To secure the most competitive contract for your next residential property development, thorough due diligence of potential builders is essential. Here are 4 factors that need to be considered to help you make the right decision.
The quality, timeliness, cost and overall service provided by residential builders varies dramatically from company to company, which is why adequate due diligence is important.
To help select the best builder for your project, here are 4 factors that need to be considered.
- Don’t necessarily choose the cheapest builder.
While it might be tempting to choose the builder with the cheapest quote, it’s important to consider the quality of their work. By choosing a builder with low specifications, it may cost you more in the long run, as errors may need to be rectified or low-quality building specifications may lead to poor finishes. - Consider the type of projects the builder specialises in.
Builders won’t be specialists in all construction types, so it’s important to choose a builder with recent experience in the type of project you’re completing, whether it be a group of villas, apartments, or a triplex. For example, if your development is a group of 2-storey townhouses, engage builders with plenty of prior and recent experience with these types of projects. - What clauses are in the contract?
While price is important, part of the negotiation will need to cover contractual conditions. Does the builder want to include any favourable conditions for themselves, such as inclement weather provisions that provide them with more time to complete the build in the advent of extreme weather? On the other hand, will they allow you to include clauses for penalties in the event that they don’t complete the build on time, or any other special conditions? - What is the financial standing of the builder?
Make sure the builder has a strong financial standing to ensure they’re likely to remain operating in the near and long-term. If the builder goes broke halfway through your build, you’ll have to appoint another builder, which can be very difficult and will lead to delays and extra costs. There are also implications if the builder closes after the project is complete, as your building warranty could become void and defaults may not be able to be rectified. To gain a good understanding of the builder’s finances visit some of their worksites and speak to their trades to see if they are paid on time. You can also ask the company for their latest tax invoice or order independent reports about builder’s finances and risk profiles.
By failing to complete adequate due diligence on builders, you increase the risk of ending up with a poorly built product as well as increase the chances of time and cost blowouts.
So it’s easy to see why it’s highly beneficial to complete thorough research and choose your builder wisely.