PropertyMash chatted to Michael Starr from LJ Hooker, who shares his top-tips for first-time home builders below. From gaining pre-approval on your loan to soil quality and looking past the glitz and glamour of a display home, here are the top 6 things you need to know before you build your home.
If you’re serious about building a home, the amount of money you can afford to spend has to be one of your first considerations. For most people, this means getting a home loan, and so, getting a pre-approval is the place to start. Contacting a mortgage broker who is experienced in house and land finance and can offer a variety of lenders is often a key contributor to whether you can get finance approval. Different lenders may have small variances in their lending criteria and the broker will be able to guide you on how you may best fit with a particular choice. Once you’ve found out how much you can borrow, you can start looking for a property that matches the amount you can afford.
• Be aware that any credit cards, car loans, and personal loans, etc, can be viewed by the bank as if they were ‘maxed out’ to the limit. This can be the difference in getting approved for the amount you need or whether you can obtain finance at all.
• Work on your deposit — the bigger the better. A big deposit will open more options to obtain better finance deals. If your deposit isn’t large, ask your broker and parents if an Equity Guarantee is an option. Equity Guarantees are often a great way for parents to help first-home buyers to enter the property market.
No matter the house and land price you end up negotiating, the reality is that the lender will conduct a valuation (and other checks) to make sure the property will be worth enough to cover the loan; and that the deal is sound enough for them to lend you money. If you’re serious about entering the market, perhaps have a small deposit, and want the best chance of getting your finance approved — don’t go overboard with extra house inclusions. The lender will usually be comparing your proposed deal with other comparable existing properties sold close by, which may or may not have non-standard additions. The valuation often doesn’t discriminate between expensive upgraded roof tiles and standard tiles — isn’t a roof a roof?
If you want upgrades and are working to a tight budget, consider leaving out items that can be added once the build is complete. Only include structural items that should be incorporated in the building of the home. Maybe the built-in barbecue or the European kitchen appliances could be a future purchase? Better to have a standard oven rather than no house because you can’t get finance. If you do add in a few upgrades to your build contract, and the valuation comes in lower than you had hoped, be prepared to compromise on removing expensive items, which may help the deal progress.
A soil test will be conducted on your land so that an appropriate slab design can be produced for the conditions. This typically occurs when you pay an initial deposit ($1,500 or so) to a builder to perform that task, amongst others such as a contour survey. When you’re initially getting quotes from a variety of builders you should understand what they’ve allowed for in terms of the foundations/slab. This is important because there can be significant differences in the final price, depending on the soil conditions.
A builder could offer a quote based on the best-expected conditions, but a little research on the area might reveal this best-case result is not a likely expectation. From this, you can begin to understand what should be allowed for in your initial quote. This will mean the price you are working on is closer to reality when you eventually handover money for the soil test. Good, upfront salespeople, based on their experience, will offer some guidance on what to expect in their estate. Some builders (usually larger ones) may offer a fixed price on their foundations, and this is often a reassuring purchasing aspect for buyers.
• Even if a fixed price is offered on the foundations, ask about the Rock Clause in the building contract and whether they cover or allow for any discovery of rock on site during construction. Rock excavation can be costly. This is something again to do a little research on in the area in which you’re looking to build. The aim is to eliminate any costly surprises.
What does turnkey actually mean? In theory, it is meant to reflect a price that includes everything. All you do is ‘turn the key’ and walk into your completed home, with finished driveways, landscaping, curtains etc. But, every builder has their own idea of what turnkey should include. As well as variances in inclusions there are definitely variances in the quality of products they offer. Be sure to compare specifications before you build and don’t forget the foundations! The most important thing to remember is that turnkey does not mean the price they have given you is a fixed price.
Has your builder included fencing into your quote? Have they quoted for a full share of fencing or half? This is a very common problem area which can cause disputes with new neighbours; all because the builder hasn’t informed you of the process with the shared costs of fencing.
In Queensland, the cost of fencing should be shared equally between neighbours. If you are being quoted for the full costs of the fence, what about your neighbours’ contributions? These items usually need to be negotiated prior to installation. If the fence is paid for in full by you without prior negotiation with neighbours, I would be praying my neighbours were good people and offered to pay their half, however, this subject does cause problems in some cases.
Negotiation on fencing should be instigated by the client or builder and done well in advance of the fence being constructed so that there are no issues. However, this is not always possible; for example, building your home when the adjoining lot has not been purchased yet. Regardless of which way the builder includes the fencing cost — what will they do to ensure you get your contributions from the surrounding neighbours? This is definitely something to be aware of and something that could cost you thousands more than it should if you aren’t careful.
Browsing display villages with the latest offerings on show from various builders is a great way to get inspiration before you build, and to hunt for a suitable builder. But, it is important to remember that display villages and the homes builders have there aren’t necessarily reflective of the brochure they hand out. Most builders use the display home as an opportunity to show off what they can do. The home may not be a standard offering, in some cases including a lot of non-standard upgrades. Often there will be a pre-prepared list of upgrades and some builders include this list along with the standard specifications, but some may not.
Some other builders go the complete opposite direction with their display offerings and don’t even have furniture in the home. They look to display exactly what their specifications are. These homes aren’t usually as ‘pretty’ to look through, however, they do offer a realistic representation of the product you’re paying for. To avoid the disappointment of not getting that big beautiful engineered window that was at the display home, be sure to ask for a list of upgrades to compare to the normal specifications you may be looking at.
Michael is the Sales and Projects Manager at LJ Hooker Land Marketing Queensland. He manages multiple subdivisions across the Sunshine State.