How can we tell if the builder will NOT go bust during construction

Just wondering if there is way to tell that the he builder will NOT go bust during construction
In Victoria, the builder insurance only cover 20% of the build value.
Currently builders of all sizes seem to go under.
Thank you for your help

 

This is a good start:

NSW Building Commissioner

https://www.linkedin.com/posts/omeshjethwani_how-to-spot-if-your-builder-is-struggling-activity-6936099105634934784-RCD6?utm_source=linkedin_share&utm_medium=android_app

 

Is there any builder that can survive fixed price contracts with massively rising costs? The answer is the ones that can access more cash, which you can't tell from prior results. Or if the price of materials comes down, which no one can predict either.

This is like asking in 2020 which restaurant will survive lockdown based on past reviews of the food.

 

There is no real way to tell.

 

Impossible to know.

You do the obvious licence and complaints check, talk to past clients but beyond that, it's impossible to know. Sometimes the builders themselves get a nasty reality check they weren't expecting.

 

That is a really good analogy @Trainee

 

No way to tell. And you have no way to tell whether the builder has creditors all over the company. Some have enforceable debts but not enforced at the time of builders taking on more work with the expectation of paying off existing debts. There’s no builder too big to fail.

 

Witnessing this atm, size does not matter

 

We actually took out our own insurance for each individual property if builder goes bust we are covered. QBE. Cost us $10,000

 

Once you start to realise something going on, its too late.

 

Ask them for property vbuilds uilds currently in flight. Do drive bys during the day every week. Are there tradies there working, are the buildings progressing?

 

One sign is they stop paying their trades and work pretty much stops

 

How is the cost calculated?

I maybe looking for a site and build future family home. On a $1m build, would it be around the $10K mark? If so I did more then happy to pay for it.

 

I didn’t know you could do this!
Would be worth it in this economic climate.
Live and learn…

 

This covers 3 villas. Need to take out a policy for each villa. I suggest you contact QBE and view their policy and what is covered

 

Builder usually takes this out. We chose to do this.

 

Easy sign they dont go bust. They handover when its finalised.

Many larger builders will appoint administrators or liquidators and sell the existing operations. While it can be anxious its far better than media make it out to be. One of the largest in past history was Beechwood. Its display homes, designs, name and more was acquired by another builder who progressed all homes and managed any insurances for completion claims and got paid etc. Its still a thriving operation. Lenders often prefer this as the new owners takes on debt or even a PART of it and lender writes it down. Its better for owners, insurers, workers, jobs etc. Yes some contractors may lose a % of their unapid amounts but comonly they get far more than a winding up. People get new jobs etc.

Probuild has gone though this with many projects sold off to other buider-developers to complete

 

Its like any business. There is no way to tell. If you know that someone is going to go bust, builder or any other business, in most of the cases, its too late to take any action. By the time people outside business knows about it for sure, its too late.

 

We built with Beechwood after the administration process, asked a lot of questions but the new outfit seemed solid enough so we went ahead and had no problems.

 

We are trying to navigate this as well as we want to do a substantial reno.

I used to manage contracts/commercial risk at large tier 1 construction firms and we had a team that would do all sorts of financial checks which cost $$$.

without those resources it simply leaves me
with standard subcontractor interview questions…which doesn’t help that much IMO as they can just say anything they want but what I’m looking for is:

how many employees do they have?
How many projects do they have in play?
What stages are the projects at? Are some finishing up soon? Are they all at the start? This will give you insight on workload. Taking too much on is a risk because delays may result in builders not being able to submit progress claims = no revenue for builder

Check their social media to see if they have been documenting their builds. Take note of work in progress and try find out when the build started by scrolling their feed. are projects progressing at a
reasonable pace?

look at their comments and tagged photos to see if any of their clients have a page for their build (popular these days) or if any clients comment on there, tag them. Then you can contact these clients and ask for feedback

that’s all I have for now and the above still doesn’t make me too confident but it’s better than nothing. Personally I’ve had success with contacting clients on social media and received good feedback on our preferred builders. I’m sure anyone unhappy will gladly tell you all about it