How to avoid a building disaster


Issues to be aware of before and during building works:

A Building Costs Analysis / Estimate empowers you:
  • To know which building quote to accept
  • Ensure you build within your budget
  • Ensure you get what you paid for
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1. DO NOT IMMEDIATELY ACCEPT THE LOWEST TENDER

Make sure that you ask at least two contractors to quote on the work you want done. Compare the tenders to ensure that both contractors have priced all items and then evaluate the tender. Compare all prices against each other to evaluate why one tender is cheaper than the other.

2. DO NOT SIGN ANY DOCUMENTATION PRIOR TO FORMALLY AWARDING THE TENDER

Do not sign any documentation until you are ready to award the contract. (See point three)

3. REQUEST SPECIFIED TENDERS

Request the contractor to specify in his tender, in detail, what materials are to be used and where. This is to avoid disputes later on by preventing either party from taking unilateral decisions.

Contractors will price some items provisionally. This is generally because they are unsure of the quantities involved or to allow you to choose some other products. Make sure that tenders allow for the same provisional quantities and products.

4. DO NOT SIGN A BIASED CONTRACT

The Gauteng Master Builders Association sells standard building contracts which protect both parties.

If a contractor provides his own contract you can be reasonably sure that the wording is biased in his favour.

5. READ THE CONTRACT

It is amazing how many people sign contracts without reading them and being aware of their obligations.

6. DO NOT APPOINT A CONTRACTOR WITHOUT CHECKING HIS REFERENCES

Ask for references and check them. Do not do this only by phone, go and see work which was previously carried out. Check whether the quality suits you and find out how the contractor treated his clients before signing.

7. DO NOT PAY DEPOSITS WITHOUT SECURITY

It is common for contractors to request large deposits up front. One should be wary of such requests and make certain that the contractor provides security against absconding with the money.

8. DO NOT PAY WHENEVER THE CONTRACTOR REQUESTS

Payments should be scheduled in the contract. Beware of making payments outside of that schedule.

A record of all payments including deposits, made at any time should be kept and it is advisable to get the contractor to sign for a receipt of each payment.

9. KEEP RECORDS

A full record should be kept of date and time of all decisions reached between yourself and the contractor.

It is normal for decisions to be taken during the contract to change original specifications.

Before the contractor implements any changes, make sure he has given a price (the additional cost or the saving) for the change, and be sure that you keep a tally of all additional costs.

You will be amazed at how quickly these extras can mount up in value and may exceed your ability to pay.

10. DO NOT NEGOTIATE “IN GOOD FAITH” WITHOUT DOCUMENTATION

This refers back to the previous point. All decisions should be in writing and priced and accepted by you before the contractor carries them out.

11. DO NOT ACCEPT POOR WORKMANSHIP

If you are unhappy with the quality of any portion of the work, insist that it is rectified immediately and not left for the plasterer or the painter or somebody else.

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Building or renovating a home is one of the biggest investments any homeowner will ever make; and is fraught with financial and even legal risks.

However when building or renovating the most common experience is one where the building contractor asks for more money at some point during the project, and you are left to find additional finance, to complete the building. At the very least you are over budget and at worst severely financially compromised.

Why is it that when we purchase any other product or service, we pay the agreed price and normally get what we pay for?

Imagine if this story was true:

Remember when you bought your first car?, The big day arrived when you went to collect your baby, but as were leaving the dealership and reached to turn on the radio, you saw there wasn’t one! You quickly u-turned back into the dealership and upon enquiry were informed that a mistake was made on the original quote and that in fact a radio was not included. You further discovered that the spare wheel, indicators and airbags had also been omitted and to have these you needed to pay more!

Happily this is not usually the case when buying a car, but unhappily is typical when building or renovating.

The reason for this lies in how Builders Quote

Builder's quotes vary considerably, as most use a different price per square metre (m2) to calculate their costs to build and hence to quote. Unfortunately this common method of establishing building costs is seriously flawed and can result in either the builder or the home owner losing money as the following simple analogy demonstrates:

A Toyota and a Ferrari are exactly the same size in m2, and have the same features: they both have four wheels, a windscreen, steering wheel, headlights etc. Should they both be the same price?

Seriously though, just the shape of a house alone can affect the price drastically as the following example illustrates:

House ‘A’ measures 10×10m (square), and ‘B’ 25×4m (rectangle), both are exactly 100m2.

But, the walls of ‘A’ are 40m long and the walls of ‘B’ are 58m long. This is an extra 18m of walling, almost 50% difference. This inaccuracy alone would cost you an extra R40, 000.00.

There are many other factors that need to be taken into account apart from the length of walls, as illustrated above, in order to accurately quote on the cost of building, such as roof type, wall height, the number of bathrooms etc. all of which mean that the m2 method of costing should not be relied upon at all and hence going ahead with building based on one of these quotes is a recipe for financial disaster.

The solution is to have an independent Cost Analysis / Estimate produced before appointing a Building Contractor. This will mitigate the risks, by providing you in advance with detailed knowledge of what your project should cost you.

How does a Cost Analysis / Estimate mitigate these risks?

First, consider the typical process of appointing a Building Contractor;

Once you have your plans, the key to a successful project is selecting the right quote from the various Building Contractors who tender for your work, and consequently the right builder of your home. But how do you choose between the various quotes (lowest to highest) that you receive. How do ensure you don’t overpay, or worse perhaps, how do you ensure that you do not land up with the builder requesting more money, an unfinished project and a fight with the builder which may lead to litigation? In other words, which quote is both accurate and fair?

These problems are common to all who desire to build or renovate their home.

A Building Costs Analysis / Estimate solves these problems when it used as the benchmark with which to compare the various Contractor quotes you receive, enabling you to identify the quote that is both accurate and fair. It also ensures that you and your builder enter into a transparent relationship where builders profit is visible, payments and timings can be agreed upon and that a fair contract can be negotiated if you use it wisely.

The answer is that a Building Costs Analysis / Estimate empowers you:

  • To know which building quote to accept
  • Ensure you build within your budget
  • Ensure you get what you paid for