Don’t let your dream home become a nightmare. What you should know before selecting a builder for your new home
Before you decide to sign a contract to build your new home, some basic due diligence can help you avoid turning your dream into a nightmare. All too often people sign contracts without proper checks because they like and trust the person they have been talking to. When selecting a builder there will always be an element of trust, however asking a few questions as part of the selection process can go a long way to ensure you do not select the wrong builder.
Ten Key Steps To Selecting The Right Builder
1. Is your builder registered?
The most important thing to remember when selecting a builder is that they must be registered. It is vital that the builder is registered with the appropriate State Building Authority. Dealing with a registered builder will provide protection to you as the owner. If the builder is not registered then he will not be insured by the State’s Building Insurance Schemes. Home warranty insurance protects you against major defects for six years. It also provides cover if your builder dies, becomes bankrupt or abandons the contract.
Before selecting a builder check he is registered by contacting your local State Building Authority or by performing an online check or simply asking to see the contractor’s registration card and checking these registration details. This may seem a very simple question, however many people trust what they are being told without checking if their potential builder has registration details.
2. Check that the builder holds the correct insurances
There are a number of other insurances a builder must also have. Before selecting a builder make sure you check to see the certificate of currency for his contractors, all risk and public liability insurance. Without these insurances you are at substantial risk of losing the payments made to the builder, should your home be destroyed or someone is hurt on site. Should there be a claim against the builder and he is properly insured your investment will be protected.
3. How many properties do you currently have under construction?
Before selecting a builder it is a good idea to know if he will be able to handle the additional work load your home will bring. A company with a full book of current projects may be viewed as a being reliable as they are in high demand. However, ensure they have the capacity to manage your project professionally and are not over committed.
Ask your builder if they do work in your proposed area. If they don’t, they may not have the resources to properly manage and supervise your job. Bringing in new trades that are untested can lead to substandard work and lengthy delays.
5. Can you build the Style and Design of my Home?
A builder should be able to build the style and design of your home. If he had any doubts he probably shouldn’t have quoted in the first place. Many builders specialize in a particular style so be sure that he has the expertise and know how to build your selected style of custom designed home.
Take a look at some of the builder’s past projects, this will allow you to see if the builder can work to your style and unique home design specification.
6. How long have you been in business?
Find out how long the builder you are considering has existed and whether it has always traded under the same name. Selecting a builder that has changed names may be a sign of past problems they wish to avoid. Do some background check ups afterwards.
The average life of a building company in Australia is less than four years. Selecting a builder who has been trading for more than four years is usually the sign of a company with a good business profile and who has been successful to date. Keep in mind that Renmark Homes has been trading for over 25 years.
7. How will you communicate with us once you commence work on my new home?
In today’s fast paced lifestyle good communication is essential. Building a home can be one of the most stressful times in a person’s life. Selecting a builder with good communication can go a long way to making the process less stressful.
It can be a difficult time if the project does not progress as expected. You will be in a business relationship with your builder and you must have a clear line of communication defined before you enter into a contract. Are you on email? Do you have an office? Do you have a web site? Is your mobile answered promptly (put them to the test). Can we have site meetings? If your supervisor is not available can I contact you?
These are simple questions but ones that are not always asked. A great source of frustration can come from a simple breakdown in communication. A lack of communication can indicate a builder that is over committed. Many good relationships have soured due to little or no feedback when asked.
Equally important as the builder’s skills, is selecting a builder that you can communicate with and can trust. If you don’t feel comfortable in the initial discussions then don’t hire them for your project. That’s where your possible nightmare may start.
8. Do you understand the building contract?
Ask your builder what contract he uses. It should be one that has been produced by his association. Has your builder given you enough time to read it, understand it and get legal advice?
Has he been helpful in answering any questions you may have. A builder who is pressuring you to sign a contract should raise some real concerns. This could be a sign of desperation due to a reducing work load. Building your home is a big investment both financially and emotionally.
It is a complete process, requiring interaction with State Government Authorities, Local Councils, Lawyers, Financial Institutions, and Suppliers and of course, your Builder.
A fully compliant contract will detail all the interactions and responsibilities of both the Client and Builder. Expect a detailed contract to be 50+ pages, if there is any less than that you should check to see what has been left out.
What should the Building Contract Include?
A building contract must thoroughly specify the work to be completed, along with the following:
- The commencement and completion date of the project should be clearly stated or easily able to be worked out
- Your name as the home buyer and the contractor’s license number should be included
- A description of all the work to be carried out during the building process, including plans,
specifications, and any particular requirements that you may have
- The necessary insurances
- The contract price
- A clearly stated cooling off period
- A checklist of items and a caution about signing the contract if you can’t tick yes to all
- A place for the buyer to acknowledge that they have read and understood everything in relation to the contract
- Prime Cost or Provisional Sum items are clearly stated, along with the builder’s margin
- Progress payments are outlined
- That the contract begins on the day when the last party signs the contract and the other party is made aware of this signing – this is the contract date and should not be confused with the starting date for the project.
9. What is included and excluded from the contact price?
The next most critical part of the contract is the building specification. The initial quote you received was most likely based on inclusions you requested. Whether you are building a Project Home or a Custom Built home all your selections (taps, baths, tiles. etc.) should be detailed in the specifications before you sign.
The specifications should be very detailed and cover more than a few pages. If items are ambiguous then have them clarified and updated before you sign. If items are missing, that were in your initial quote then they need to be added.
Allowances for certain items in contracts are common. However if there are many allowances for items that you think should be covered, then the time to negotiate them out is before signing the building contract.
If there are certain items excluded which you know about, then they to need to be itemised in the specification so as to remove confusion. Remember there may be a gap of many months before certain fixtures and fittings are required. If they are not properly documented its likely that things will be forgotten.
The specification is the all encompassing document that details exactly what you are getting for the price. It takes precedent over the plan. If there is a difference of opinion on what you think you are getting then refer to what is detailed in the specification as that is what the builder is obliged to supply and you are obliged to accept.
The contract should also contain all the other documents that would be required to build the home.
A complete contract, specification and building documents can easily exceed 80 pages. If the contract is incomplete you should not sign it.
10. When is the deposit is to be paid for building a new home?
For home building contacts with work to be covered by a home building insurance scheme, the builder can ask you to pay a maximum deposit of 5% of the total contract price. Never pay a deposit until the builder has given you an insurance certificate specific to your property and the contract has been signed. Never under any circumstances should you pay more than 5% of the contract price.
You also have a Cooling off period which varies from state to state. During the Cooling Off period, usually 5 days, you are able to withdraw from the contract but you may still be liable for the expenses that the builder has already incurred.
Remember, building a new home is a huge financial and emotional investment. Please take the extra time to do a thorough check on any prospective builder, their workmanship, references and credentials.
This series of articles is designed to help you understand the building process when deciding to build your new home.