Deposits with builders

Hey all, we are awaiting land registration (already been delayed once) but have paid our initial deposit on our build of $3.5k (not a H&L package btw) received full working drawings and tender etc and secured our loan for both purchases. Our sales person for the building co rang and asked us to pay $10k by Xmas to secure our tender price for another three months? Our tender says it's valid until February 2. She gave us four days to pay...we didn't but just wondering if this is a normal thing builders do? It's our first build so we are pretty clueless..

This depends. There can be two type of deposits.

I paid my builder $2,000. This covers the creation of drawings, soil tests, etc. But I can still walk away as no contract is signed.

My price is not guaranteed though until I sign the build contract and pay the balance of the deposit, my deposit will be 5%, so the balance will be around $8,000 total (so I only have to pay the remaining $6,000). Once I pay this amount, my price is locked in for some time.

Some builders like Burbank offer a 12 month price freeze as part of the contract. Others might allow you less. With some builders, if you sign, but the land is delayed past your expected title date, you have to pay a fee to the builder. I've heard $2,000 a month, or $5,000 every 3 months before. This is to cover the costs of the builder storing your materials, etc while they wait for land to be ready to build on.

It sounds like you paid the first deposit (like I did), and your builder is now expecting the balance of deposit to lock in your price. A lot of builders put their prices up in January and July, which is probably why they gave you that deadline.

Last year my builder warned me if I didn't have contract done by January, the price would rise 5k. But thankfully my builder is nice and never charged me more.

Thanks aloenyx. We were just taken aback at the tiny time frame in which to make that decision. It wasn't possible for us to physically get to our money in that timeframe anyhow being so close to Xmas. We are having a meeting with them when they re-open and hope we can work something out. I can't even imagine building another house now as we've tailored this one to suit us perfectly. The developer whom we bought our land off seems very nonchalant about registering our subdivision so the thought of paying a builder those amounts in case of delay seems terribly unfair! Looks like we will have to try and lock our builder in in that case so we don't have to alter our loan or lose our inclusions...it's so much more daunting than I ever inticipated! Our lending manager told us not to pay anything until our land registers hence our confusion.

Also as our land isn't registered so they have not been able to do contour or soil tests yet so we are worried about our site costs exploding. Another reason we didn't want to lock anything in. We know going by the original plan of subdivision we have a cross fall of 1m and our tender has allowed for a 'typical cut and fill' scenario. We have an M class slab and certain amount of piering included in the tender. We remember from our initial tender the builder mentioning a drop edge beam but they don't remember having that conversation with us so it's not in our formal tender. From memory it was about $6k...I've pretty much allowed around $10k extra in site costs in my mind but have no idea if that's going to be enough at the end of the day. There's a lot of 'what ifs and maybes' and it's what keeps me up at night wondering if it would of been better to just buy established! We sold our first home in August so renting is draining our savings waiting for all this to pan out!

Hi
Yes I've never understood the delay costs myself and to this day still clueless
We will be signing tender on 18 Jan. Stupid thing about this is our home price dropped when they hiked prices up. But I'm happy with the final price so can't complain
we soldiered on and pushed our fee date to March but time of contract we are going to try push it to June.
No harm in trying I say
Good luck with your build


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Hi Emmz, it's all such a confusing mine field! I feel I need a lawyer just to get a tender sorted...I'm worried about committing with a large sum incase something goes horribly wrong! This is our only shot at building our dream and don't want to make any wrong moves and risk losing our $. I don't feel I can trust our builder now as it seems they are trying to take advantage of our naivity in the process. Doesn't feel right to lock in when our land hasn't settled. We are spending a decent amount on the proposed build and thought they may show some good will? They've added a $10k 'out of area charge' to our tender which seems ridiculous as we are only building in the southern highlands of nsw, a total of 45 mins from our builders location...plenty of trades etc down there so that was my first 'wtf moment' they gauged our DG quote too as I know a glazier and he said he'd do it for us but they charge a quarter of what these guys wanted for another project builder. Mark up was $5k on that! A few other little oddities and now this $10k in 4 days thing has me ready to run for the hills!

Hi, I believe your builder needs to provide you with a warranty insurance certificate before you can handover your 5% deposit which is usually provided at contract signing.

Apparently it's a 'preliminary works agreement'? I don't feel comfortable with it at all so won't be doing it but curious to know if other builders are using them? These guys are relatively new but have displays in some big name centres in South west sydney. I was presuming they were following suit of some big boy builders but maybe not...maybe they think they've found a honey pot. I'm not impressed though. That time frame of a few days during the busiest time of year for everyone to read through a contract etc and put pressure on for $ is not a nice way to start a working relationship. The more I think about it the more I get upset! It's turned me off.

Don't be pressured into anything, we paid preliminary costs to cover the plans etc and soil test. Reviewed plans and got them corrected and things all costed prior to signing a contract. Then paid 5 percent deposit, that covered everything up to going to site. So the builder started doing things ready to pull the trigger once our formal finance came through. When that cam through we had a tap and they went to site pretty much straight away, they were waiting for us to finalise finance. That was our process in a nutshell. We lost a ppa deposit with another builder as we walked away due to the uneasy feeling and pressure to sign with unresolved questions.

Hey Decka..we are meeting the sales lady on Saturday to have a chat but I'm not feeling comfortable I have to say. Found out through fair trading that they were fined for using an unlicensed contractor only six months ago which has just added to the nervousness. Wondering if we may be better off finding a custom builder...either way I've started talking to a building inspector and will be hiring him for our construction. Seriously considering a specialist building lawyer to help steer us right but we'll see how we go.
Checked out your build btw and extremely impressed with your design! It's all coming together nicely...how exciting! Look forward to seeing your kitchen selections...those tiles are amazing!

Thanks deejay, very nice of you to say. I think if we went with the other builder it may of worked out ok, but if it went pear shaped we would of been kicking ourselves for not listening to the warning signs. If things didn't work out with the builder we have now then it wasn't from ignoring anything and we couldn't of known, I hope that makes sense.

Oh, another reason we went with thst builder is because the sales lady had been working for them for 8 years and knew her stuff and was nice. In what seems to be an industry with high turnover of sales staff it helped me make the decision.

Makes perfect sense!

Good luck deejay hope it works out, take your time and remember it's your money and you are doing them a favour, not the other way around. The power is 100 percent with you till you sign the contract,

Thanks Decka...will do! They do make you feel like they're doing you a favour! Crazy mixed up scenario that is...it's a huge amount of money we are forking out and our dream so not risking it going in the wrong hands! Look forward to watching your build progress

Yeah I know, seems we put more thought and research into buying a new dishwasher or tv than a house lol.