Browse Forums Home Finance 1 Sep 05, 2009 12:57 pm Hi A question for those not using bank finance. If you say have just sold a property or cashed in your super and will be paying "cash" for your new home, how have you provied proof to the builder that you can pay the contract price? Did you have to provide proof that you can pay? If you and the family pool your money to pay for most of the home but only borrow say, 20k are you required to show you can pay the rest and how do you do it "show me the money" type thing. Feel free to PM me if you like as I need some help with this. Thanks kindly KW............... “It's just as unpleasant to get more than you bargain for as to get less” George Bernard Shaw. Re: Proof of your ability to pay? 2Sep 05, 2009 1:01 pm I think you need to provide bank statements showing the funds, and if you sold a house i think you need to provide something showing that you have received the money - same with your super is suppose? I'm actually not too sure... but i think thats the way my builder explained it to me right at the beginning (i happened to ask... i'm using bank finance though for mine!!) viewtopic.php?f=31&t=22766 - my build thread! Time waits for no man. Unless that man is Chuck Norris. Re: Proof of your ability to pay? 3Sep 05, 2009 1:56 pm Some builders will make you open an account in joint names with them to deposit the funds. Both will need to sign to release the funds - that way you can't spend the money and then tell them "too bad". Some things are worth waiting for. Re: Proof of your ability to pay? 5Sep 05, 2009 3:36 pm I just love people who give advise from interstate on a state particular legislation. In Victoria, The Security Of Payments Act and the Domestic Building Contracts ACT 1995 all make provision for a request of "EVIDENCE OF FUNDS TO COMPLETE". The current standard MASTER BUILDERS NEW HOMES CONTRACT, prepared in accordance with the DOMESTIC BUILDING CONTRACTS Act 1995 makes this provision in Section 11, clause 3. Section 11 also outlines clearly your rights and obligations of the builder. Though the Security of payments Act has been in the past used mainly in commercial building, it is being implemented in the domestic arena. When not being payed by a financial institution some smaller builders will get nervous. It has happened to me, the client had the loan pulled for a breach of bank terms (which happens more often than one might think) and i was left with the bill for site costs, drainage, slab and the list went on, all on a 5% deposit!! Check out your rights in VICTORIA through Master Builders, the Building Commission and the BACV. Some people might not like what i have to say, but its not only builders who go bust, clients can too. If you choose the option of joint bank account, make sure it is ratified by a legal practitioner, costs about $300 and sets out terms in accordance with VICTORIAN LEGISLATION and protects you. A trust in accordance with current legislation can even be set up by your respective accountants. This will keep tabs on variations if any and timely progress payments. Never pre pay a progress payment, go to www.buildingcommission.com and check the Contracts Act to ensure every one is at the right stage and reading off the same page. Hope this helps. Re: Proof of your ability to pay? 6Sep 05, 2009 3:41 pm We had to provide a bank statement & also, opened a joint account with the builder & deposited a percentage of the build cost in that same account. Built the Eden Brae Cambridge 34 Family with Boston Corner Facade Re: Proof of your ability to pay? 7Sep 05, 2009 6:46 pm I was only borrowing a small amount and had to show bank statements showing the amount I was funding along with the loan approval as well. There was nothing extra I had to do to ensure I didn't spend the money from my previous property. Re: Proof of your ability to pay? 9Sep 05, 2009 8:40 pm Judie Casa2 A letter from your bank stating that you have sufficient funds would be suitable. This is what we did and it was fine. Judie Only a moron would start pouring concrete and building a house on the strengh of a bank guarantee or bank confirmation. As I stated, these things are all well and fine until something goes wrong. Then you find out you are not protected by legislation, as you would not be: hand it over to the lawyers and watch everything dissapear!!!! Re: Proof of your ability to pay? 10Sep 05, 2009 9:00 pm pete002 Judie Casa2 A letter from your bank stating that you have sufficient funds would be suitable. This is what we did and it was fine. Judie Only a moron would start pouring concrete and building a house on the strengh of a bank guarantee or bank confirmation. As I stated, these things are all well and fine until something goes wrong. Then you find out you are not protected by legislation, as you would not be: hand it over to the lawyers and watch everything dissapear!!!! Surely a bank guarantee or bank confirmation is more than enough. Demolition August 2009, Construction Started September 2009, Completed December 2010 Re: Proof of your ability to pay? 11Sep 05, 2009 9:20 pm Yes Casa, in a perfect world thats all you need. i remember doing handshake deals along time ago for smaller jobs, but things change. I cant speak for NSW but here in VIC, The contract legislation is in place and should something go wrong, VCAT (Victorian Civil Appeals Tribunal) wont even hear the matter. At least with a trust in place your protected by even common law. I find bank gaurantees a strange instrument, the big four banks wont issue one unless you have the funds clear, allbeit in a fixed term with there institution. The sad fact of the matter is that with some of the ******* material thats come across my desk, you have to re evaluate how you treat people. cheers Re: Proof of your ability to pay? 12Sep 05, 2009 10:00 pm We had to provide our builder with a bank statement showing the available funds and it was a requirement that we had to put our funds in first when making the progress payments, so it took us to half of the lock-up payment before the loan kicked in. I am in Victoria. When we lived in Qld we had to open a joint account with the builder and deposit our money into it first. Blog: http://bluemistkids.blogspot.com "Never be afraid to try something new. Remember, amateurs built the ark, and professionals built the Titanic." Re: Proof of your ability to pay? 13Sep 06, 2009 1:41 pm Thanks to all I did not think anyone would reply to this post, so thanks. I’m in Vic. HIA new home contract states “with in 30 days of the date of the contract to enable work to begin the owner must supply satisfactory evidence of the owner’s capacity to pay the sum of the contract price”. It was brought to my attention that some builders have asked for the full amount to be put in an account that can only be draw on for the purpose of stage payments. Or joint accounts, now why would I open a joint account for hundreds of thousands of dollars with a “nice bloke” I don’t even know. My point is if a builder is willing to take a job, get you to sign with out asking can you pay first, or seeing pre approval then that is the risk they take, its business. Also why would I want to put say 200k in a no interest or low interest account just to make the builder sleep better at night? 200k @ 4.oo% for 6 months is $4000. Sure, I can pay but I don’t ask for proof that they can build so I can sleep better at night. Joint account, I don’t intend to marry the builder, he’s not my type lol so why would I put my money in his name? My solicitor said “Satisfactory evidence of the owner’s capacity to pay the sum of the contract price”. Means just that, it says nothing about maintaining the capacity to pay. The contract states that if you can’t pay or provide evidence, then you have to pay the builders margin and for work they have done then the contract is at an end. So it protects the builder. What if a person needs the cash flow for their business? Why should you pay in full for your home that they have not started yet and won’t give you a date of state or finish? Pete002 The Security of Payments Act, Pete don’t know anything about it yet. But can you tell me please how it relates to my contract, as its not mentioned or referred to. I believe the contract is whole with in it self. The only other Act I feel would be the DBC Act. If they builder had special conditions then they had the opportunity to put them in, hey it’s their contract, I did not write it. I also understand the builder’s side. If only a moron would pour concrete before seeing the money why do they get you to sign the contract first and then ask "can you pay"? Is it because they think they can get their margin and other costs easy due to the fact that you may not be able to proof you can pay. Because some builders are now realizing you can take someone to court but if they have no money “bad luck”. What’s your suggestion for fair solution for both parties? Thanks Pete. Also, If a person cant supply Satifactory "to the builder" evidence and they say they want a joint account and I say no, what then. If they want to bring the contract to an end do I have a right of appeal, is it a VCAT thing? And Satifactory to who "VCAT". Im sure they would say what is satifactory in the end. Any more suggestions or comment would be great. Regards & thanks to all. KW……….. “It's just as unpleasant to get more than you bargain for as to get less” George Bernard Shaw. Re: Proof of your ability to pay? 14Sep 06, 2009 5:27 pm we had to have a joint account as we were only borrowing a small amount from the bank finished building 40 square home on 5 acres with perry homes.working on the landscaping just finished pool deck with ://forum.homeone.com.au/viewtopic.php?f=31&t=2217 Re: Proof of your ability to pay? 15Sep 06, 2009 5:33 pm My FIL had to get letter from the bank to say he has the funds. We are in Victoria. Have look at your house plans and you will probably find that brick articulation joint has been missed. 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