How does residential home building work?

How does residential home building work? 

A Quick & Simple Guide 

Topics Covered 

• What are the typical steps when looking for a new home?
• Site Costs
• Stages of Construction and Payment
• Deposit
• Build Contract
• Price Freeze/Increases – is it a fixed price forever? 
• How do home upgrades fit into it?
• How do site costs work?
• Design Guidelines
• Council and Permits
• What is a Façade?
• Warranty, Insurances and Protections

In this article, we will be covering the main steps, processes and elements when it comes to building a new home, while also answering some important questions when it comes to what you’re entitled to and how it all works. 

Firstly, what is a ‘residential build’? 

A residential build is typically a single title home that is constructed on a vacant piece of land. This is  typically in newer areas where suitable land is widely available (Greenfield areas), however it can also be in inner-city areas where you choose to knock down and rebuild a dwelling. 

What are the typical steps when looking for a new home?

Note: To start, either you own a block of land or you are currently looking for a suitable block of land. 

1. Find the home builder and design that suits you 

   There are many display villages in newer areas, these are designed to showcase new homes that are suitable for majority of the vacant land sizes on sale. These display villages are the perfect place to look at what homes and designs will suit your needs as an individual or family. 

   Each home on display will have a sales representative who works there between the advertised hours. The sales representative is expected to  have the knowledge and expertise to answer any of your questions regarding the build or the process. Some building companies have slightly different processes to others, however the majority are quite similar.

2. Check your finances 

   Either your preferred mortgage broker, bank or the builders referred broker will need to begin the process of confirming your ability to borrow money (if required). Before you commit to anything, it is best to make sure you will be in a position to obtain finance, even if your land doesn’t title for some time. 

3. Home Proposal 

   Once you’ve chosen your preferred design and building company, you will be presented with a sales estimate by the consultant with any options you’ve selected for your new home. A siting will usually also be presented in this meeting, displaying how the home sits on the land. 

   In this meeting, if you are happy with what is presented, the next step will be to pay an initial deposit. This will secure your site start date and keep things moving along. 

   Checklist for your home proposal meeting: 

   - Initial Deposit

   - Provide a copy of the land contract

    - Provide finance pre-qualification

   - Developer guidelines (if buying in a new project)

   - Relevant land documentation

   - Read and sign off any required documents 

4. Colour Selections 

   Once you’ve indicated that you’d like to proceed, in most cases you’ll have a colour selection appointment. This appointment allows you to select any upgrades on offer, such as a larger stove, different flooring and more. 

5. Sale Completion Appointment 

   This appointment will go into the finer details of your home and confirm everything including your sales quote. At this stage, you also have the opportunity to ask the sales consultant any other questions that may come to mind since meeting with them last. 

   Checklist for your Sale Completion meeting: 

   - Sign off on your house plans including siting on your block

   - Sign off on your house specific options including colours, electrical and facade

   - Pay the second instalment fee (amounts differ between builders) 

6. Pre-Contract Meeting

   You will usually have one final meeting prior to your contracts being issued. This meeting will cover what is in the contract, and allow you to make any final requests or ask any questions. 

   You can expect to receive the following documentation in this meeting: 

   - Blank/Draft Master Builders Association Victoria Contract 

   - Special Conditions 

7. Contract appointment 

   At your Contract Appointment you will be presented with your tender document and a full set of your house plans including siting on your block. A further deposit payment is usually payable upon contract signing or just after. This totals 5% of the contract price. 

   

8. You are ready to start building 

   When building a new home, the cost of your house will generally be paid in 6 stages. This makes paying for the home more manageable and allows the bank to check that the work has been done prior to releasing more funds, protecting you and the banks interest. 

   While the percentage of a contract can change to suit lending policies, the below percentage amounts can be considered reasonably standard and within HIA or MBA (Master Builders Victoria) building guidelines. 

   10% payment at completion of Slab Stage 

   This is where your slab is laid to act as the foundation of your construction. The type of slab that is laid will depend on the class of site you are building upon. The most common form of slab is a concrete slab that is laid prior to any walls or roofing being completed. Upon completion of the slab, the builder will inform the owner, who is required to pass on the invoice to it’s lender/broker. The bank will then organise an independent inspection to ensure the quality of work is to its satisfaction. Once approved, the invoice will be paid and the builder will proceed on to frame stage. 

   15% Payment at completion of Frame Stage 

   Once the frame of your house is completed, this will be inspected by a surveyor (like the slab) and approved if satisfactory. Most frame types in Victoria will be pine timber frames. Other states could consist mainly of double brick or steel.

   35% payment at completion of Lock up stage 

   External wall cladding and roof covering is fixed, the flooring is laid and external doors and external windows are fixed (even if those doors or windows are only temporary). At this stage, the outside appearance of the house will look mostly complete (excluding landscaping/driveway and fencing). It’s at this stage that the house can be locked up to improve security from material theft which can occur. 

   25% payment at completion of Fixing stage 

   At this stage, all internal cladding, architraves, skirting, doors, built-in shelves, baths, basins, troughs, sinks, cabinets and cupboards are fitted and fixed into position. Generally, you are about 6-8 weeks from handover at this point. This will depend on the time of year and position of your builder. It may also vary depending on the type, size and complexity of your new build. 

   Final 10% Payable at Completion/Handover 

   Practical completion 1 (PC1): 

   This stage allows you to visit the home with your supervisor and inspect the quality of workmanship. Normally you will go from room to room and highlight areas of dissatisfaction to correct. A good supervisor will highlight errors themselves to assist you in the process, or you can bring an independent building inspector along for your own peace of mind. 

   Practical Completion 2 (PC2): 

   This viewing is to tick off the errors highlighted in PC 1. Once all errors have been rectified and given your approval,  you are all but ready to proceed to you completion and handover to take full ownership and occupy the property. 

   This is your final stage before taking ownership of your new property. You can view the items required to satisfy this stage in the below link. https://www.consumer.vic.gov.au/housing/building-and-renovating/checklists/when-building-work-is-complete 

   What is the deposit process when building?

   Initial $1,000 Deposit (can range from $888 - $3,000) 

   This will typically be refundable (not always) and lock in the current promotion and pricing. 

   NOTE: Some builders opt for a second progress payment of around the same value once you agree to the tender. 

   Unconditional deposit: 5% 

   Builders will generally charge a non-refundable deposit amount of 5% of the contract price. This payment will allow them to pay for services required to achieve a successful building permit on the new home and start construction. Services will include engineering reports, water and plumbing reports and council/developer required documentation. 

   This will get you to your site start or site cut to prepare your land for a slab to be laid.

   Important Note: For works over $20,000, 5% is the maximum deposit that can be requested by a builder. 

   

    

   Build Contracts 

   Typically, the contracts used will be supplied by HIA, forming the base agreement. The builder will then add in variations to suit your specific agreement. It is always advisable that you have your legal representative review the contract prior to signing so you fully understand the agreement. 

   Price Freeze/Increases – is it a fixed price forever? 

   No. This is why it’s important to have your legal representative review the contract or for you to ask this question directly to the builder. Builders will typically hold the price for a set time before implementing an agreed increase in price, this is to safeguard the builder against unforeseen delays in site start. 

   Typically, a builder will hold your price (price freeze) for 12 months before implementing an additional fee to continue the agreement. 

   How much extra will I pay? 

   Builders will commonly charge an additional $1,000 - $3,000 per additional month of delay. This is a typical range, some builders may charge less or more. 

   The most common reason for delays are to do with new land development and land not titling when originally forecast. 

    

   How do home upgrades fit into it? 

   To start with, builders will typically offer you standard inclusions. These are the basics you need to move in, however they include very few luxuries. Higher end builders will have more luxury inclusions in their base specifications, however for most major builders, this is uncommon. 

   You will need to review the base inclusions and determine what is important to your quality of life and budget. It might be opting for a larger oven, stone benchtops or higher ceilings. 

   Typically you will be able to choose these upgrades initially with your sales consultant and make any final decisions at your ‘colour appointment’. During this appointment, you will be able to view all the options physically, allowing you to touch and feel the items you will include in your home. 

   All chosen upgrades will be added to your contract and final pricing. 

    

   How do Site Costs work?

   Site costs are the works required to prepare your land for a build. The requirements and costs varies by region, individual site and costs are impacted by soil type, rock, site fall, driveway gradient and fill. 

   Builders are able to review developer engineering for individual lots to assess what is required upfront, however sometimes when the builder is performing the initial site cut they might encounter something unexpected like rock for example, which may incur further costs. 

   Are my site costs fixed? 

   This depends on the builder and agreement. There are a few different scenarios to consider: 

   1. Fixed site costs and free rock removal: Meaning the costs are agreed upfront and if the builder discovers rock on your land, there is no extra charge to remove it.
   2. Fixed site costs with a rock removal allowance: Meaning the site costs are fixed, however if they find rock it will only be covered up to the agreed allowance. Anything over, you will need to provide extra funds.
   3. Site and rock allowance: The builder provides an allowance for both works based on your land documentation. The final costs won’t be determined until on site tests are completed.

When do I find out how much it will cost if it isn’t fixed? 

The builder will typically need to go on site and perform tests to determine what the actual costs will be. 

Design Guidelines 

All new land estates have a set of guidelines to ensure consistency and standards across the area. They include items such as exterior materials, home sizing, energy efficient requirements, colours used and more. 

Your building sales consultant should be familiar with what is expected within the land estate you may be purchasing in and can assist with selecting the right homes and options to suit. 

To receive your building permit, you must first have approval via the appointed Design Review Panel (DRP). Their details will be in your design guidelines provided by the land project and your builder will typically handle the application and relay any feedback to you.

Council and Permits 

Once your land is titled, the builder will apply for the appropriate documents to obtain a building permit. This includes ordering engineering, developer approvals, energy rating assessments and any additional approvals required through council. 

What is a Façade? 

In building, your façade is the stylised street fronting design of your home. This is typically what will give your home character and is largely based on your taste along with what the Design Guidelines will allow. 

Majority of builders will provide ‘base’ facades that cost no extra, while also offering upgraded facades which use different materials and are a little more structurally complex. 

Available materials typically include brickwork, render or feature cladding materials like weatherboards, cedar panels or tiles. You also have the option of a wide range of roof tile profiles, colours and materials along with alternative window materials such as timber. 

Warranty, Insurances & Protections 

Does my builder have to provide a warranty?

Yes. The Residential Building Work Contracts and Dispute Resolution Act 2016 (‘the Act’) requires builders to provide warranties on all building work they perform. These are called statutory warranties and they must be included in all residential building contracts. 

How long is the legislated warranty? 

The statutory warranties last for six years from the date of practical completion in the case of a permit or notifiable work.  If the property is sold, the new owners get the benefit of the warranties until the end of the original 6 year period. 

Do builders offer longer warranties? 

Yes, with a number of them offering over 25 year warranties, however it’s best to review what is covered in detail as some are purely for structure/slab and have certain conditions which need to be met outside of the mandatory period. 

Is my deposit safe? 

Yes, Victorians are now protected with much harsher penalties for builders who fail to take out domestic building insurance prior to full deposit payment. 

What does ‘Domestic Builder Insurance’ cover? 

Initially, it will protect your 5% deposit. Domestic building insurance covers you if your builder: 

• dies 
• is insolvent 
• disappears. 

When is the insurance taken out? 

The builder must provide you with a copy of the policy and a certificate of currency covering the property before you pay your full deposit.

Do you have any questions? Speak to an expert.

First name

Last name

Email

Submit

One last step, verify the request with your mobile.

Phone number

+61+64

Resend Code

Back

Your personal information will be collected and passed onto this article sponsor to contact you about your enquiry. They are required not to use your information for any other purpose.
By proceeding, you will also agree to our Terms of use & Privacy policy.

If you have more questions on this or a related topic, you can speak to an expert by calling 1300 289 324 or by visiting www.buyfairproperty.com.au 

Produced by BuyFair Property Group in collaboration with Eight Homes and Openlot.com.au 

BuyFair Property Group provides off the plan investment options and education. With Australia’s first ‘Investor Centre’, BuyFair Property Group offers free education and guidance on all the main components of property investment. 

Eight Homes Will streamline the process by taking the hard work out of your decision. Eight Homes makes owning your dream home more simple and affordable than ever. 

OpenLot.com.au is Australia’s leading off-the-plan platform. Discover land for sale, house and land packages, townhouses for sale in Australia with estate info, releases and settlements, construction updates and more. 

Definitions & Terminology 

Siting – An accurate illustration showing how your preferred build would sit on your land, taking into account mandatory setbacks and requirements. 

Housing Industry Association (HIA) - An association of more than 60,000 members working in the housing industry. It is the peak national industry association for the residential construction and home building, renovation and development industry in Australia. 

Tender – Providing a written submission for building works. This is a proposal for the client to engage the builder for the specified services and product. 

Slab – The foundation of the home, used to support the structure and typically made of concrete. 

Practical completion - A concept in building and construction projects, that signifies that all building work has been done in accordance with the construction contract, and the house or building is reasonably suitable for occupation or being used for the intended purpose. 

Price Freeze – Typically used to signify a builders commitment to holding the price for a set period of time. 

Driveway Gradient – Identifies how steep the driveway is from one point to another. 

Fill – Additional soil that isn’t original to the site used to further level/complete the land. 

Site Fall – The degree of slope on the land, the less site fall, the flatter the land. High site fall blocks can be difficult to build on and sometime require unique structural changes and/or retaining walls. 

Developer Engineering – A document produced by the developer of a project showing the technical aspects of the development and land in question. This document is predominantly used by builders to determine the amount of fall on a site, as it shows the future levels once development is completed. 

Design Review Panel (DRP) – Typically an employed third-party who is responsible for enforcing the design guidelines, providing guidance and issuing approvals on complying builds.