Before you sign a building contract, it’s incredibly important that you’re confident the quoted price is accurate.
Although it is impossible to estimate the cost of building to 100% accuracy, a fixed price quote will ensure that your contract is as close as possible to what you will pay at the end.
There are many things a builder should take into consideration to reach the final price in their quote—such as the type of block you are building on, the style of home design and also the level of inclusions you want.
Fixed price quoting is where you, the owner, get a quote based on actual costs rather than an estimate. This is the safest option because you can plan your budget, secure in the knowledge there will be no hidden extras.
A fixed price quote means time has been taken to assess the job including every aspect of the build from earthworks to finishing. It may take some time to collate all the costs, however the wait is definitely worth it.
To conduct a fixed price quote, your builder will need:
As part of the fixed price quoting process, you should also get a concept plan of your house.
Most contracts allow for some extra charges for things like hitting rock, extra foundation work, interest on overdue payments, etc. Most of these variables can be broken down into two categories: prime cost items and provisional sum items.
The Domestic Building Contracts Act 1995 states that:
A prime cost item is: An item (for example, a fixture or fitting) that either has not been selected, or whose price is not known, at the time a domestic building contract is entered into and for the cost of supply and delivery of which the builder must make a reasonable allowance in the contract.
A provisional sum item is: An estimate of the cost of carrying out particular work (including the cost of supplying materials needed for the work), …. for which the builder, after making all reasonable inquiries, cannot give a definite amount at the time the contract is entered into.
Builders that overuse prime costs and provisional sums essentially give rough estimates of what something might cost. For example, a builder may allow $5,000 for earthworks but once the job starts it might end up $20,000 because the job was not reviewed properly. A fixed price quote will help you avoid surprises like these.
In addition to reducing or eliminating prime cost and provisional sum items, a fixed price quote should clearly detail all the inclusions of your build.
The type of inclusions offered will vary from builder to builder—depending on the market and the most common style of housing—but some of the high quality inclusions to look out for are:
If you require additional inclusions or customisation, this should be negotiated and included in your fixed price quote.
Tip from a builder: make sure you get a complete fixed price quote that covers all stages of the building process. Some builders will offer a fixed price quote from the slab stage up—the foundations/slab stage is the highest risk area for cost overruns, meaning that this type of quote isn’t truly reflective of your final costs.
A fixed price quote will undoubtedly save you time in the long run, and potentially tens of thousands of dollars. The benefits of a fixed price quote include:
When you first start considering which builder to go with, make sure they have a fixed price policy. Otherwise, your dream home might end up costing you more than you think.