Hi,
We are getting preparing to sign a contract with a builder to build a residential/commercial property and was wondered if anyone has any information regarding any inclusions or exclusions that we should make or watch out for in the contract?
We will run it by a solicitor however we like to do our our preperation work beforehand.
Thanks,
FionaHowdy,
As someone who has just purchased land and has entered into a comprehensive building contract, I think I have some valuable advice to give you! I’ve been very lucky with the property that I am building… before the slab is even laid (they’ve just started) the property is already worth $50-80k higher than what I am paying for it.
The number one rule is, watch out for the banks! A lot of these institutions, facing a massive boom in housing loans, have put on a lot of new staff, a lot of whom are inexperienced. Thus, it can be very difficult to get the correct information out of them.
What information is the most important? First of all, the loan to value ratios that they will lend! You have no idea the amount of trouble I faced trying to get a straight answer about what percentage of the land component they will lend, what percentage of the house component they will lend, how progress payments are made, who administers them and how first home owners grants are applied and so on.
Remember, building a house will usually require a little more than the standard 5% deposit required for an established house. That’s because you need to first buy the land, and the banks will only lend upto 90% of the value. Then for the house component, you’ll usually be allowed to borrow 95% of the value of the builders contract price, but some builders may want 10%… be weary of those who want 10%, because standard HIA indemnity insurance (incase the builder flies off) only overs upto $10,000 for a deposit.
Also, ask the bank how the progress payments will be paid… will the builder contact you when he needs a progress payment, or will he contact your solicitor, and who will have to ask the bank for the money, and who at the bank will be administering your account.
Make sure the terms of the agreement with your solicitor as well… most will usually require payment of their fee once settlement on the land is complete, not on the entire house.
Make sure the builder understands explicitly (and its even better if it’s laid out in the contract) that you are to be contacted about decisions for ANY finishes to be made to the house, paint, colour, kitchens, door knobs, shower rails, anything. The final look and feel of your house, should be what YOU want, not the builder.
Good luck, building can be very rewarding but also extremely frustrating, hope you have a great time!
Sincerely,
Mal
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