Why a Preliminary Agreement is a No Brainer - The Builders Edge

Talking preliminary agreements if you're seriously thinking about building, you've got to invest in yourself as well. Got to be the full design, not just a chuck scratching or a concept.

From builder to builder, are all prelims the same?

Unfortunately, they're not. So then they get pressured to stay with a builder that actually don't buy.

Talking preliminary agreements firstly, what is a preliminary agreement and how does it differ from the final construction contract?

Yeah, look, a building preliminary agreement, obviously shortened down as a prelim like that in itself is completely separate to a building contract. The preliminary agreement is something that should be done in the early stages to ascertain what is required to get to a contract stage. So a preliminary agreement there is, you know, you're sitting down, you're working through your designs, your concepts and getting all those little nuts and bolts and loose ends to come together. You know, make, make your, you know, house a home. You know, get all those little things as little details. Those things are important to you all in place so that the whole home complements each other and becomes a very functional, practical space. So that's the design aspect. While that's happening there, there's lots of things in the background that still need to be done. Part of this preliminary agreement, like, you know, getting a soil test done or percolation test. You need to be engaging engineers with different sorts of construction methods there. You know, sometimes they're born in much earlier to make sure things are all going to comply and work. So you're bringing all these different fields into play into one area. Once you've got your plans and specifications and all that sort of all ironed out, you know, you need energy efficiency reports and things like that there as well. But gathering all that information is what, what's going to give you the right tools then to tender to that project, to actually quote things live and accurately. It's got all the detail there to show you what you're trying to construct. It's your roadmap, the early stages. You know, a lot of people will shortcut that there just with some concepts and you know, I won't do the engineering, I won't do the soil test there. You know, the impact that can have. It's then it's going to create hidden surprises down the line. So the only way we operate is to a full preliminary agreement and do full plans and specifications there. Now as a, that is completely separate to a building contract. Like the building contract comes after all the preliminary stuff has been done. Once that's all put together, a tender is Prepared, you go through a building proposal and, and a contract, you know, outlining everything you've agreed upon. There, nice and clearly, black and white. Yes or no, what's included, what's not included, as per your agreement from the preliminary agreement. Now, now that is not a contract. You're not bound to a preliminary agreement that will make you and you're forced to build. Okay? So once you take that step there, you're armed with all the relevant and correct information to make an informed decision on, hey, you know, should we proceed with this any further or is there a few tweaks and changes we still need to make? And either way, if there's changes that need to be made, they're made. And, you know, hopefully everything works forward to going to a contract. But in the event your circumstances change or, you know, it just doesn't work out, you are not obligated to sign a contract. You know, if everything's all good, you go into a building contract that should really be a master builders or HA contract, whatever is the preference of that builder. We personally work with a master builders contract there. It is there to obviously protect the homeowner and make things very clear and black and white there for both parties involved. So, you know, you go through that thoroughly and that should all reflect upon your Ashley building proposal. And once that's all clear, we sign the contracts, deposits are paid, and that's when you actually can start construction there. So that's the sort of difference between a prelim and a building contract there.

Anyway, I guess the question on the tail end of that is from builder to builder, all prelims the same?

No, unfortunately they're not, you know, and I think, you know, master builders or, you know, the HA and people like that should really start making these sorts of things mandatory there that, you know, this is the process that has to be taken to, you know, minimize the pitfalls of, you know, people not doing things thoroughly. Unfortunately, a preliminary agreement can vary from builder to builder. Some of them don't even do them. Some of them don't even wear what they are. You know, they'll just work off a chook scratching or maybe a, you know, slightly refined, you know, concept. And I'll quote that they'll just, you know, swing from the hip there a little bit and work to a square meter rate or, you know, this should be X amount of dollars. And, you know, it might cover it, it may not cover it, and that's where it can end up being a disaster, you know, for the homeowner that either the builder doesn't have the funds to finish the build because he doesn't know his numbers and didn't quote it properly or the homeowners happen to reach into their back pocket there and, and pay for the, the overs, you know, so it's, it's thoroughly important that if people are looking at doing a preliminary agreement, you know, they've got to be asking the question like, are we seriously going to be building issue? It's not something you're thinking about, you know. Yeah, you know, you've got to do that groundwork, get your plans and specifications done in full. If they're not done in full, you're opening yourself up to loopholes, you know, so you find building companies won't have as detailed preliminary agreements because they're not willing to invest the time that it takes to put all that stuff in place and then actually give you a full exact number of what things are going to cost or where that roadmaps going to take you to. They are always trying to streamline their production and you know, they'll worry about that down the line. So you know, got to be very careful about only half doing a preliminary agreement.

By having a preliminary agreement, how can that prevent cost overruns or unexpected cost arising in the future?

Oh, look, it's a no brainer. Like if you spend the time doing a preliminary agreement and you invest in yourself now going down that path and the conversations and you know, the things that are put into your plans and specifications is what's going to be constructed in your home, you know. So if you haven't got those little details mentioned in the preliminary agreement there, you could run the risk of that actually not even being built into your home. You know, yes, things can be added on, you know, down the line like if it's a PowerPoint and you know, a bit of a feature pendant or something like that there. But if you're thinking about, oh, I might add an ensuite on or you know, something a little bit different today, like you really need to be having these conversations early on in the preliminary process.

So if a homeowner has a, gets a receive that receives a prelim off a builder and they might be hesitant about the level of detail involved in the preliminary, what steps can they take at that point to sort of bulletproof their, their situation?

Look, you know, I've seen recently there that you know, more builders are doing preliminary agreements because they do understand that it is the, the better path to go, which is a great, you know, step forward for the industry in itself because it's going to definitely protect the homeowner. But like I said, they're trying to shortcut that process and they're leaving parts of that out there. Now by that happening, it's going to really start creating big problems for the homeowner. And you know, there's going to be definitely hidden surprises there when it comes down to them connecting all that together. Like the true benefit of spending that time, you know, and working closely with your builder through a preliminary agreement, you know, it's about understanding all the things that you're wanting and what you're trying to achieve so it can actually can come into play into fruition at the end of the build.

So why would builders shortcut a prelim? I mean, isn't it in the builder's best interest to have a very detailed prelim?

Look, one would think that it is the best approach in, you know, being very thorough, but unfortunately that's where you're gonna get. Building companies take on too much work for themselves and they can't facilitate the actual time that is required to actually deliver a detailed building proposal by gathering all the preliminary agreements and getting all those plans and specifications in play there. So it's purely just a time factor and lack of resources that they actually have to be able to facilitate that.

So what, what, what should homeowners look for when reviewing and signing a preliminary agreement?

Yeah, look, a few things film to look for when signing a preliminary agreement there is to make sure that it's covering all aspects of their build. You know, it's going to be the full design, not just a chuck scratching or a concept. It's going to be a very layered up, detailed plan, you know, that is pretty much ready to be lodged to your certified. Now, having all your engineering, your bracing, your tie down, you know, soil test there, energy efficiency reports, these are all things that need to be looked at. It could even be that you need to get noise corridor reports done and other assessments there. It could be bushfire codes, flood, you know, hazard overlays. All these sorts of things need to be thoroughly looked at because it can dramatically change the cost of your build. And if these aren't assessed earlier on.

Yeah, I love that. So, so what are, what are some final thoughts that you would share with homeowners who might be perhaps just hesitant about signing a preliminary agreement?

Yeah, look, the best advice I can give people there if they're looking at building a new home is you've got to go into a preliminary agreement. So if there's a builder that isn't actually even offering a preliminary agreement. I'd be staying clear straight away the ones that are looking at signing their preliminary agreement and a bit confused because one's offering it for X over here, other one's excellence for Y over this side. There could be a bit of discrepancy in the price of where things are, you know, but you've got to ask yourself, well, is it more affordable over here? Because they're not actually doing everything that needs to be done, you know, And I really think if you're seriously thinking about building and you know you are 100% committed to that outcome there, you've got to invest in yourself as well. You know, a good building company. And I can't speak for all the others out there, but for ourselves there, when we offer a preliminary agreement, the cost of that there actually comes off their construction price. So when we delivered them a building proposal and a contract that it's on, you know, that price that they've spent on their plans and specifications comes off the actual cost of the construction. Because you know, you need those ingredients there to, to build your home. You know, other companies will factor things in in different ways.

You know, would other builders do that as well or would they have a slightly different structure?

Look, some of them are definitely structured differently. Can't speak for how all of them do that aspect there, but for ourselves there, we want it to be a win win thing. We don't want the customer to lose anything whatsoever. So for ourselves, and I do believe currently, you know, in, in our area, we're the only ones sort of operating this way that you do a preliminary agreement with us there, whatever you spend on that agreement there comes off your actual contract price. But most importantly, so that it's no risk or obligation, you know, for them for that, is that if they get to the preliminary agreement stage there, their circumstances change or they feel that we're not a good fit for them there. Those plans and specifications that we have given them full copyright to them to take to any builder they desire. We don't want to see people spending money and it just going down the drain that they can't use it anywhere else. And unfortunately what we do see at the moment is you'll have, you know, some, you know, probably more project building companies and things like that offering lower entry prelims and they're only doing half the work for it. But the other aspect, and I've had customers just recently go through this here, that they've spent quite a lot of money on prelims but the copyright is still the builders.

So what happens at that point?

So. So they don't own the plan. So they've spent thousands, thousands of dollars. They got a 400 and they forego that there. They fall for there, and that's where they use that scarcity, you know, over them there, that they fear that, you know, I don't want to lose all that money all this time. So then they get pressured to stay with a builder they actually don't like, you know, and. And that's really not a great outcome. You're not going to get the best home in those sorts of circumstances. Do you know what I mean? So, you know, know, for us, we're very open about that there, and we understand things changing and we don't want people doing something they're not comfortable with or that they're going to go losing on. So for us, we'll always release full copyright and we're very open about that there. So then it's, you know, you got nothing to lose and everything to gain when you're going through our pacific process in itself.

Yeah, well, that's. That's a lot of value in that, and that makes total sense. I appreciate you sharing that with us.

No problem at all.

So, shifting gears just before we wrap, but we're going to jump back into our get to know your norm jar. So there you go, mate. Let's see what we pull out this time.

All right.

And again, this is just to see and get to know Norm just that little bit better. All right, this is interesting. Okay, so, Norm, if you could travel to any point in history, where and when would you go and what would you do there?

Travel any point in history? I think I'd probably go right back to the older cavemen and dinosaurs, I think. Of course, I. I like me exploring and I like sort of getting off the beaten track a little bit there. So I think it'd be a quite a humbling sort of experience. I think it's just to go back to the beginning and start again. I love that, mate.

I'm actually not surprised at that time, but, yeah, thanks for your insight and your wisdom again, mate.

No, no problem. Pleasure.

Cheers.