For major building companies, offering free design work is the perfect bait. It’s attractive to potential clients and makes a great headline. Unsuspecting potential clients sign up thinking their getting a great deal.
Once the designs are done, the builder makes up for that ‘free’ work by over-charging for the actual build. Want to seek another quote? You can’t. Those plans belong to the builder. You’re stuck and will now be dictated to by the builder on price, timelines and every other aspect of the build.
Along with making sure you don’t get locked into a builder, the same applies to some designers and so-called ‘building brokers.’
Many designers and building brokers will offer cheap (or even free) plans to lock you into their copyrighted design of YOUR dream home. You’re then locked into using their builders and are unable to leave or source your own builder without paying a significant sum of money to release your plans.
These brokers will add significant margins to the build to cover their ‘free’ advice and you have no idea whether your building quotes are actually competitive or not because you can’t shop them around!
No one wants to pay too much for their home. But not many people think about paying too little.
A project quote from a builder includes MANY decisions about costs, timing, and quality, but perhaps the most important factor is the builder’s margin.
A cheap quote could mean a few things. It could mean the builder is very efficient. It could mean they’re using cheap resources. Or it could mean the builder is cutting margins.
This last one is particularly dangerous. When a builder is pricing your project, one thing you will not be aware of is how badly the builder needs the job. Pricing lower may win the project, but it reduces their margin for error. A miscalculation may put the builder in the red.
This may cause them to price lower on other projects, as they need the money to continue on yours. This ‘death spiral’ may take years to play out. Some clients will end up with a cheaper home, but the clients at the end will be left with a half constructed property that was under-quoted and that insurance won’t cover.
As the client, you will be unaware until the builder goes bankrupt. This HAS happened, many times over in Perth.
There are MANY factors builders consider when pricing a home.
For example, a builder may seek a quote from a reliable sub-contractor when pricing your home. That sub-contractor may over-quote the job, knowing the builder won’t look elsewhere. Or they may over-quote the job, because they don’t want the work. A builder may save as much as 50% for that trade by looking elsewhere.
Quality of materials, bulk pricing and timing issues all affect how much your home costs.
You need to be able to trust your builder, but having some idea of how they price your project is important.
The complex nature of building means that you should ALWAYS plan for cost and time increases.
Everyone working for you will try their hardest to prevent this from happening (and the chances of these events happening is lessened with advice like ours), however failing to plan for some margin or error really is planning to fail. Always ensure that all estimates you are making have margins built in. This is how we ensure there are no surprises.
And just as importantly – don’t allow yourself to be carried away.
One of the secrets that makes great design professional is their ability to match your dreams on paper, but ALSO temper an innate desire to continually upgrade your home, blowing up your budget in the meantime.
Many clients have either been guided by their design professional (or guided their design professional) into greater and greater changes that slowly but surely push beyond the boundaries of their budget.
Upon finding at tender stage that their home is unaffordable, months of time (including design time, council submissions, tender processing) is wasted.