Before you sign .........

This thread is complementary to the "Things you forget" thread ............

viewtopic.php?f=31&t=5823

The above thread is a great resource for things you need to consider when planning your house, where the light points go, the best way to insulate your ceilings, those sort of things.

Please use THIS thread in a similar manner, as a resource of things you need to do BEFORE you sign the contract with your builder.

In short, assume someone woke up this morning and decided to build a new home, what should they do in the days / weeks / months before they actually sign on the dotted line with a builder ?

P_D


*****************************

Just a thought guys ............

To keep some sort of "order" to the list. which hopefully will grow like the "Things you forgot" list, maybe for the first week or so if people sent me a PM (use the little [PM] button at the bottom of this post) INSTEAD of replying in this thread, that will allow me to see where the major topics are and I'll set up the headers to suit.

Once I have a few responses I'll delete this paragraph and maintain the list like I do the other one !!

Of course, if you want to jump right in, that's fine too

!!!


P_D



*****************************

The New Car Analogy

If your Sales Consultant is giving you a hard time giving you a "Final Price", try the New Car Analogy

You've seen your the sales consultant drive up in his (say) nice new Subaru and you say to him.......

You...."That's a nice new Subaru you have there"

Him...."Thanks"

You...."I just know that when you purchased it, your dealings with the car dealer did not go like this..........

Him...."How much is that WRX ?"

Car Dude...."The base car is $45,000"

Him...."How much for optional carpets, leather interior, paint protection, climate control, roof racks, registration, insurance and dealer delivery fees ?"

Car Dude...."Don't worry about that"

Him...."Well, how much will I get for my trade-in ?"

Car Dude...."Don't worry about that either, just sign for the $45,000 base price and we'll tell you all the other costs later"

Him...."OK"

Tell him that you're proposing to spending multiple times what he paid for his car on this new house and if he got a price for his car before he signed for it, you don't consider it unreasonable that you get the price for your new home before you sign on the dotted line !!!!

There are a few stages to building your new house ......

1) You wake up one morning and decide to build a new house

2) You spend the next few months driving to every display centre within a 50km radius

3) You decide either ....

a) To build a home from one of the display centres
b) To build a home according to a plan you have drawn up
c) To go "independent" and get an architect to draw up plans for you and you engage a builder to build your new home

4) Now, one way or another you have a starting design for your new home.

If you are using a "Project Builder" to build one of their "Off the shelf" designs, the steps will go something like this ....

1) You show "interest" in their "Super Lux" design

2) The sales consultant gives you the "price" of the "Super Lux" design (Price #1)

3) You ask for the "total" cost with the "upgraded" kitchen bench-tops, taps and some other nice-to-have things (Price #2)

4) You sign a "Preliminary Works Agreement" (PWA) and give the builder some money in the range of $3,000 - $6,000. CONSIDER THIS MONEY DISPOSABLE !!! However, if you DO go ahead, this money comes off of the final price for your build.

5) The builder arranges soil reports, contour reports, engineering reports as required for building the "Super Lux" house on your block

6) The builder presents you with a "Contract To Build A House" with additional costs to allow for things such as the upgraded footings YOU WILL NEED over and above their "Standard footings", the upgraded wind speed requirements, the additional encumbrance, bushfire, energy efficiency and other "statutory" requirements. (Price #3)

This contract will also contain several PC (Prime Cost) and PS (Provisional Sum) items for things such as tiles, taps and other things you choose for your home.

So, what's the difference between PC (Prime Cost) and PS (Provisional Sum) items ?

As I understand it, PC (Prime Cost) isn't too scary, it something like this ......

Dishwasher....Westinghouse Model DW-1..... PC $500

I understand this to mean that the builder is going to supply you with a Westinghouse Model DW-1 dishwasher, and they've checked the price, and they expect it to cost $500, so your cost will be $500, but that might vary a touch if Westinghouse increase their prices or we can't get the Model DW-1 and have to use a Model DW-2

However........ PS (Provisional Sum) items you need to avoid at all costs (no pun intended) !!

Rock...Removing Rock PS $1,000

I understand this to mean "We've used a rock breaker in the past, and it cost us about $1,000 so we've just stuck that number in your contract, even though we have NO IDEA how much the rock breaker for your job will cost, so don't complain if you get a bill for $50,000 for rock breaking" !!

Your defences against this happening are limited but include having the "Rock clause" worded, if not in your favour, at least neutral ........

Rock removal as required, hire Rock Breaker and float at $xx / hour

OR

Rock removal as required, hire Rock Breaker and float at $xx / tonne

In some states the builder must show you the invoice from the Rock-Breaker-Dude and is only allowed to add "reasonable" overheads to it (GST and their mark-up).


7) You sign this contract and you are now committed to build a house.

Read the above several times until you fully understand the implications of it !!

8 ) The builder sends you off somewhere to do your "Selections" where you choose your actual taps / tiles / colours and all the things that will be the first step to turning your house into your home.

9) The builder receives all your selections, prices them up and presents them for you to sign. This NOW gives you the TOTAL PRICE (Price #4) for your new home.

NOTE..You received the FINAL PRICE (Price #4) <<AFTER>> Step #7...When you legally committed to build your home !!!

So, Going all the way back to Step #2 of the "Project Builder building one of their "Off the shelf" designs" option, when your consultant first tells you the price of the "Super Lux" home, depending on your life-stage and the price of the home...Know and understand that the final price WILL BE somewhere from $50,000 - $200,000 above the original price.

That's why, IMHO, you absolutely consider, and ensure your sales consultant knows, that as far as you are concerned you're paying the PWA as a "Fee-For-Service" for them to do all the work that they need to do to get you a FINAL price for your new house !

Builders (the sales consultants) sometimes have the attitude that you paying the PWA $$'s locks you into building with them.

Again, if you're going this route, make sure that they know that you don't see things that way, and you're perfectly prepared to walk away if you're not happy.

P_D

Thanks for the informative post PD. We have just finished our first tender appointment and were wondering if it might be possible to demand we do our colour appointment and get the full costings back BEFORE the contract appointment but I suspect they will refuse.... it certainly does make one nervous though. :s

I'm in Victoria and I believe many of the major builders here now do all the selection appointments before the contract signing. That is certainly how Carlisle Homes do it. I coudn't imagine being committed to building something without knowing the actual cost. I'd be terrified.

We have only got refunds since signing the contract!

My response would be ...........

Me....."We want to do the colour appointment and get the costings back before we sign the contract"

Sales Consultant.."We don't do it that way"

Me..."OK, Thanks for your time but we wanted the full price before we signed a contract (use the "New car analogy..Bottom of first post) , If we do decide to go with you we'll get back in contact with you."

Wait ........

P_D

We're building with Hotondo and that's how they do it as well (at least, this particular franchise in Geelong - I don't know about any others). We completed our selections on the weekend and should get our quote in the next week or so.

The fact we know how much it will cost BEFORE we commit to a contract was definitely a factor in our decision-making process - we can still make amendments until we get everything just right (or affordable!) and we can still walk away - at this stage we've only outlaid about 1% of the build cost for soil tests, slab engineering, etc.

This is true.

It has always been the case that with any builder you can either sign a contract with allowances made for various items in the contract OR you can have everything fully priced prior to signing the contract. For a project builder this can depend on how they've defined their standard process and with other custom builders how prepared and organised you are to work out all your selections early on rather than throughout the build. It's often easier for the builder to make an allowance but typically you need to be aware that this allowance will be on the low side....

Personally I wouldn't sign a contract with too many large allowances and unknowns.


2

This is the very reason why I ultimately found a good small custom-builder. I was able to arrive at a price with upgrades before I paid any deposit. I met with their kitchen, tile, electrician and carpet suppliers to work out exactly what I wanted the builder to price up for me. They builder then gave me a base price for a house based on their standard inclusions and gave me itemised pricing for the upgrades.

Some key things are:
1. Research, Research, Research, rinse and repeat ( for each aspect of the build and builders you talk to).
2. Understand the characteristics of your block and what about your block will drive site or other building costs:
- know and understand soil type and affect on slab cost
- know and understand the geotechnical report for your estate ( gives some determination of depth of rock and helps with determining pier or other foundation requirements)
- ensure slab costings suit you soil type
- ensure there is sufficient provision for piering or drop-edged beams, etc
- is your site in a bushfire-prone area, flood risk area or near the coast ( all of which could further drive site / build costs )
3. Talk to as many builders as you can. Sit down with them an ask them what the typical costs are for an M-slab, a H1 slab, etc, etc. Ask them how much piering they include - do they provision it as a lineal amount (e.g. 100m) or do they provide a depth per pier (say 2m per pier). Try and establish how many piers a typical house of the size you are intending to build would need.
4. If you have a problematic site ( with trees, slope, lots of rock or significant retaining wall or cut/fill volumes ), try and understand what impact this will have for price.
5. Work hard to understand what is included and what is not included for the price.

A sales-persons job is to give you a price that you understand and are comfortable with. If they don't give you the information you need, keep asking or find a better salesperson or builder.

I spent a couple of hours with a consultant from one of the big builders and carefully discussed the whole process. Whilst I was there, they entered it into the system and gave me on the spot pricing, including site costs suiting my block (remember the research above), cost of upgrades, etc. Afterwards they did site positioning. For other builders that weren't so organised, I took notes on paper, usually spending about 30-45 mins establishing a rough (total) cost at the first consultation.

One builder wanted to charge me to obtain the same level of detail. They were initially not able to give me good numbers. I liked their product so I was eventually able to convince them to give me an itemised price. They then went away and prepared it for me.

In this process, I visited 4 large display villages, spoke to over 10 consultants in relative detail. The end result was relatively detailed proposals from 3 builders, all without paying a cent.

Do your homework! It is worth it.

[edit - fix typos and add other cost drivers]

Get a building and interior design trade certificate as no-one will tell you how things should be done Also even if you remember telling the Pre-start girl 4 times the same thing and it was on one of your pre-start addendum, make sure they are all still on there on the final addendum!

We met with a consultant, then had a color appointment, then went through tender, and will be signing the contract soon. We've paid a few hundred for soil testing etc.

I can't imagine ever signing for everything and handing over money before you even know what you want? Sounds odd to me.

Part of the reason for the way things operate is that is actually costly to the builders in order to go through all the pre-start activities to come to a final price for people - so if there was no "contractual" commitment to to continue, they can lose money if people just go through the process out of interest to find out what the cost is. I guess in terms of the "car analogy" - they aren't directly comparable in all situations because there is a limited and known set of options available for the car, whereas a house pre-start can be a lot more varied.

The flip side of that is that it didn't make any sense to me that I'd have to sign a full contract before knowing the actual cost for our build. I'd already paid upon signing the PCQ so why shouldn't I know the full costs?

My own personal experience was that the builders were accommodating to my requests and this was probably helped by being genuine in my intent to explore options with them. I think people can make a mistake by getting too adversarial with builders early on - this isn't a once of negotiation like a new car sales but an ongoing relationship for months, and you need to take an approach that reflects this.

I think the key advice is to take things at your own pace, ask questions if you aren't sure, and if you aren't happy with how you're being treated, or if you're being pressured then back off.

This is of course correct, Indeed it's pretty close to what I said ...............


WOW !!!

Thanks Guys, so many posts in such a short time !!!

However, while we're getting some great personal stories from quite a few people, if this thread is going to be a useful resource for people, maybe it would help if we tried not to stray too far "Off topic" and tried to keep the posts directly relevant to advice that we would like to give other people who have yet to sign a contract ??

Things that we have learnt along our journey, mistakes we have made, areas where we have been disappointed at the builders, where with foresight, we could have influenced the outcome in a more favourable way had we of done something different earlier in the process !!

Cheers,

P_D

Sorry - I was just trying to reiterate one of the points that I think people aren't aware of. I actually think your summary at the end best represented how to think of the situation:



It is all good advice - I've certainly used the "things you forget" thread a lot since we started out, it's bookmarked right next to my building thread

Understand the attributes of good and bad building sites before selecting land. There is some good general info below, mainly focused on soil and site classification.

[from one of my posts in this thread]

These are the Australian Standard Definitions for the different soil classifications that can impact site costs:



Source: http://www.engineersaustralia.org.au/sites/default/files/shado/Divisions/Victoria%20Division/Groups/as2870_-_2011_2_part1.pdf

There is other good info here: http://www.engineersaustralia.org.au/sites/default/files/shado/Divisions/Newcastle%20Division/Branches/be_careful_of_as2870_presentation_27th_june_2012.pptx

Fantastic points regarding understand the site cost. Good one. i wish i knew them before wasting so much time.

Asking questions with a rep

make a list on paper and work thru them.

with all of them you will notice.

q1=how much for this ?
a=$200
q2=will i get this included?
a=wow that is a nice tv you have where did you buy it?
you a=harvy norman and tell him its 3d 4khd blablablayour mind goes awall and you never get a answere
q3=will we have the undermount sink?
a=yes you CAN(but will cost $800)

they are pro to just get you to sign the contract. the point of no return

Hi guys,

My hubby and I went with a house and land package primarily to be able to secure a block of land that we wanted. We thought the builder had pretty much what we wanted for a first home so we were happy with the house plan we decided on (albeit it was within 24 hours.. pretty rushed!)
We signed a PWA and paid the deposit with the builder, then was told that it wouldn't be lodged for a week to give us a chance to make any structural changes. After reading this thread, i had another look at the PWA and i noticed that there were two things oh the PWA with 'PS' next to it - the BAL and awnings for the sound proofing for windows (the house is near a freeway and bushland). On a side note, the title won't be ready until Feb 2014. So I have a few questions i hope someone can help me with:
* Is there a reason why only 1 week is allowed for structural changes? Being a first home builder, I'm not sure of the timelines, but being that we won't be ready to build for at least another 5 months, would it be reasonable for my hubby and I to ask for a little more time to go through the plan so we are sure there's nothing we want changed?
* How do I ensure that those two 'PS' costs don't blow out? (although i don't think i'm too worried as those particular items can't possibly be that much more.. right?
* If i have signed for the land (with the developer and awaiting a formal approval and contract from the developer), am i legally bound to stick with this builder being that they had the land exclusively from the developer? This is on the assumption that I see the deposit that i paid to the builder as what pepsi_drinker referred to as 'disposable' and am prepared to never see that money again.

Both my hubby and I feel like we totally rushed into this, however our first priority was to get ahold of the block of land and felt that this was a chance for us to secure it rather than wait in an apparently very long line for a similar block in the estate we want to get into.

Thanks!

Hi.....And congratulations !!!
:


Probably because they really want to lock you in !!!

Now, IMHO, is the time when the ball is really well and truly in your court !!!

The Builder figures that he has you on the line, but hasn't yet actually snagged you so it's in their interest to keep you happy, really, really happy !!

The question is, does your PWA state that YOU WILL sign the contract within one week ?

If it doesn't then you're not going to sign the contract until YOU are happy with it !!



If I was you, (subject to the wording of your PWA) I wouldn't be ASKING the builder for any more time to go through the plans and make sure you're 100% happy with them, I'd be TELLING them that you're going to be taking your time to make sure that you're happy !!!


Think of it this way .........

I have a $50 note here that I'm offering to sell you.

Do you want to enter into a legally binding contract for me to sell it to you and you to buy it from me ?

If you do, after we have both signed the contract for you to buy it from me, THEN I WILL TELL YOU THE PRICE !!

I might charge you $35 for it, I might charge you $118 for it...........Interested ??

http://hia.com.au/hia/content/Builder/r ... _sums.aspx

"PS’s ‘are allowances included in the contract price for work including the supply and installation of goods and services which cannot be entirely foreseen, defined or detailed at the time of signing the contract.’ "

I'd say something to the builder like..."You know what Bushfire Zone we are in, WHY CAN'T you calculate the costs ? Likewise with your awnings, go to the shop, find out the (retail) price or the excat make and model and tell your builder to price them !!!



No comment on this...READ WHAT YOU HAVE SIGNED or make an appointment with a lawyer to decipher it for you !!



Again, Congratulations on getting the block you wanted !!!

Just remember, You guys are holding the cards now, once you sign things you only lose power, not gain it !!!

All the best !!

P_D

A good tip from this thread:

We are currently in the process of refinancing from one bank to another (through a broker), and made them aware that we will be building on the land.

However, they can't give us a pre-approval figure! We already paid a $1,500 deposit to get a quote and soil tests, etc from a builder, and just completed two months of selecting colours and electrical items, and trying to keep costs down as much as possible.

Our broker said the bank is waiting for a "fixed price contract" but can't tell us how much we can spend! We will be using equity in our current home for the deposit, and borrowing the rest, but a figure our broker told us is now about $50K less than our estimated total cost (of which some of those items are also TBC).

We are up for $84,000 in site costs, OH&S and council requirements in the sales quote (our land has a 3M fall from corner to corner, but the builder said they can build on it).

And of course it will be subject to the bank's valuation of the value of land and proposed build! But this can be earth-shattering if, after all the months (and years on the land) of planning, changes, amendments and deletions, the bank rejects the application! It's unfair if you don't get told what your budget is from the start!