Building Regulations in Victoria require that all work over $10,000 (including labour & materials) be carried out by a registered building practitioner under a formal contract and that any work over $16,000 must be insured by the builder with Home Owners Warranty Insurance. These regulations apply whether the work is carried out by a registered domestic builder or as an owner builder project (even if the work is broken into stages, with part of the work done by the owner and part under contract to a registered builder). Note that in the case of Owner Builders the warranty insurance must be in place for work valued at $12,000.
In terms of pricing the work -We have a policy of offering free estimates, but charge for detailed quotes. The Estimate is, as it sounds, an approximate idea of cost, to give the client a ball park figure to allow for financial planning & rough costings. However, a Quote is a fixed price that the builder is held to if the work proceeds to signing of contract – it will then become legally binding, once attached to the contract; so you can see the builder needs to get this figure correct! As this involves a lot of work and time to get right – involving not only detailed material costs, labour, overheads but also getting prices from a number of contractors – it is only fair that this is a priced exercise.
Many builders will offer “free” quotes, because this has become common over time and everyone feels pressured to follow suit – however, this process actually distorts the costings of the whole domestic building industry. This is specially so in more complex, individually designed work, or when extension & renovations are involved, because the software that is often used for this process is not flexible enough to easily cope with the complexities of one-off design. Builders who offer the “free” quote are not in the charity business, so they compensate for the large amount of time involved by “loading up” the cost for their quotes with a percentage. If people are told by banks, designers etc to “get 3 quotes” , and if the building goes ahead, then obviously they would only get, on average, 1 in 3 contracts (Often it is actually more like 1 in 4 or 5 as many projects do not proceed after they are priced). So, in order to cover the costs of the other times they have quoted, and have missed out on the work, they must put a percentage of 3-5 times the cost involved in the quoting process on top of the actual cost of the project. This extra cost on the price is therefore masking the real costs involved in getting detailed quotes, and is also skewing the price of work on those projects that actually proceed to construction.
The alternative, of course, is to think of a number and double it, and some builders will do that, especially if they are busy and don’t really want the work – if they do happen to land the job, they are in milk and honey!
To make this cost transparent and appropriately apportioned, We have a policy of charging 1-2% of the price of the project depending on the amount of work involved – eg whether specifications and/or permits are required or not.
This cost is then deducted off the price if the project consequently goes ahead and a contract signed. In that sense, it is a sort of “deposit”.
In any other area of the building industry people will pay an estimator to do more or less the same job, and that cost is clear and up front.
We believe that this system makes for a much better balance in costings in the domestic building industry.