As a service and quality focussed, family-owned building company, we often hear heart-breaking stories of building experiences turning sour due to unexpected costs incurred during the building process (even with a fixed price contract).
It is incredibly challenging for clients to look at a build price and completely understand what is covered. Often people will just see the bottom line and fail to look into exactly what is included (or excluded) from the total.
We have put together the following list of red flags to look out for and questions to ask when evaluating a build proposal.
1. Look at the fine print: A two-page Pricing Proposal is unlikely to provide the level of detail required to satisfactorily understand what is included. Beware - if it’s not written down then it may not be included.
2. Provisional Sums (or PC Sums): This refers to an allowance for specific items that have not yet been selected. For example, an amount allocated to cover the cost of the kitchen, electrical, flooring selections or plumbing. Make sure the PC Sums in the build proposal are realistic and are based on actual quotes from suppliers. Ask to see the quotes and make sure that the recommended selections suit the style and size of the home.
3. Earthworks: This is often the area of most risk as you can never be absolutely certain of what you will encounter once earthworks are underway. Try to determine if the PC Sum is realistic as, if the actual cost goes over the (PC Sum) amount then you as the client will have to pay the difference. If you are building in a subdivision then we suggest checking with neighbouring properties as to what their earthworks cost and if there were any complications to be aware of.
4. Look out for what is excluded (not just what is included): The following are just a few of the items that we often see omitted from pricing proposals – architectural or draughting fees (for any changes to the design), Geotech and Engineering services, building consent fees, driveways, septic tank and stormwater systems (particularly for rural properties), patios and fencing – just to name a few.
5. Electrical: Pay careful attention to the quality and quantity of the proposed electrical fixtures and fittings. Ask to see a draft electrical and lighting plan to ensure it is in line with your expectations.
6. Flooring, Plumbing and Fixtures and Fittings: Speak to the suppliers that the builder uses. Visit their showrooms and view the ranges that pricing is based on. Check what warranties and guarantees are on their products.
7. Kitchen and Appliances: Check that PC Sums are based on actual quotes. Ask to see a concept design for the PC Sum allowance. Visit the kitchen supplier and check out their range. Check how many drawers, what type of handles and what type of benchtop the PC Sum allowance will cover.
8. Warranties and Guarantees: A Master Build guarantee covers problems with Materials and Workmanship for the first two years and a total of 10 years cover for any Structural Defects. Warranties on fixtures and fittings can be much shorter – make sure you are aware of what is covered and for how long.
9. Fixed Price Contract: When does Fixed Price not mean Fixed Price?
When the contract includes a Cost Fluctuations clause allowing for price increases during the build to be passed onto the client. Check your contract and if it includes a Cost Fluctuations clause, ask if your builder has ever had to invoke it and in what circumstances. To limit your exposure to price increases we suggest including a separate Cost Fluctuation Contingency in lieu of the standard Cost Fluctuations clause. This builds an allowance into the agreed price to cover increases in costs that occur from the time you sign the contract through to the completion of the project. Seek advice from your lawyer - you want to avoid any unpleasant surprises during the build.
10. Reputation: Due diligence, when it comes to selecting a builder, should involve talking to as many former clients as possible. Ask them – Did the build contract include EVERYTHING or did you encounter unexpected costs along the way?