Almost everyone has a budget for their new home. It typically goes like this: “If I sell my current home for this much and the bank has said I can borrow this much, then my budget is this much.”
Next comes the wishlist followed by the realisation that the budget is not going to be enough. “No problem! We’ll do a few weird and wacky things that are bound to be cheaper. I bet no one has thought of these before to make the house cheaper! What do you mean the ideas won’t work and that they will make the house more expensive?”
“Oh well, I’m sure we’ll be able to save on things as we go along.”
In my experience the single biggest cause of stress in Building is not all the building issues such as weather delays, materials not being delivered or someone misreading the plans, it’s the stress of the budget running out.
Get the budget right, the stress will go and you’ll be able to enjoy the challenges that come with Building.
Getting the budget right means having a realistic budget in the first place. This means being aware of what is included in your contract, what extra costs there could be and what other costs you could incur while building that you wouldn’t normally have.
There are many different types of building contracts but if you’re borrowing from the bank there is a pretty high chance they will insist your builder has a fixed price contract. This typically means the cost of your building project will not change (unless you make changes or variations… which both will be costly).
I have, however, seen many disputes between builders and owners relating to fixed-price contracts. The majority of these have been because it wasn’t made clear what was included and excluded from the fixed price, or the contract price included some unrealistic allowances that were adjusted during the build when the real costs were determined.
It is relatively common to have allowances in contracts. This is usually (but not always) for items that you haven’t made a final decision on yet. For example, the contract may include an allowance of $10,000 for your kitchen. If the cost of your kitchen turns out to be $11,500 you will end up paying the builder an extra $1,500 over and above the contract price to make up the difference.
If your contract includes any allowance you should ensure the amount allowed is a realistic representation of its true value before you sign the contract.
I have seen multiple cases where owners have signed contracts that contain allowances only to discover too late the amount is way off the mark. Unfortunately, some builders even use this process to make the bottom line of their quote look cheaper and more competitive. You could end up paying thousands more for your home than the contract price you agreed on.
Allowances in contracts are not just limited to monetary amounts. I have seen instances where a contract allows for 40m2 of driveway concrete, only for the owner to discover their driveway requires at least 80m2 of concrete.
When calculating your budget, have a good think about any extra costs that you may incur that you normally wouldn’t be paying if you weren’t building. Do you need to pay disconnection and reconnection charges for power, phone, or gas? Is your new home out of town so your fuel bill will double with your site visits? Will you be doing lots of baking for the builders and subcontractors? Better still, are you planning on having the roof shout of the century?
During your build, there is a chance you may be renting as well as paying for the mortgage on your new home. Have you allowed for these extra accommodation costs? And, have you budgeted for a few extra weeks rental just in case the construction is delayed.
There’s a lot to take in, I know. But getting this right means you’re not going to have any nasty surprises. Once the money is sorted, you can then enjoy watching your new home being built.
At Homeworx, we prepare a comprehensive written contract so there are no grey areas or potential disputes.
Your contract also includes a copy of your detailed quote, payment schedule, and 10 Year Master Build Guarantee – which covers you for loss of deposit, workmanship, structural cover and completion cover.
We believe you shouldn’t have any surprises while building, particularly financial surprises. We make sure our Fixed Price Contract is genuine. Unlike many other contracts, we won’t include any allowances that can often be inaccurate or misrepresentation of the true cost (unless you have requested an allowance be included and agree it is a realistic value).
So, with a Homeworx fixed-price contract, the reality is the cost of your home will not change unless you make the changes.