Builders are all RICH!! Or are they?

Builders are all RICH!!! Or are they?

How to make sure you’re getting a great deal, and your builder won’t go broke during construction

If you’ve ever looked at the final price tag of a new renovation or building project, it’s pretty easy to assume that whoever is getting that check probably takes money baths inside their gold plated pools. This can lead clients to think that their builder’s business is always doing great, luring them into a false sense of security.

The reality is that most of the money paid for new projects goes towards the materials and actual building of the project. If builders aren’t making as much as we think, then their businesses may not be as safe as we initially thought as well. Here are some alarming stats. 80% of building companies will go broke within their first five years of trade. 20% of the remaining companies will go broke within the following five years. This means that an astounding 96% of building companies will go broke within their first ten years of operations.

As a client, this shouldn’t scare you away from ever wanting to build again. It should merely bring to your attention the importance of checking your builder’s financial solvency BEFORE signing a building contract.

What happens to me if my builder goes broke during construction?

If your builder does go bust during your project, sadly, you are not alone. Because of this, some safeguards have been put into place. Builders are required to take out QBCC Home Warranty Insurance prior to starting your project. Great, right? Sort of. Unfortunately, these policies rarely cover the full cost of your project which means you will be left holding the burden of a large chunk of the payment with no recourse.

How do I avoid an insolvent, dodgy builder?         

The best strategy for avoiding this situation is doing proper research about your builder BEFORE signing a contract. Get a list of all trades and ask them a few questions about the builder.

Does the company pay on time?

What are they like to work for?

How long have you been contracting to the builder?

If a builder hires and fires regularly, this should raise alarm bells in your mind as to why. Ask for a list of previous clients and referrals and see what they have to say about the service and professionalism of the builder. If they refuse to give you these, that should be a huge red flag.

How do I pick the professional builder from the bunch?

Builder’s margins aren’t that much different from most of their competitors. If this is the case, then why is there such a big gap in pricing? The reason is that some builders use tricks like low initial prices to get the contract and then hit you with high variation fees on items they should have allowed for, but didn’t.

How do you avoid this and protect yourself?

Ensure that your builder GUARANTEES a ‘Fixed Price’ quote and his proposal’s have around 10 – 20 pages (depending on project size) with every item, variation, and renovation requirement clearly listed in great detail. Builders that provide proposals of this detail are likely to be much more reliable. These Builders are also much less likely to go broke during construction thanks to prior planning. A Professional Builder’s price may be the higher price, but you know exactly what you are getting and exactly how much it’s going to cost.

You think it’s expensive to hire a professional? Wait until you hire an amateur!

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