Building Costs quoted in many contracts are unrealistic – here’s why
I was just a young, wide eyed, impressionable kid when doughnuts were first introduced to Australia. My father took me to this specialty restaurant in George street Sydney called Downyflake Doughnut Bar and there are two things that stick in my mind about it.
First thing was that the Doughnuts were a bit of a let down to what I had anticipated. The second thing that I remember clearly is a poem that was displayed prominently on their wall which went like this.
“as you wander on through life brother, whatever be your goal,
look upon the doughnut, not upon the hole”.
So, what has that got to do with building costs you ask?
Plenty! Compare that wide eyed impressionable kid with potential home buyers walking through builder’s display homes. If you were a fly on the wall you’d hear plenty of ‘oohs & arr’s’ in any given day.
When it comes time to signing most building contracts though, and they are not easy for the lay person to fully understand – that’s where the disappointment will likely set in just like that young kid with the doughnuts.
Now, don’t get me wrong. I’m not saying that typical home buyers are wide eyed impressionable fools but I will say that display homes are designed to make an impression, and they do! We often speak to potential clients who had started to go down that path and then feel let down. They say something to the effect of “we thought this and that were included”. Which brings us to the second point – the hole in the doughnut?
So – you think you have your building costs covered?
Most builder’s quotes will have a list of ‘inclusions’ [albeit a bit rubbery at times]. Let’s compare that list to the ‘doughnut’ – [ie the part that you eat]. It’s the list of omissions that you need to see which is rarely if ever provided or accurately quoted. We’ll compare that list to the ‘hole in the doughnut’. However, unlike the doughnut which is entirely satisfactory to eat with a hole, building a house without some of those omissions is not possible or viable. That is to say that when you add up the costs of those things that are omitted it will obviously add to your building costs.
Common Omissions & Exclusions
If you want to ascertain your true building costs an excellent way to understand what’s included in a quote is to ask the builder what is ‘excluded’ from the quote. Like reverse engineering, sometimes you need to start from the end and work your way back. I could easily provide you with a checklist of at least a dozen things to look out for however space does not permit, so here are just half a dozen of the more common and important ones. We can and will look at some others later.
- Prime costs aka PC’s: Builders often put in very low pc costs for tiles, carpets, hardware etc. – In fact for all sorts of things. Typically the PC allowance is less than the likely cost which has the effect of making their quote more attractive. It’s best to go and choose EVERYTHING, including lighting up front, give them the list and have it included in your building quote. You will often find the terms ‘standard’ or ‘builder’s range’ used in describing these items and more often than not the builder’s choice will differ from yours, often markedly resulting in a cost blowout.
2. Site Costs: These relate to the land itself (soil composition) and preparation of the site to commence construction. Expect some costly surprises if your slab / foundations haven’t been engineered and priced prior to the initial ‘quote’, so it’s always a good idea to get a proper soil test conducted on your block prior to going shopping for a builder. In fact a good site plan i.e. a detail and contour survey is also well worth the investment. Site costs can include clearing vegetation, demolition, excavation and will often vary dramatically from one site to another depending on accessibility, slope of the land, soil type, existence of rock and the requirements of the design itself to name a few. If your site is particularly difficult to access there may be additional costs related to traffic management or road closure for example. We have even seen quotes where Site Costs were given a lowly PC allowance or omitted altogether. Have you heard of buying a car where wheels were not included but were an optional extra?
3. Retaining Walls: Rarely are building sites absolutely level. Most homes these days are built on slabs which require a level building pad and to achieve this the site is prepared using the cut and fill method. Quite often
this will require the construction of retaining walls at some point and rarely is this cost included in building costs. Worse still the need for retaining walls is rarely even stressed and given scant regard. In many many cases retaining walls are best built prior to commencement of building works. Building them later will often result in a higher cost due to limited access and inability to use appropriate machinery and so forth.
4. Landscaping: This includes pretty much everything external to the home that you will need at some stage such as fencing, driveways, access pathways, clothes line, gardens, topsoil, turfing, a letterbox, street numbers and maybe some exterior lighting.
5. Connection of all services: You will likely need to be connected to water, electricity, gas, telephone, internet, and sewer to name the most common requirements. If sewer is not available you may need a specific on site sewerage plant that may have specific Council requirements in your location as well as specific soil absorption testing – one size does not necessarily fit all. Similarly with town water the cost of a water meter is not insignificant or if it is not available you will likely need some form of storage i.e. Water tanks, so make sure that adequate storage for your needs is provided along with a suitable pump.
6. Permits & certifications: Are your building plans approved? Have they been engineered? What about your plumbing approval? All these things have fees and charges attached which may or may not be included in your building quote or may have an inadequate PC allowance provided. If your plans have not been ‘engineered’ you can’t expect the builder to give you a fixed price but he should be able to correctly ascertain the fees for plumbing approval and the BA itself.