First Home Buyer? Here are some questions you should be asking your builder.
For First Home Buyers the process of building a new home can be daunting. There are so many moving parts in and around purchasing your new home that you can easily feel overwhelmed or unsure if this is even right for you. However with a little guidance from the right people (I suggest the trifecta of a builder’s consultant you can trust, a good mortgage broker and a parent or friend that’s built before) you’ll be across it in no time at all.
Here’s a few questions you should be asking your builder…
How much money will I need to pay?
While there is no one size fits all answer to this question, the one thing you can be sure of is you need some cash on hand. I’m not in a position to offer financial advice, but there will be costs that will fall on you in the building process – even with a mortgage in place. Generally you’ll need at least 5% on the contract price as a deposit and, while your bank or lending institution will likely capitalise any fees and charges into your loan, be mindful of costs that could come out of your own pocket – such as the initial deposits to the builder and land developer, stamp duty (or part thereof) on the land portion of the new build and legal or conveyancing fees. There will also be costs after the home is complete that you will need to pay for such as moving costs, setting up services (like power and gas), landscaping and even a letterbox!
Critically as a First Home Buyer you want to make sure you haven’t over capitalised on your home by packing it full of expensive upgrades - as your bank or lender will want a valuation prior to loan approval. If they deem the home is worth less on the market than you’ve paid, they’ll ask for an additional cash component out of your pocket.
How do I access the First Home- Owner’s Grant?
This again is one for your lender to advise on, but the process is handled by your bank or lending institution as part of your loan application. As a first home buyer there are a couple of key criteria to be eligible – you need to be a citizen or permanent resident of Australia, you need to be over 18 years of age, you need to not have bought any property in the past, and you need to not have lived in a home owned by a partner or spouse. There will be limits to how much you can spend on the total package price. For more information you can visit the State Revenue Office website here.
What size block will I need to build the plan I want? Or can I build the plan I want on my block?
There are many factors that contribute to the size of home you will be able to build on your block. Each allotment is different, from the footings required due to soil conditions, retaining walls and easements, to bespoke restrictions your developer has added into the contract to have a consistent built form outcome across the entire estate. If you’re unsure, speak to a new home consultant, discuss your preferred house plan and size, and share with them the engineering plan for your block along with the Developer Guidelines document.
What is included in the price (and what isn’t)?
Be sure to thoroughly investigate what is and isn’t included in your new home. The builder will have a list of ‘standard specifications’ which are in the base price of the floorplan. However, you most likely will need at least some upgrade items to cover any developer requirements, your site works costs and even things like floor coverings and driveways.
Your builder should provide you a new home sales quote with the ‘base’ price of the home and any upgrades you will require or that you’ve asked for.
Do you offer fixed site costs?
Site costs are one of the most complicated components of a new home build – and one of the most critical. I’ve dedicated an article just to this, which you can read here.
Are there likely to be any additional costs after I sign my build contract?
The last thing you want is to be getting a call from your builder asking for additional funds, after you’ve signed your contract and the bank has paid your 5% deposit. Make sure that your builder covers all of their costs in the new home contract before you sign it and that they are liable for any errors or additional requirements, especially around site works.
What is your process?
You need to inform yourself of the builder’s process both in getting you to site and completing your home. This process will differ from builder to builder and you will need to plan your cashflow to pay for your new mortgage while the home is being constructed, as well as forward plan things like cancelling the lease on your rental property and moving.
Do you commit to build timeframes?
You may have a process outlined by the builder but if they don’t stick to it you could find yourself looking for temporary accommodation or incurring additional months of mortgage repayments you didn’t budget for. Your builder will likely give you a range of dates for your new home to be complete – and this is normal. There are many factors that can shift the completion date so be prepared that you may need to budget and plan for a few extra weeks before you’re able to move.
How long is your warranty and what is/isn’t included?
By law, all builders have to offer a 7- year warranty on your new home. Some builders offer more as a point of difference - 25 years, 50 years or even Lifetime Guarantees – but be sure to read the fine print. Most of these warranties only cover significant faults in concrete slabs and timber frames and many require you to conduct regular maintenance otherwise the warranty is voided. They will also be voided in the event of natural disasters (like storms). Oh, and they are non-transferrable if you decide to sell the home.
BONUS: Questions your Builder should be asking you!
What is your budget?
A smart builder will ask if you have a budget and then cater their recommendations and plans to your amount. There’s no point to get all excited about a 35 square double storey home when your budget will only allow for a small single storey. As a first home buyer getting into the property market is the critical step. It’s unlikely this will be your last home, let alone your ‘dream’ home.
Do you own land?
Perhaps even more important than the house you are going to live in is the location. Your builder can help you source a block of land if you don’t already own one. Or they will tell you what options you have in your budget for the block that you do own.
What is your family structure and your lifestyle?
This question really is “how do you live in your home?” Do you have a spouse/partner/children/pets? Do you work from home full time or part time? Do you like to entertain at home? Do you have guests regularly stay with you? All of these questions will inform the home designs that the sales consultant will offer for your consideration.
What is your timeframe?
Do you have finance and you’re ready to build now? Or are you still saving and looking for something in 6 months? Many First Home Buyers don’t realise that once they sign their new home contract there’s still quite a bit of work to be done in the back office before it can be built. This process can take between 10 and 16 weeks, then you have the construction period of 4 to 6 months to consider. A good builder will map out their process and give you some realistic timeframes to work from, to assist in your planning.
Do you have finance in place?
Finance, like land, is critical in building a new home. Many builders can refer you to a third- party mortgage broker if you haven’t got one yourself. Some builders also offer in-house financial services. You will need to have finance in place by the time you sign your new home contract – and there are plenty of hurdles to jump through to satisfy your lender - so best to get started straight away.
Good luck! And happy house hunting.
BY DANIEL SENIA
Daniel Senia is a professional sales and marketing advisor, ex-National Marketing Manager and Business Manager for two of Australia’s largest home builders and current General Manager of First Place Building Company. Have a question? Email firstname.lastname@example.org