Building a House is not the same as Buying a House
A contract to build a house is entirely different to a contract to buy a house.
An existing house can be inspected and checked in all of its glory. You can see the taps, count the powerpoints and the whole house structure is there before you. A buyer can negotiate with the seller knowing what they are offering to buy and what the vendor is offering to sell.
A contract to build a house on the other hand usually includes some presumptions. It is presumed that the site conditions have been allowed for in the footing allowance. It is presumed that council will grant approval for the dwelling to be built in the materials stated, the position nominated and to the specifications provided.
Under the usual contract conditions the purchaser can utilise their negotiating skills dealing with the builders’ representative to get themselves the best deal possible. A bonus ‘free air conditioner’ plus what ever extra perks they can get have included. The client can sign the building contract confident that they have looked after themselves to the best of their ability. But at this point the client loses their bargaining position and passes any power to alter the contract to the builder. Due to the manner in which the contract is constructed the builder retains the power to alter the price of anything noted as ‘ an allowance’, can charge extra for anything not specifically noted in the contract and has various other mechanisms to manipulate the contract price in their favour if the need or desire arises.
The role of the building broker is to enhance and protect their client’s interests and redress the power imbalance between them and the builder.
The builder will not start work on the contract until the client has paid the down payment. Invariably they will leave some estimates and allowances included in the contract price. These estimates and allowances provide the builder with the opportunity re-negotiate the contract price behind the scenes and without the knowledge of the client. Scary stuff, right?
The client is unaware that the price has changed until after the plans have council approval and selections have been made. The revised price is only then presented to them when the job is ready to start.
The client’s negotiating skills have been used to no avail. The builder has manipulated the situation, drawing the client in and then using the client’s funds to provide the documentation necessary for the builder to arrive at the price that they are prepared to build at.
Presented with price variations the client has to choose between agreeing to pay them, which may add thousands of dollars to the price, or not accepting the variations and the increase in price which voids the contract and the time and money spent by the client is forfeit. This practice is widespread and condoned by the building industry.
So how does the client protect their interests in the face of this? By engaging a building broker to advise them, prepare the documentation on their behalf and assist them in the selection of a builder.
If you or someone you know is contemplating building, a no obligation chat will cost you nothing and can make all the difference.
Call Jon Carey on 0412025528 or email at email@example.com or download your own copy of our comprehensive building guide booklet.