So, you’ve done the hard work and saved up to build your first home and are excited for the process and building the house of your dreams. But what you might expect is just how important it is to make sure that you set all the right expectations and costings in your building contract prior to construction beginning. With the ever-rising costs of building materials and shipping of products post covid, as an excited new homeowner, you need to be aware of this factor when it comes to your new home build. What we’re observing in the industry from a public’s perspective is the amount of residential builders going bankrupt or into liquidation. This is occurring due to fixed-price contracts being signed and agreed upon pre-covid at a set cost to build and it is becoming problematic for the builder and homeowner involved.
With the cost of materials rising with inflation, shortcuts are being made to keep within that agreed fixed-price to build. For example, your expectation in your contract for kitchen fittings was to provide cost of luxury fittings but now the fitting installed are standard line fittings to keep within budget. Depending on your contract you have every right to change the fittings to the luxury line, but be aware that the builder may add the additional cost to your final bill. To avoid bill shock at the end of the build, it is important to have these discussions with your builder at the start and get everything, including the fixtures and fittings, in writing and signed off by both parties for transparency and clarification prior to any work beginning. It is not uncommon that after the start of the build, you may want to make changes to aspects of the build. But bear in mind that every time you want to make variations to your home, whether it seems insignificant or not, such as changing the style of ceiling fan or position of the fan in a room there can be additional costs, sometimes substantive addition costs, involved in the variation. All of which will be added as an extra cost to your final bill. The little changes can add up to a lot more on the final figure.
As a new homeowner, it is vital to be across every variation made to your build from a contractual sense to avoid a “he said, she said” situation when it comes to completion of build and a potentially hefty additional bill. When drafting up variations to your building contract, it needs to be stated that no work can begin on this variation until this document has been signed and agreed. Once the variation has been agreed upon and signed, then the build can resume. When adjusting your building contract and factoring in variations, from a financial perspective you need to make sure that your bank loan can cover the additional costs involved. The last thing as a new homeowner you want to do is get a home loan for $400,000, being the maximum you can borrow, to then add an extra $50,000 in variation work on top of the build and being left in a pinch when your bank won’t lend you the extra funds. If this happens, you may be able to agree to a payment plan with the builder, be required to obtain short term funding, or worse.
If you do find yourself in a situation where you and your builder are not seeing eye to eye or you’re just not sure where to start with your building contract, then speak to our WGC team about your building contract.