Price Building: Base Price vs Display Home Price

Have you ever heard of the term “PRICE BUILDING”?

Probably not, because as a client of some building companies you have possibly been a victim of it. When you walk into a display house and ask the sales representative how much it costs, you will be given a base price for that house. Now’s the good bit. The house you are shown may not be exactly what is included in the base price. In fact it is probably several hundred thousand dollars dearer.  

I spoke to a potential client recently who’s original quote actually doubled when the required changes were made. The builder “price built’ the quote when the changes were made. One of the changes that caught the client’s attention was an eighteen thousand dollar increase in price when they changed the style of stairs. What some builders do is get you to pay a deposit on a house design that is deliberately under specified knowing that they will make a lot of money on the changes you will have to make the house what you actually want.  

What should you look out for?

Well the list is long but here are some of the obvious ones: 

1. The slab. Many builders quote on an M class slab which is very often not adequate for the soil and site type, so will have to be upgraded to a higher strength. 
2. Electrical. Providing one light fitting and power point to each room.  
3. Any build over sewer or stormwater changes can add up to $20,000 to a job. 
4. Cabinetry. A large expense in any house build. This is often given as an allowance rather that quoted amount knowing that there will be substantial changes driving the price up and up. 

All of the above items are considered variations from the original quote. How are variations dealt with? Variations are usually charged as a cost plus. Where some builders will catch you is the definition of a variation. If you change four cupboard sizes in your kitchen is this one item or four items? Is there a minimum variation charge e.g. $1000 per variation regardless of the size or cost of the variation. In this scenario it is possible that you could pay over $1000 to change the size of a cupboard door.  

To conclude, know what you’re looking at when you walk into a display home. Know that with some builders the person that signs you up will not be the person who deals with the building process so there can be some disconnect between the contract and the build process and the loose could be you.