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Reading between the lines on how homes are priced

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Whichever builder you choose to build your new home, it’s worth noting that the labour costs of building it will be very similar regardless of which homebuilder you choose.  

That may not make a lot of sense when looking at prices that builders will show you during the early research stages of your building journey. That’s because builders use different pricing models and strategies to separate themselves from their competitors. It’s also because some builders have established close working relationships with quality building supplies companies.

Nonetheless, when it comes down to brass tacks, all builders are invariably paying the same price for everything from building supplies to soil testing to site costs, construction costs, trades services, zoning, permits, and council approvals.

The biggest difference between builders when it comes to price is their pricing strategy and what is and what isn’t included in their initial tender price.

Tender pricing strategies vary enormously between builders; for home buyers, this makes it hard to compare apples with apples when assessing initial tender offers from different builders

“The biggest difference between builders when it comes to price is their pricing strategy and what is and what isn’t included in their initial tender price.”

When you get to the pointy end of the transaction, what matters the most is how much the cost of your new home has increased between the initial discussions and actual handover. That increase could be the difference between being able to afford your new home, or not being able to afford it and being left in a financial situation with your builder.

Two common pricing models that other home builders use

Two pricing models that are popular with other Sydney home builders are the Free Tender Model and the Base Price Model. While both are designed to instantly appeal to home buyers, throughout the build they both become less and less appealing and could pose problems as your build nears completion.

ANSA Homes, however, believes in true transparency of pricing. And as a part of The ANSA Certainty Promise, we provide a Final Price First guarantee.

Breaking down tender models and used by other Sydney builders

The process of buying and building a new home can be broken up into several steps. At each step, a significant event happens. And if you’ve chosen a builder that uses the Free Tender model or the Base Price model, at each step your builder will add new costs to the price of your new home.

So, by the time you reach the latter and final stages of your build, the true total price for your home may well be more than you’ve budgeted for and more than you can borrow.

“At ANSA Homes we use the Final Price First model, which gives true clarity and consistency on price from start to finish.”

Forewarned is forearmed, as the saying goes, so let’s go through the steps of home buying and home building and explain exactly how pricing under the Free Tender and Base Price models starts low and ends high, potentially causing home buyers to come unstuck.

Step 1: Free quote/Base price

Both the Free Tender model and Base Price model typically start with a free quote or a low or ‘base’ price tender. Almost an ‘off the top of my head’ style price provided. This sounds appealing, but it’s worth noting that this price typically only includes low allowances for many things, including site costs, provisions, and specifications. It has none or very little pricing that relates to your actual piece of land, and your actual build specifications providing little relevance to the real end price.

Step 2:Tender (you may have to pay up to $5,000)

The details of the free quote are compiled into an official tender contract, during which additions such as an allowance for site specifics, provisions, specifications, and BASIX are added, pushing the price up.

Beware here as many allowances will not cater for the specific needs for your specific piece of land.

Step 3: Accept tender, sign contract 

A few more “unforeseen” costs around site specifications and BASIX may be added as the homebuyer signs on the dotted line and pays the 10 per cent deposit.

Again beware of ‘allowances’ that are not site specific. Once the Tender is accepted and signed, you are under contract and have invested a significant amount of money. Be sure of what is included in the Tender price.

Step 4: Selections and upgrades 

With the homebuyer now locked in, and having invested their savings, the builder then reveals what level of inclusions they’ve committed to. Everything not already included is then charged at a premium, on top of your Tender Price, further driving up the end price of your home.

Step 5: Council approval and BASIX

Additional council fees and the true cost of BASIX requirements are added because the generalised allowances provided for are generally not sufficient. These are typically attributed to unexpected challenges with your block.

Step 6: Start onsite

As construction commences onsite, the builder adds more costs for unforeseen requirements such as extra piering. This is, again, due to the initial allowances not being site specific.

Step 7: Handover

With the new home now completed and ready for the homebuyer to take ownership, builders may add some final incidental costs. They may even refuse to hand over the keys until these final additional costs are paid. Be sure you know exactly what these are for and that they were previously discussed and accounted for.

In contrast: The ANSA way and the Final Price First model 

At ANSA Homes we use the Final Price First model, which gives true clarity and consistency on price from start to finish. With our Final Price First model, there are no smoke and mirrors. Everything is laid on the table from our first discussion, giving home buyers certainty of price from the very beginning and a pain-free build.

Find out more about our Final Price Model or call ANSA Homes on 1300 757 810 or send us an online enquiry to speak to someone about your new home building journey.

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