Some years ago, a client came back to us with three quotes for the same house. Every builder had the same plans. Our price was $1.15 million. One quote came in at $1.4 million. Another came in at $750,000.
He wanted to know how two builders could be $650,000 apart on the same plans. The honest answer was that the plans were the same, but the specification and selections each builder had priced were not. Two homes can look identical on paper and be very different to build.
In 2019, we changed the way we work. We now work with clients, architects and consultants during the design stage, developing documentation together in a format clients understand. If they want to test our price against other builders, they can, knowing the prices that come back should be for the same house and the same specification.
Here is what Jonathon Armstrong, our Co-Director, suggests checking before you sign a building contract with any builder, Patton included.
Compare Quotes Line by Line
“If they’re pricing the same house, you should have no more than five to 10% swing,” Jonathon says. Some of that comes from how each builder runs: the rates they pay their trades, their overheads and their margin. Some can come from allowances you may not notice, such as an amount set aside for site conditions or other unknowns.
A bigger gap usually means the quotes aren’t for the same specification: one has allowed for higher-end selections, or something has been missed or excluded. Start with the list of exclusions, usually at the end of each quote. If one builder allows for internal painting and another doesn’t, that is a part of your difference.
When you first meet a builder, we suggest asking three questions:
- What isn’t included in this price, and is there anything I need to pay for on top?
- What do your allowances actually mean? “Builder’s range” can cover a lot of ground.
- How will you communicate during the build, and who do I contact?
Check Your Allowances Match What You Want
Allowances are one of the easiest ways for a quote to look cheaper than it really is. A prime cost (PC) allowance is used when the scope is known but the product isn’t.
For example, the plans might show 50 square metres of wall and floor tiles, but the tile hasn’t been chosen. The builder includes a purchase price, say $80 per square metre. Tapware, sinks, baths and appliances often work the same way.
A provisional sum (PS) covers labour and materials where the scope still needs refining. Cabinetry and stone are common examples. So are earthworks, because you can plan to spread sand on site and find clay that has to be taken away. Where possible, provisional sums should be based on a quote or estimate.
Set too low, an allowance makes the contract look better, and then small increases add up to a lot of money as you make selections. If you have been showing your builder photos of high-end mosaics, your tile allowance should reflect that, perhaps $150 per square meter rather than $60.
Allowances are usually valued at the builder’s trade price, not retail. This is worth knowing when you go shopping. The price on a showroom tag is usually retail, so a tile can look over budget when it’s actually within your allowance at trade price. Check too whether the allowances are stated inclusive or exclusive of GST. If the quote doesn’t say, ask. When comparing quotes, make sure each builder’s allowances are on the same basis, so you’re comparing like with like.
Read Your Specification and Drawings
If we could ask every client to do one thing before signing, it would be to read the specification and drawings carefully.
A good specification has real detail, because it also tells the trades what to build, but you should be able to understand it. Ask your builder to take you through it, then read it yourself rather than relying on an AI summary.
Watch for anything marked “subject to”. A price subject to engineering could change significantly once the engineering is done, so ask how much it could move.
There are a lot of conversations in the months before a build starts, and it is easy to forget one. We once removed paving at a client’s request, with a credit agreed, and months later they were surprised it wasn’t being done. It was all in the specification, and reading it before contract would have caught the misunderstanding.
Mistakes can run the other way too. We have had an item that was agreed as included but incorrectly noted as excluded, because the specification hadn’t been updated. We put it back in at no cost to the client. If something doesn’t match what you remember, ask.
Bring a Builder In Before the Plans Are Finished
A common story goes like this. A client spends 12 months or more designing a home with an architect, takes the plans to tender, and the quotes come back at double the budget. We have heard of clients spending $100,000 to $200,000 in design fees on a home they then couldn’t afford to build.
Bringing a builder in early tests whether a design is feasible before you spend heavily on engineering, approvals and consultants. That’s the purpose of our Concept Feasibility stage. Before the design goes too far, we look at the concept, the site and your budget together, so you know early whether the design and your intended investment line up.
A quantity surveyor can give a quick, high-level figure; but a builder working alongside your architect can also suggest small changes that makes an expensive details far more affordable. A builder pricing a finished tender simply prices what is drawn. On some projects, we engage the designer or architect ourselves, so they work with us and the client to manage the budget.
Budget Generously for Perth Hills Site Costs
What surprises people most about site costs on Hills properties is how expensive they are. Earthworks, retaining, rainwater tanks, and power and water run-ins to a rural or semi-rural block all add up.
Jonathon’s advice is to over-allow. If you have an early indication of $100,000 for site works, be more conservative, allow up to $200,000. On a $1 million budget, ask your designer for a home that costs $800,000. If the site comes in under, you can upgrade fittings or keep the money, rather than cutting things from your home to pay for site works.
Design matters here too. We’ve built a number of homes on sloping Hills blocks, and our advice is to design to the block rather than placing a house designed for a flat site onto a slope. Otherwise you can spend hundreds of thousands of dollars on a sand pad and retaining walls before the house begins. A different approach might not cost less, but it could give you a more interesting home for the same money.
Before You Sign
Every check here happens on paper, before you are committed. A missing exclusion, a low allowance or an unrealistic site budget is far easier to fix now than halfway through a build, which is why we spend the time on documentation early.
Want to know what warning signs to look out for when choosing a builder? Continue reading Part 2: Building Contractor Warning Signs
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