Building A New House
Jul 27, 2019 5:49 pm
Just getting quotes from builders and also ask them the questions re initial deposit followed by percentages of build price and the results vary.
The deposit where you commit to the builder runs from $2000 to $5,000. Then each builder has different ideas despite the fact they all in WA claim to be using the "standard HIA" contract. "Housing Industry Association", a gov. body and one builder claims that HIA contract lays down the law re deposits. That builder wants 6.5% before he even starts after a $3,000 deposit, this means with my $15,000 I am pre-paying the site works plus drive way, insurance and engineering, shire fees, etc. and no slab to be seen.
However, my mistake was to say "cash" as I cannot see the banks pre-paying a builder anything as they like to go broke. Another builder wants $5,000 and 10% on slab down, but productreview.com.au tells me 10% of the count of 5-star glowing reviews give that builder a "do not build with him" 1-star review!
The government tells me one should definitely not pre-pay a builder anything and I suspect the magic word "cash" in my case made the salesman too cheeky. My architect justified his horrible charging by saying those sales persons/designers receive a 3-5% sales commission; is he correct?
Re: Deposits via cash or bank loan, what is the difference?2
Jul 27, 2019 7:11 pm
Hi Domwild, I work for a builder in Perth. The initial deposit which you have said varies between $2000 & $5000 is a non refundable deposit, it get the ball rolling with an initial sketch, site survey, soil test etc. That money is spent getting everything done so the contact can be completed as best it can at that stage. If you proceed with the build the deposit which you have paid comes off the total contract value. The 6.5% is the first progress payment and is normally raised once the builder has the building license, so it is down the track and basically when the job goes to site.
Re: Deposits via cash or bank loan, what is the difference?3
Jul 27, 2019 7:22 pm
Further more to the last reply, the progress payments during the build is not what the HIA sets out (HIA is also NOT govenment) it's what the builder sets out, but that is governed by the banks or lenders, if they arent happy with the progress payment schedule they will get the builder to amend the contract.
What normally happens is the second progress payment (slab) is only 2 - 3 weeks after the deposit.
A builder cant ask for more that 6.5% deposit payment (as the first progress payment) that is written in the building contracts act in WA.
That 6.5% would only just cover what the builder has spent up to that stage. There is normally 6 progress payments in a standard single storey build unless it a key start loan and that would be 3 payments
Re: Deposits via cash or bank loan, what is the difference?4
Jul 28, 2019 8:13 am
Thanks Doozer. You are correct and one salesman of a builder is wrong to suggest the HIA is a gov. instrumentality. From the WA Commerce web site:
" In short, deposits are limited to 6.5 per cent of the total amount payable and progress payments must represent a ‘genuine’ payment for work already performed or materials or services already supplied. In other words, you pay for what you have received, not what might be supplied in the future." End of quote.
In order to get quotes I had my own plans drawn up, have a contour/features survey and soil report/footing detail and I know how much site works cost plus the crushed limestone access road. And I am certainly not prepaying anything with cash, which has not been supplied.
Seeing that you are in the trade, tell me what the BANKS expect to pay after the initial $2,000 to $5,000 deposit?
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