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There are many home builders that do provide their clients with a fixed price for their home build upfront. However, there are some that don’t fix their build price at the early stages before their clients commit to them. These builders do not fix their prices for a number of reasons including but not limited to:
- It’s their Pricing Strategy
- They are too Lazy
- It’s not their Process
So it’s imperative that you understand and decide on whether obtaining a fixed price tender is important to you or not. If it is not important, then this blog is going be useless to you!
Pricing Strategy
Let’s face it, building is a very a complicated process and most people do not understand how it all works. So the easiest way for you to compare (generally) is price.
If you are comparing two 35 square homes: both have 4 bedrooms, 2 bathrooms, double garage etc… they should then cost about the same. This is true and false at the same time.
It’s true in the sense that if it’s the same design, the same inclusions, the same site and similar builder’s cost structure – then the price should not vary that much between builders. I dare say the final price will differ between $10,000 – $20,000 (more or less); depending on how much the builder wants to make.
It’s false however in that no two builders are the same, even in the project home builder’s world. Builders don’t include exactly the same inclusions, they don’t build the same way and most of the time you are comparing different designs (assuming you are using their designs).
So if most people compare based on price, then it’s only logical that some builders will need to use different pricing strategies to lure clients in at a lower upfront price and systematically increase their costs at a later stage.
Part of the Process
It can also be that the builder’s process does not allow for upfront fixed price. This is usually true when the builder does their reports at a much later date or includes provisions for later. They do this, not to lure you in, but because this is all they know. They have always done like this, so why change now?
Too Lazy
Some builders are just too lazy to do their investigations properly on your site. They will provision for most costs and some costs do not get accounted for upfront. Through having provisions in your tender, you will get the extra charges as a nice surprise later on.
Having said that, there are many builders that do offer upfront fixed pricing and these are worth finding. Their upfront pricing might generally be higher than others. This is because they have genuinely accommodated for your all of your build costs and priced it accordingly.
So what are the 3 hidden costs that some builders can get you on? – please note that there are many more hidden cost items and here are just three of them that I will discuss in this blog.
Cost 1) Drop Edge Beam
I get a lot of clients telling me that the other builder has not included drop edge beam because it is not required. I then look at their block and it’s clear that their site will need drop edge beams. So if the builder does not think it’s required, then why does it say clearly that they are not included?
The tender should instead state something to the effect of “drop edge beams are not required as per our investigations and if it is required, we are the professionals and we will build these drop edge beams at no extra costs to you should they be required at a later stage”; Right?
When you buy a car and it’s missing the wheels, the manufacturer does not replace the wheels at an extra cost. Rather they put them as part of their upfront price because they have done their homework and they understand that a car has to have 4 wheels. Let’s get back to Drop Edge Beams or DEB…
I will talk about Drop Edge Beams in a lot more detail in another blog as it’s a massive topic. However here is a quick definition: a Drop Edge Beam is the edge of a concrete slab that holds the fill under the slab and is required when a cut and a fill is required to flatten the slope of your land.
So how do you know if you need a drop edge beam? Here are some questions that will help you identify it this is required:
- what’s the cut / fill of your land?
- how much spoil removal will need to happen?
- what’s the slope of the land over your building envelope?
- will you need retaining walls later?
- how close are you to the boundary?
Cost 2) Required Piering
The builder should account for the required amount of piering upfront. If the builder gets it wrong or have not accounted it for it correctly, then you should not pay any extra for them. When you pay a builder, you expect them to know how much piering is required to build your home based on the soil test / Geotech reports. This is not up for negotiation. This is a RULE.
The only exception to this rule is when the soil test comes back and it’s not clear how deep the piering has to go.
Some of the common excuses some builders give clients: “We only include nominal piering because we do not want to overallow like other builders do. We only charge you for what we actually need – so you are actually paying for the actual cost of what you are using.”… What a load of BS?!!!
Another reason: “We wanted to make sure that your foundation is solid – we have only allowed for x amount of piering in your tender but we took the liberty to increase that because we want to give you a quality finish. By the way Mr. Client, that will cost y dollars.”… oh come on, really?!!!
So I ask: if you cannot get this one right, what else are you missing or did not get right?
Cost 3) Service Connections
When a builder investigates your build site upfront, they should know exactly the number of meters required to have your service run and connected. Granted there are some exceptions like not knowing where the final location of the septic tank etc…, but outside of very few and known factors, your service connections can be fixed upfront. This should just be part of their fixed site costs.
Service Connections should not be a provisional allowance rather a fixed cost. Service connections include gas, electricity, water, sewer, telecom, etc… It’s a massive red flag if the builder includes it as a provision or specifies the number of meters for the service connection.
A Note
It’s important to understand that there are lots of areas that can trap you. It’s worthwhile to find an honest builder that partners with you and helps you understand the build process rather than tries to close the sale with some special offer(s) and a low lead-in price.
You know what they say: if it’s too good to be true, it probably is… If the price is way too low, then I would think twice before engaging that builder. Cheap does not always mean Value…
