So our next stage is for you and your agreed architect and or builder to agree on a fixed price building quote so that we as your brokers can get a valuation done.
Here are the items we need to get a valuation done on your property and progress your application.
- A fixed price building quote.
Note – this is not an estimate, it’s not an invoice, it’s a really specific document that the bank need to send a valuer to your block and to look over your plans to ascertain what they think it’s worth. It is the contract you sign with your builder to build your home AND it lays out all the payments due and that they will occur at a fixed price in stages.
This link is to the HIA’s standard building contract and is very commonly used.
The fixed price building quote will spell out not only the work to be completed, but also how the builder wants to be paid in stages.
Examples of the stages may be:
- Base or Foundations or Slab (different names can be used) – they all basically refer to the completion of footings such as stumps or a concrete slab.
- Frame – the completion of the framing stage for the building and approval by a building surveyor. Typically roof framing also is done at this stage if masonry walls are in the property.
- Lock-up / internal lining – completion of the external wall cladding and roof cover (so you can lock up the property). Flooring may be laid here, but may also not be. Windows and doors externally are fixed and the building is secured from weather (and vandalism).
- Fixing or Fitting – this is where your internal fitouts including internal architraves, skirtings, doors, joinery, baths, basins, troughs, cabinets, skins and cupboards are in situ.
- Practical completion / final stage – completion of the property so you can get an of occupancy certificate or certificate of completion.
Some lenders are very specific on how they want these stages paid, for example ME bank specify:
- Slab down/base – including any deposit previously paid – 15%
- Frame/plate height 25%
- Roof on 25%
- Lock up 15%
- Final/completion 20%
Another lender – St George / Bank of Melbourne (owned by Westpac) list their standard schedule (although not a “set in stone” blueprint as):
– Foundation / slab (including deposit) 20%
– Frame 20%
– External lining 30%
– Lock up / internal lining 20%
– Practical completion 10%
Things to be aware of:
– If the valuer deems that the builder’s quote is not in line with the bank’s best interests, they’ll often comment and the builder may need to amend their schedule.
– If you have other contractors it is best if you can get your builder to incorporate their invoices into that one fixed price building quote otherwise you may find that the bank won’t pay that invoice until completion (or in some cases at all) – best to let your broker know up front if this is going to be the case so the best lender can be chosen.
– Make sure you’re only sending through the final agreed contract as any changes made after the valuation typically need to be paid for from your own pocket.
– The more heavily weighted a builder has to the funds being given to them up front, the more likely it is that a valuer or the lender will have issue with their schedule.
– And as always, do not sign your fixed price building quote unless it is subject to finance, we also strongly recommend you have a solicitor look over your fixed price building quote and advise you on it the same way they would when buying your land with that contract.
Your plans don’t need to be council approved to get a valuation done and your finance confirmed, but you will need to provide the council approved and stamped plans prior to the lender making the first payment.
Here’s where detail matters. Your inclusions detail the specifications of everything going into your house. They spell out whether you’re having laminex benchtops or marble! And as you can imagine a difference like that will impact a valuer in their assessment as to the price your home may be worth. The more detail the better. The less a valuer has to guess, the easier it is to do their job and hopefully, say your home is worth what you’re spending.
- Builder’s insurance
Now is also a great time to get a copy of your builder’s insurance and forward that to your broker as the bank also require a copy of this.
Valuation – what happens if your build doesn’t value up
Now, when your valuation is done it is done as a TBE (to be erected) and your broker will order this for you. This means that the valuer does his or her best to estimate what the home will be worth when it is finished
The best-case scenario (typically) is usually that your build comes in at land price + build cost price. That’s what the hope is (with potentially an increase in the value of your land since you bought it). If that happens, then the estimates your broker used at the beginning of the piece should all flow nicely.
But – sometimes the valuer does not believe that the value of the property you are building is going to realise the cost of it at the end of the day. This can be a problem especially if you don’t have a large deposit or a large amount of equity to contribute. If this happens your broker will step you through the rationale that the valuer has given you (although they won’t be able to send you a copy of your valuation report) and then you have some decision to make. Some options will include:
– Renegotiating with your builder
– Refining what you want in your home
– Having a new valuation (at a different bank) organised by your broker
– Choosing a new builder
– Contributing more equity to your build in the way of savings, a cash gift or potentially a guarantor supported application
Having your home not value up is one of the big potential issues with any build. If happens, we’ll step you through what your options are and guide you as to how to keep continuing on.
Here’s what Leah had to say about her finished build: “I love that we got exactly what we wanted, our dream house, the building quote was reasonable and that meant we could upgrade fittings and fixtures to have exactly what we wanted.”
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