Have you ever heard the term price building? It’s a trick some builders use to draw clients in with cheap, yet unrealistic prices. Those who have fallen victim to price building know – it’s not something you forget quickly.
What is price building?
Price building happens when costs are added to the base price of a contract. Say you visit a display home and ask the sales representative how much it would cost to build a similar project – you will be given a base price. But the home you’re viewing will likely include more than what’s allowed for in that base price. In fact, it’s probably several hundred thousand dollars more expensive than the quoted price.
We recently met a client whose original quote doubled once changes and upgrades were made. For this client, an $18,000 price tag was given to a simple staircase style change. The builder had ‘price built’ the quote when changes such as the staircase were made.
What should you look out for?
Some builders will encourage clients to pay a deposit for a house design that is deliberately under specified, knowing they will make thousands on the changes needed to customise the home.
The list is long, but here are some of the obvious alarm bells when it comes to price building:
1. The slab – many builders quote on an M-class slab which is very often not adequate for the soil and site type so will need to be upgraded to a higher strength.
2. Electrical – providing one light fitting and power point to each room is common in base quotes, but you’ll likely need more.
3. Sewerage or stormwater – any changes to a build over sewer or stormwater can add up to $20,000 to a job.
4. Cabinetry – a large expense in any house build, this is often given as an allowance rather than a quoted amount as builders know there will be substantial changes that drive the price up.
The above items are all considered variations to the original quote. How are variations dealt with? They are usually charged as an additional cost to the original signed contract. Be careful, as some builders will catch with the definition of a variation. For example, say you change four cupboard sizes in your kitchen, some builders will count this as one variation, while others may count it as four.
In some cases, there may be a minimum variation charge regardless of the size or cost of the change. Say there is a minimum charge of $1000 and you simply want to change the size of a cupboard door – that’s an expensive variation!
What’s the lesson?
Always be aware of what you’re looking at when you visit a display home. Remember that with some builders, the person who signs you up will not necessarily be the person you’ll deal with during the building process, so there may be some disconnect between the contract and the build process. Embarking on a building journey you’re unsure about only risks the success or cost of your dream home…