Of all the questions people ask themselves when building their own home from scratch, this is arguably the most concerning one. Unfortunately, it’s not a cut-and-dry answer either.
It depends on the specific terms and conditions outlined in the contract between the buyer and the builder. Typically, a fixed-price building contract is used for a house and land package, which means the builder agrees to build the home for a specific, agreed-upon price.
However, there may be circumstances where the builder is permitted to increase the price. For example, if the buyer requests changes or additions to the original plans or specifications, or if unexpected complications arise during the building process that were not foreseen when the contract was signed.
It’s important for buyers to carefully review the contract and understand the terms and conditions before signing. Any potential price increase clauses should be clearly outlined in the contract, along with the circumstances in which they can be invoked.
If the builder attempts to increase the price beyond what is outlined in the contract without a valid reason, the buyer may be able to dispute the increase or take legal action to enforce the terms of the contract.
What are the prime cost items in a building contract?
For those who are new to this term, prime cost items are products or materials that are not included in the base price of a home but are allocated a specific amount of money in the contract. The allocated amount is a provisional sum and is an estimate of the cost of the item, which may be adjusted up or down depending on the actual cost incurred during construction.
Here are some common prime cost items that a first homebuyer should be aware of:
- Kitchen appliances: This includes ovens, cooktops, range hoods, and dishwashers. The allocated amount may not be enough to cover high-end brands or models, so it’s essential to do your research and check if the allocated amount is realistic.
- Flooring: Prime cost items can include carpet, tiles, or timber flooring. The allocated amount will vary depending on the quality of the product chosen.
- Bathroom fixtures and fittings: This includes items such as taps, showerheads, and toilets. The allocated amount may not be sufficient to cover designer or luxury brands.
- Light fittings: This includes ceiling lights, wall lights, and outdoor lighting. Again, the allocated amount may not cover high-end or custom-designed fixtures.
- Heating and cooling systems: This includes ducted heating, split systems, and air conditioning. The allocated amount may not be sufficient to cover the installation of larger or more advanced systems.
It’s important to keep in mind that the allocated amount is only an estimate, and the actual cost of the item may vary. Buyers should do their research, get quotes from suppliers, and ensure that the allocated amount is realistic before signing the contract. Any changes or upgrades to prime cost items should also be discussed and agreed upon with the builder in writing before proceeding with the construction.
Speak to Perry Finance
For more than 10 years, Perry Finance’s committed group of residential and commercial brokers have shared our expertise and provided guidance on debt strategies through extensive product knowledge and experience within the financial sector. We’ve served Melbourne and the entirety of Australia as a crucial partner to our lender panel.
Put your property development project in the best hands possible and let Perry Finance help you take advantage of the most optimal funding options available. Our team of experts provide innovative finance solutions that are founded from debt structuring experience and a deep understanding of products.
