As I am quite vocal on H&L packages, I often receive PMs. Sometimes due to the strong opinions on H&L I think people prefer not to post on the forum. I'm not sure for this persons motivations to PM me and not ask the forum, but given their urgency I feel the person needs to here some more opinions than just mine. Therefore I have posted there below with my responses In Bold. I welcome any furth input for this person especially from @sash @Sonamic @MTR @melbournian @ashish1137 Name removed. I will post this on the forum without any link or detail of who sent it. I think you could do with more than just my opinion given your urgency. To make things easier I will make comments in Bold within you post. I am using mycompleteackage, which is the same of Escape homes. Not much feedback out there but they have been always quick in responding to all my questions. I have a copy of the draft contract. Could you please let me know if the following conditions are standard? I know nothing about this group, but recommend not using groups like these as the package normally includes a larger profit or commission for the agregrator, and therefore it's cheaper to buy the land seperately and then buy a home to be built with a volume builder. - 5% deposit before colors selection and working drawings Not standard but not completely unusual either. Is the deposit refundable if you don't like the total price after sections? - Only two plans attached to the contract (mine is a custom design) At a minimum I would want to see a house plan with dimensions and and floor surfaces and lighting and electrical points. If they have all this information on two plans then so be it. - Building period 220 days non negotiable 180-280 is pretty standard range of completion days but make sure this includes weekends and public holidays and wet days and that these are not on top. - Building permit within 60 days of land titling Pretty standard, but you'd expect them to do it in less. - Number of days to make progress payments = 7. This looks to me a really short period but they said it is standard. Standard but I often cross out and write 14 because banks can be unreliable. - Interest for late PC payments = 14%. Again, looks to me pretty high but they have said it is standard Pretty standar, some higher. I have crossed out and written 10% before and had no grief. - It is a standard HIA contract. There is a section at page 7 where it says “The price of this contract is not fixed”. I have asked to change this to fixed as this was the whole purpose of our conversations but they said because of all the inclusion and special conditions in the contract it is like a fixed contract. Do you usually get this changed? Be very clear on what is not fixed and why. - Prime cost items: refer to inclusions / spec. I think this is fine Ask them to expressly state what items are prime cost. Refer to spec leaves it open to interpretation. You should know exactly what is open for price increases. - Provisional sum items: refer to inclusions / spec. Again, they always talked about a full turnkey contract. In the spec the only items with a prov sum I could find are tiling @ $22/m2 and carpet @ $70/Lm. They said this is only because if I select products more expensive than the standard selection they will charge for. Sound strange to me. Same comment as prime cost items. As long as you know which ones they are that's ok. Do you know what Tiles and Carpet you can get for those allowances? Are they satisfactory to you? If not do you know how much the ones you want are? These items can add considerable cost to Your contract price. - All the upgrades I have selected are listed under “variations” but w/o a price attached. The total cost is included in the total contract value. Again, a bit strange, especially if I want to get a credit for a variation down the track. This is not unsual. You need to be pretty sure about what you want included before you sign a contract. You will probably be charged monies to change any items after signing a contract. This would mean you don't get the full value of your variation. I know I should have discussed all these conditions at tender stage and unfortunately I don`t have much power now. Price of the house already raised $6000 and they are really pressing me for the price as they reckon they cannot keep the price. Something to learn for the future. You still have plenty of power, you have not signed the contract. Remember you are spending a lot of money, you need to make sure you are happy and comfortable before signing. If your research tells you that you are getting a good deal then proceed. If your feeling pressured and your not certain on the value the package represents, then nothing is lost from walking away. Don't let fear dictate your decision, both Analysis Paralysis and FOMO are as bad as each other. Thanks a lot, I really appreciate if you can answer today as I need to sign the contract on Monday.
I don't believe the person was after legal advice. Incidentally if I sought legal advice and listened on every deal I did I would never have made a dollar. Lawyers can be great deal killers as they want to mitigate their clients risk and then so does the other sides lawyer. Don't get me wrong there is a time and a place for legal advice. But I don't believe a house and land package is one.
That may be the case but is irrelevant here. You have given specific advice about terms of a contract. What if you were wrong? Or missed out something? Up to you if you want to do this, I am just pointing out the risk.
Not related to this thread but, So true. Lawyers have killed many-a-deal. So have BnP reports. Nowadays I brief my lawyers fully, telling them to not make it sound (to me) worse than it actually is and only be critical on a point if it is serious.
When you're advised of the risk, you are able to quantfy it - both upside and downside risk. Eg. the house has galvanized iron plumbing which may corrode, cause leaks and low water pressure. If you're aware of it, then you can make allowances for it.
My advice is relevant to my experience not to my non existent law degree. I will clarify this with the person. But please rest assured they did not write to me thinking I was a lawyer. They wrote to me under the premise of my experience in completing H&L packages.
There are a lot of "wealth creation" companies out there spruiking house and land packages. They load 20k plus into the contracts for their commission and sell to suckers. So much wrong with that if you ask me.
Back to my OP if people could comment specifically on the persons situation I think that would offer them assistance. Whilst I agree with you, it takes time and effort to put a package together yourself. Some pay $20k plus for someone else to do it for them. I would not because they don't normally put together a package that is as good as what I put together myself, plus I'd rather save the $20-50k.
Had a comment from a colleague this week in relation to a contract. He said paraphrasing "contracts are important, however once signed they just get put in the bottom drawer" While I completely agree....in most cases. It's the ones where something, anything, goes wrong when you will be happy to have had a lawyer involved.
Caveat - last time I built land and house was 2007. Wont comment on the contract, but if this person can pull out of this contract they should. @Cactus already mention this but I will reiterate, the way you make money with land and house is very simple, you must source the land and then the product. Not a package as your margins will be very skinny. When using this strategy it is important that market conditions are strong/rising and to make the odds work in your favour buy in the earliest stages of the land development, because as the development moves onto new stages generally in a strong market the prices will continue to rise. If you get in early you can make money on the land, therefore you have more than one option and you significantly reduce the risk if the market turns. MTR
Agree with @MTR, better to secure land independent of the build contract. It gives you more control with selecting builders. If you can can, try and buy building blocks that are already registered. It can take 12-24 months for new developed land to be ready for building. Of course it is much harder to source the best blocks. If buying unregistered land, be very careful of sunset clauses and the inevitable pauses. Make sure you check easements. Be wary of large trees, rock or significant slope. Anything that can significantly drive siteworks. For the terms listed by the OP, ideally make stage payments conditional on satisfactory independent building inspections.
Without having read/seen the contract, it sounds like all the risk is on the purchaser, such as non-fixed price, penalties etc. Which is not really unusual for H&L packages but is why many only go the fixed price path. I'd be very worried about cost control & schedule overrun.