Generally when you obtain a tender from your builder, it has an expiry date.  Every builder provides you with today’s pricing and locks it in for a period of 3, 6 or 12 months.  However every builder is different so you must check their validity period and never assume the period.

Definition

So what is a tender validity?  A tender validity means that your tender and price are valid for a certain period of time and locked in based on today’s price.  It has a start date (usually when you pay your initial fee), and has an end date which vary from builder to builder.

Period

How long should a building tender be valid for?  There is no right or wrong answer here however anything less than 6 months from signing off on your building contract / agreement is very risky and you will most certainly pay for it at a later stage.

I would strongly suggest that you have your builder fix and lock your price in for a period of at least 12 months or more if you are going through the DA process (obtaining your plan approvals through local council).

A note:  when I sell home & land packages, I always lock in our pricing for 6 months after expected land registration to provide for ample time for finance / colour selections / authority approvals (CDC vs. DA) / etc…

Expiry

What happens when my tender is no longer valid?  In this instance, whether you signed with the builder (and paid your fees) or not, there are generally three options your builder can opt to.

OPTION 1)

  • keep your tender price as is and update it’s validity at a monthly incremental cost or

OPTION 2)

  • update your tender to today’s pricing or

OPTION 3)

  • keep your tender price as is and extend it at no extra cost to you

Factors

So what affects tender validity?  There are numerous factors that affect your tender validity including but not limited to:

  • land registration
  • authority approvals process
  • your own colour consultation (if you take too long)
  • your builder has problems so delays happen

Because most of the above conditions are outside of your control, I would strongly suggest that you negotiate a longer period validity for your tender & price so you don’t get hit with price rises through the process.

Please remember that these price rises are generally valid as the cost of materials and labour simply go up over time.  If you cannot afford any unknowns or surprises, then fix & lock your price with your builder upfront.

Cost

How much should you pay to extend your tender validity?  I have seen different builders charge between $900 to $2,500 per month to extend your building period depending on your project and the complexity of home that you are building.

A Note

Please remember that builders (generally) want to start building your home as soon as possible as that’s how they make money.  However some builders may have too much work already so they will delay your project unnecessarily to allow enough time to start your job.  This is not fair and you will end up paying the price through delays (interest payments, rent, etc…) and extra monthly cost for extending your tender validity.

It’s a bit challenging to know if the builder is delaying you on purpose or if it’s outside of their control!  The last thing you want to do is pay a cheaper price, then having to wait for the builder for months to start only to find out later that your tender is no longer valid and you must pay extra.  Just another way of low upfront pricing to lure you in and hit you with charges later… So beware!!!

Hence why it’s very important that you select the right builder for you and your family.

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