Choosing the right home builder can seem daunting when you’re looking forward to building your dream home, especially given that the construction industry is in turmoil. Over 2000 construction companies have gone into liquidation in the last two years.
The Australian Security and Investments Commission data shows that 783 home-building firms collapsed in September 2023 alone. After jeopardising the careers of 11 staff and the home building of 90 clients, the Victorian builder Montego Homes went into voluntary administration on January 17.
Economic conditions, such as rising interest rates, supply chain issues, labour shortages, high demand, spiking raw material costs, material supply constraints, and pandemic-era stimulus ending, are causing these problems. Let’s explore the steps you can take to minimise risks when selecting a home builder.
1. Do Thorough Research
Doing your research can help you identify risky players. Reviews are generally a good indicator of building quality; however, tread carefully, as some companies require you to sign a non-disclosure agreement with builders or threaten negative comments with legal action if not removed.
Consider creating a list of potential builders in your areas by looking at ads, local newspapers, and articles and asking for recommendations from friends and family within your pricing range. Interview the potential builders to answer any questions you have.
Award-winning home builder Summit Homes, who have been in business for over 40 years, suggest speaking to experts about your plan, whether building, developing, or renovating. Some questions you can consider asking potential builders include:
- Are there additional fees related to development or home?
- Will you get the reference of recent occupants/buyers?
- How much customisation can be done instead of standard features?
- Do they offer a warranty program?
- Does the price include landscaping?
- Are there major development plans in the area in the next 5 years?
2. Check Licence Conditions and Insurance Purchase
Check and verify both the company and the builder’s licence because sometimes a builder can have a clean record while their company is going through disciplinary actions. You should check if the clients have filed defect claims, if the company has been disqualified or banned, and if they have mandatory home warranty insurance.
To gauge their financial situation, check if they can get home warranty insurance. Every state, except the Northern Territory and Tasmania, requires mandatory insurance for builders’ projects, ranging from Queensland’s $3,300 to $20,000 in other states. The insurers will inspect their financial performance to check their capacity to complete the work they claim.
3. Check Court Judgements and Bankruptcy
Upon searching the builder or company name in a court database, such as AUSTLII, you will find past court judgments made against them. Keep in mind most legal actions over defects are settled out of court for an undisclosed sum that will not be recorded.
You can also search ASIC registers for current company information, such as the company director (You’ll have to pay cash), to search for their name in the court database. Simply select ‘organisation and the business name’ under search within, and under ‘For,’ find the company name.
You can also check the director’s bankruptcy, as after bankruptcy is declared, an individual is banned from setting up a company for three years to clear their debt. However, they can set up another company after this time period.
Endnote
Choosing a home builder in today’s construction landscape demands caution. With thousands of companies going under in the past two years, economic challenges like labour shortages and rising costs create uncertainties.
To minimise risks, start with thorough research. Check reviews, broaden your builder options, and ask crucial questions. Ensure licences align with regulations, verify insurance, and peek into court records for judgments. Investigate bankruptcy status for both the builder and the company. By navigating these steps, you fortify your decision-making, ensuring a smoother path to building your dream home amidst industry challenges.
