not going up 17% per year, not even in WA.

House builders are experts in extracting more money from you, and making it sound so acceptable.

perryr · Aug 14, 2007 2:58 pm

The story we received from PD was as follows:

- you pay the $600 deposit for the soil test etc. This locks you in to the next available site start (usually about 6 months away).

- you pay the next deposit at tender appointment, and everything is locked in, subject to extras which you may choose at colour selection time. No structural changes are permitted.

- the $1000 per month keeps you locked in at the tender appointment price for each month you delay the start. So, it you original start was Jan 08, but you can't start until Feb 08 (perhaps because land isn't ready) you pay the extra $1000 and PD cop any price rises. I think there's a limit of only 3 months that they will delay the start.

Hope it helps!