You’ve all heard the horror stories of disastrous building projects
These are stories like:
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the lawyer who stole the trust account money
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the investment scheme that lost pension money
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developer who ran away with money, and
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the builder who never finished the job.
I’m not making light of these horrors; they happen and they scare the living daylight out of us. We tell our stories to all who have ears. They share our encounter with all their friends and family. We spread the story to all corners of the ever-shrinking globe.
Before you know it, we all have a deep mistrust of builders, developers, lawyers and investment brokers. (Not to mention used car salesmen, but that’s a story for another day.)
Do your homework
This is not optional, if you skip this step you’d be setting yourself up for so much stress.
One of our earlier projects was for a buyer in Gauteng and a house build in Velddrif. The buyer and his wife came down for a weekend to come and check out their options on the West Coast.
The couple looked at someone else’s almost-finished house, which they loved. They walked the estate with us and got a feel for the available plots, and they loved these too. They chose their favourite there and then. We then took them for coffee while they browsed through all the concept plans, and found one they fell in love with.
They knew what they wanted, and we completed all the paperwork on the same day.
When reality sets in
Once they were back in Gauteng, the whole process started. The transferring attorneys contacted them and provided them with banking details to transfer:
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the plot’s registration costs
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the plot’s full asking price, and
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the full building contract price.
The attorneys would keep all the money in an audited trust account. From here they would release funds as per the contracted draws.
Now, these buyers had been scammed before, and they were understandably very nervous. They feared that the builder was going to run away with their life savings.
We explained that the attorneys would keep the money safe until payments were due. Next, they feared that the attorneys would run away with their money.
At long last, the plot was registered in their name and construction began. We were very excited for them and sent photos of their foundations. Now they feared that the builder gave us photos of someone else’s foundations. Someone was still going to run away with their money.
All’s well that ends well
Once the builder had poured the floor slab he obtained the engineer’s certificate. This official document contained the erf number, and they felt a little bit more at ease.
The builder himself started sending them weekly photo updates of the project. Their very nosy agents (yup, that’s us), also visited their site as often as possible. Receiving pictures from two different sources made the process a little less nerve-wracking.
All the time they kept on saying that they felt like they had acted too hastily. That they hadn’t done enough homework.
They are now very happy in their new beach house, and all’s well that ends well.
Throughout this process we learned a valuable lesson:
We provide whatever info we can, but let the buyers do their own homework.
Reviews and testimonials
Ask if you might have the numbers of previous clients of the builder, and chat with them about their experience.
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How did they experience the builder’s quality control?
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Did they feel that he had his finger on the project the whole time?
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Did they get regular updates?
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How did the builder handle problems or complaints?
Ask who the conveyancing attorneys for the plot are and Google them. Check “HelloPeter” for reviews. Phone them and ask as many questions as you can think of.
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What interest rate do you get on the money invested in a trust?
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If they handle the building contract funds, who authorises the payment of the draws to the builder?
Research
Have you read our article: Buying a house off-plan, Where do I start? If so, you’ll remember the very first step was to do window shopping online before you start shopping. We recommend you now go back to the property portals. This time it’s not to window-shop, it is to price-check.
Now that you have a very good idea of what your new house will entail, you can compare it to similar properties in the market in your area.
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Are you overspending for your area?
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Will your new house, once completed, be in line with the prices of similar homes in the same area?
The values of the surrounding properties have a big influence on your property value. My aunt always said: “It’s better to have the smallest house in a good area, than the grandest house in a poor suburb.”
While this is a bit of an oversimplification, it does bring the point across. Your property value depends on your suburb, your street, and your neighbours’ values.
Attorneys are not building inspectors.
You pay the building contract money to the attorneys to keep in trust. They pay out in increments, as stipulated in the building agreement. It is not the responsibility of the legal team to do physical inspections before payout.
Let’s digress for a moment and look at an example. One of the builders we often work with has a draw schedule of 7 draws, although it may differ from builder to builder. (I’ve seen others who stipulate 10 draws of 10% each.) The banks all have different prescribed increments which the builders then adhere to. For this conversation, I’ll use the more common schedule.
The first payout
is a 10% deposit, there will be no evidence to inspect, as it is an upfront payment.
The second payout
is on completion of the floor slab. An engineer’s certificate will go with the builder’s invoice. The engineer had already done a physical inspection, no need for other inspections.
The third draw
is usually requested when the walls reach roof height. This step in the process does not need an engineer’s certificate. The builder will often supply the attorneys with a photo of the project as proof of progress.
With your permission, the attorneys will pay the builder.
Should you have any reason to doubt, contract someone to check. A professional home inspection company or an independent valuator could help. It will be for your own account, but it is rarely necessary.
We love to pop in and take photos for our far-away buyers. Not only is it great for their peace of mind, but it’s also an excuse to keep the channels of communication open. A way to strengthen the bond with our clients.
The fourth payment
is on completion of the roof structure. Once again, an engineer’s certificate will go with this draw invoice.
The fifth and sixth payments
are requested during the finishing process (plastering, painting, tiling, installing sanitary ware etc). If in doubt you could once again contract someone to check for you. The builder will probably include photos with his invoice, which are usually accepted as adequate proof of progress.
Your snoopy agent (and yes, I am) will probably also keep you up to date, it’s simply too exciting to miss out on.
The final payment
becomes due when the municipal building inspector’s signed off. The municipality issues an occupation certificate confirming that the dwelling is safe and signed off.
Before you’re allowed to take occupation, you’ll have to authorise the final payment. The Occupation Certificate is accepted as proof of completion.
How does that change when you have a building loan?
If you’re building with a mortgage bond, the bank takes care of most of this. Each financial institution has its own prescribed draws schedule.
The builder sends his draw invoices to the bank. They may send out a valuator to check on progress when necessary (definitely for the final payout). Your bank will need a signed-off draw request from you before they pay the builder, so with every draw, you have a say.
How do I know the job was well done?
Who’s checking the builder’s workmanship?
You have two separate institutions looking out for your best interests:
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The Municipality
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The National Home Builders Registration Council
You did your homework. You made sure to choose a builder who’s registered with the NHBRC. Your builder in turn registered your house with the NHBRC as a building project. You would know this because you would have had to sign the forms.
The Municipality and the NHBRC both do physical inspections every one to two weeks throughout the project. They ensure that the correct construction standards are upheld, from the foundation up.
Their concern is that the dwelling is safe for human habitation for at least five years. What they don’t do, is
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check whether your tiles are straight,
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your cupboard doors line up or
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your paint is pretty.
Check out their website for more information on the warranties they then provide:
Every new house has snags.
Some imperfections are very difficult to pick up by simply looking around. Even an experienced builder may overlook one or two things. This is normal, and it is very much part of the building process.
Some builders will give you a week from occupation to compile a snag list. This grace period will vary from builder to builder. You can check your building agreement for the stipulated snag-list period. It may even be a month or, in some cases, three months.
Professional home inspection
Consider having an inspection done by professionals if you have any doubts. After completion, we recommend you invest in a professional home inspection company. These guys know what to look for, and they can compile a snag list for the builder to attend to.
Don’t ask your uncle or brother to go and look (unless he’s a professional home inspector, of course). It’s really unfair to put the burden on someone not qualified.
If you don’t know one already, a quick search such as THIS brings up a whole list of inspection companies in your area.
Your snoopy agent (yup, still me) might go take a quick walk-through video for you. This we’d do to show you the progress, but not to take the place of a professional home inspection.
Visit your home build when you can
If it is at all possible, find a way to pop in when you can. This could be a monthly visit if possible, or at least once or twice during the last finishing process.
Always make appointments with your builder upfront and ask him to meet you on-site. Should you see anything that requires attention, this would be a good time to discuss it with your builder.
It is important to remember that he is in YOUR team, as opposed to being an opponent. So often we encounter incidents where the owner wants to fight when they see something that requires attention. Ninety-nine per cent of the time, the issue gets resolved by asking him about it.
How often is often enough?
If you are in the area you could pop in at more regular intervals.
- Once a month in the beginning,
- fortnightly once the finishing starts and
- weekly during the last month.
As always, make an appointment first.
It serves no purpose to visit a construction site more often. Home building is not an instant process. You’re setting yourself up for disappointment if you don’t see progress on every visit.
It’s also worth mentioning that you should never give instructions to the crew. All instructions should always, without exception, be given to your builder. He is the project manager of your build and the only point of communication.
Finally, bring your furniture and be happy.
Are you interested in the process of buying a house off plan on the West Coast?
Call us right away – let’s start a conversation.
More about your realtors: Sarel and Melanie
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