Question on building contract process

Hi all,
Our builder is leaving us a bit confused with how the contract process works.

We are doing a semi-custom build (using a previous clients plan that they modified off a standard design, then we modified fairly heavily to suit our sloping land).

Up until now we have paid a deposit, moved to "working drawings" (apparently means the structure of the house, room dimensions etc is locked in) and discussed what sort of upgrades we would like. This currently has gone to a 21 day tender.

After this we get our fixed price contract, which we then sign and take to our bank. We then discuss things like kitchen plans (materials, layout etc) and the electrical plans (layout, upgrades) which is then put through AFTER going to the bank as a post contract variation. The builder tells me this is a normal process?? At the moment we have a provisional sum of $5000 to allow for electrical upgrades but were only given an electrical layout that we had no say in whatsoever at this point.

Is this the normal practice?? I would have thought it would make more sense to spec out everything including electrical layout etc. to what we are happy with, THEN they fix the price THEN we take this to the bank? I was under the impression post contract variations cost money from the builder AND the bank? Why would they suggest this method?

Any help would be appreciated to clear this up for us.

That was the same process for us as well.

Except we got a pre approval from the bank, so we knew our budget. Anything we upgraded from after submitting the contract to the bank, we knew would come out of our savings. You can put in an allowance now and keep to that budget.

As a building contractor for over four decades I would be extremely concerned signing off on incomplete documentation, you are asking for trouble. You could be lucky and the builder may not take advantage but you will be taking a risk.

Once you are"locked in" you could be paying premium for everything and anything

I would recommend pre contract consultation with your own independent building consultant to walk you through for your protection.
Many people understand that to build a house you need to buy bricks but try to avoid paying for expert advice, it's a fallacy. it's just as important as bricks if not more.

The law will protect you only if you are deceived but not if you willingly sign off on a "bad deal"

I can't help you because i am in Victoria but find a good consultant.

I completely agree with BuildingExpert. Do not sign anything unless you know down to the least detail what you are getting and how much it is going to cost you.

We also knew how much our bank was going to loan us prior to signing contracts. We also had money to fund part of the build ourselves.

Are you able to put in your tender provisional sums for upgrading? I would add $ for upgrading electricals, upgrading kitchen, upgrading tile/carpets etc. This way you will have a bit of a cushion in relation to upgrading things when you go through your selections phase. You will also know how much you can spend on upgrading items.

The process that you are going through at the moment is the same that we went through at tender and prior to contract signing stage.

Thanks for the info everyone. Seems like this is a normal expectation then, very confusing though! I have a $5K provision for electrical and we have spec'd up some other areas in the house as an option during the tender (so we just cross off what we don't want) guess I should probably add some extra for the kitchen too.

+1 for Building Expert, of course - he's an expert so why wouldn't I!

Nothing is normal unless you accept it as normal!

In my case, I demanded every single item was priced up prior to contract signing.

If you are not in a rush, I suggest taking the time to follow building experts advice. (Edit - if you are in a rush, I suggest changing your mindset and make yourself not be in a rush) :)

Don't let the builder rush you in to signing until you and your consultant are happy. I realise people are super keen to move in to their dream home, but if it really is a dream, it's worth waiting a bit longer to ensure it is a dream come true.

I spent just over 2 years in the design and planning process, at times I got really frustrated and upset at delays and the time it was taking. But now that we've started I've forgotten all that because I am totally comfortable with the design, the detail, the contract etc.

Good example from animal how it should be done

Just some more tips;

1 Time can be your greatest friend or your worst enemy in negotiating depending on
whether you have it or not. If your builder is more keen to sign than you, you could cut a good deal.
2 Emotion is your worst enemy, divorce it, assume you are negotiating for a friend.
3 Knowledge is power, if you don't have it buy it, it's no different to buying bricks but lot more valuable.
4 You have the power of walking away, try it and see what they will do to keep you.
You can always come back.
5 Never believe in "lost" special if you don't sign today.
6 Know exactly what you want
7 Have a game plan and rehearse it

If you don't have 1&3 and don't know 2,4,5,6 & 7 you could be a"cooked goose" and I have seen plenty of them.

hi

i hope someone can help with with my queries


my builder has given me a quotation/scope of works that has many items listed , a few with PS and PC items that has the price written down but the majority(90%) of the items do not have any prices at all

and a total figure at the end

my question is should i demand to know the price of each and every item of the scope of works?

is it normal for me to expect all the items priced and evident to me

he is saying that due to competition issues he does not want to put those figures in.

I feel that I am being kept i the dark, and dont feel comfortable with this quote

I must say that he has been quite easy to deal with, but i do want to know the complete details of all the items

At the same time,i dont want to offend him, unless i know that it is normal to expect a more detail costing

thanks all

david

Hi david123n,

I can only speak from my experience.

I chose a cost plus contract, which is totally open book. I see the price of every item, labor costs etc. I question, I complain (nah don't complain), and have the option of changing along the way to suit budget. e.g. we just added floor to wall ceiling tiles at no variation cost other than the cost of buying the extra tiles and getting them laid, but we also got a reduction in cost of painting the walls that no longer need paint.

But cost plus comes at a risk, I also wear the cost blowout if it occurs. So to avoid this I got the design quoted to a very fine detail, even down to cost of toilet roll holders.

If you are in a lump sum contract, I don't believe it is normal to see a lot of the prices.

I think the key is building a positive relationship with your builder. I trust my builder to act in his best interests - and his best interest is to be open and honest with me! :). Not all builders are out to get you.

Under a lump cum contract they are carrying some risk and will naturally price a buffer in to account for that.

Perhaps you could approach it by way of saying you'd like to know the cost of some of the items to be able to choose some cheaper ones as you are on a limited budget?

Sorry not much help.

Hi David123n

Do not be afraid of offending your builder. He is not your friend - even the Building Commission will tell you that. We entered into a contract where we were only given a lump sum figure and assured this was normal by our building designer. Not asking for a breakdown of costs was not the only mistake we made but was certainly the biggest. Tell him that you need a breakdown of costs and you don't need to provide any reason - just say that is the way you prefer to do it. If he won't give it to you, walk away. Also with PS items he needs to give details of how he arrived at the figures because afterwards he is going to have to justify his costs with receipts and account for any increases. And it doesn't matter how easy he is to deal with. Our builder was the nicest person in the world until we got to the end of the build and started finding we had been misled. He very soon became not so nice to deal with.

We are in a similar situation, have paid our deposit and they are working on our working drawings right now, we should get them next week sometime.

There are many things I want to add/change, such as bulkheads, floor to wall tiling in wet areas etc, and every time I email my rep he says just do that at prestart.
We have a figure for what we have so far agreed on, but worried it will be blown out of the water at the prestart meeting when we are feeling under pressure and indecisive.

After reading this thread I am going to email my building rep and ask for things to be included now, and not sign til I can see everything is stated that I want...

Hi straberry jam, Liliana, animal and all

thank you very much for your advice.I will definitely be more assertive and more demanding in what i would like to have.

That is what i had on my mind after seeing the scope of works but not knowing how this biz works, getting your advice definitely encourages me to demand that he tells me everything i should know

and not feel bad about it.

wouldnt it have been nice and straightforward and decent to present all facts clearly, and with no intention to hide or mislead or take short cuts.Alas, that is not how biz works in this world!

I am sure most are decent and honest but we cannot be too careful enough with a huge investment

i am aware of the risk of cost plus.I had a builder who suggested this.It sounded great, as if you can really control your cost, but is too open to misuse.It is not too difficult to get a tradie-friend to fake a quote, and there goes your cost savings,unless as Animal says, you get every single item costed from the start

I list some of the items here for your comment whether it is reasonable to ask for the costs of these items separately. these are some of the items with no price

1.bulk excavation
2 footings excavation
3. formwork
4.concrete supply andconcreter works
5 carpentry supply
6.carpenters/subcontractors
7 carpentry fitout
8 windows and doors
9roofing
10 plumbing and gasworks
11rendering and plastering
12 timber floors(supply)
13 painting
14 aircond
15 balustrading
16 garage doors(supply install)
17shower screens,wardrobes n mirrors

thanks again all/very much appreciated

I think you need to know that in a lump sum contract builder's costs are a commercial secret and as a builder I certainly would not be disclosing them to you.

You cannot have flexibility of choice and control in a lump sum contract, that is why you need to work out what you want and make sure it is included. Once you start changing you will blow your budget.

If you want flexibility and choice you need cost plus or a project management contract and it will cost you plenty

strawberryjam said " There are many things I want to add/change, such as bulkheads, floor to wall tiling in wet areas etc, and every time I email my rep he says just do that at prestart."

I don't think you know what you want and it will cost you plenty, I don't think you are ready for a building contract.

Hi BuildingExpert

I don't think David123 is talking about making changes - he would like a breakdown of costs for the build. From what I have read on here even people building with volume builders are given more detailed costings than just a lump sum figure. If I had to build again I would want to know how much I was spending on the the foundations, the frame, the roof, electrical, plumbing etc. The builder may not be obliged to give these figures but I'm sure there are plenty of builders who will.

I have merely requested prices for things like floor to ceiling tiles in the ensuite, and a bulkhead in the kitchen. Not asking for a breakdown of costs of what is included in the build, but for things I want to add/include, as they don't come as standard.

I don't think it's fair that the costs are not disclosed until prestart, for such big ticket items. No time to think, prioritise or consider really.

Not ready for a building contract??

Hi strawberryjam

What I meant was that you should know exactly what you want and make sure it's included because once you are locked in changes will be costly.
I was under impression that you were still changing a lot of details, if not disregard my comment.

Cheers

Ahh got ya.

We haven't signed the building contract yet, not til after pre start. We have told them we won't even be signing it at prestart either as we want time to go thru it all and decide

I have actually demanded to know prices of things upfront- for which they have told me to wait til prestart- but finally gave in and gave us pretty close estimates now which was good!

hi all
sorry i couldnt get back earlier
yes, the first quote told me that many of the items are commercial secret/competition reasons
i got 2 other quotes( 3 in total) ..2 of them(one of them is what i have been talking abt) are very rough quotes with not much detail.The 3rd one is better with lots of items priced/quoted

so i am going thro this one with w fine ''tooth comb'' but i feel i need to ask the oithers for a similar itemised quote.
all 3 are about the same price ( 3-5% diff) but when you dont have the details, it is impossible to know exactly what u are getting
so i feel that b4 i sign anything i need to get as much detail writen down in the building schedule of works that should be part of the contract

i wonder if 'building expert can tell what sort of margin they would have priced in.I suspect that these 3 builder have priced in about 20% margin',calculating from the 3rd quote that had many items priced
how would you go about haggling over the price? this is a custom build home
i read that most builders make about 12-15% but i am not too sure on this

i dont want to haggle to the extent of causing builder to take shortcuts.They do need to make their money too.And we dont want to spend too much either!

thanks all

Can't help you with profit margins and it does not matter. What is more important is that you do your research , explore your options,compare apples with apples, negotiate with skill and then close with the builder when you feel god about it.
I never liked domestic margins hence did other work.