HomeMortgageBuilding cost blow-outs – how brokers can help

Building cost blow-outs – how brokers can help

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Price increases for clients building new homes are becoming a common problem, says a Sydney broker

Many Australians who have signed fixed-price building contracts and have commenced construction or waiting to start are experiencing price rises due to ongoing supply chain issues.

Sphere Loans director Mirasol San Esteban (pictured) said she had been working with multiple clients in recent months whose fixed-price building contracts unexpectedly increased and needed to source extra funds in order to proceed with their build.

“The hardest part is when the client does not have any leftover money to fork out for an unexpected added cost,” San Esteban said.

“The ongoing supply chain issues are adding time delays. Many of my clients who are building have signed their contracts with their chosen builder, settled on the land and are now paying the mortgage on the land but there is such a backlog of building materials, it is taking much longer for the builds to begin or progress.”

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San Esteban said brokers were helping to fill in the gaps to assist clients.

“Of course, we give the client the first option to come up with the extra funds themselves, however if they can’t, then we need to complete a variation of the contract,” she said.

“The broker goes back to the bank who reassesses the deal to release more money due to the increase in price. This can be painful because we need to review the client’s financial situation again, request updated payslips and resubmit to the bank. Once approved, new documents are issued and sent for signing.”

San Esteban said the process, along with ongoing building delays, can be upsetting for clients.

“We may as well start from square one again,” she said. “I have clients that have been waiting for their new houses to be built for 12 months and even longer because building materials are so hard to source at the moment.”

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San Esteban said it was important for people wanting to build a new home to engage a good broker to help guide them through the process.

“As brokers, we need to educate our clients about this issue. Chances are they might have seen or heard stories about people who are in the process of building in the media,” she said.

“As the issue is ongoing, I think less people are looking to build at the moment and more are looking at buying a property either off the plan or something established.”

San Esteban said building a new home at the moment was a stressful process for brokers, clients and builders.

“I could imagine everyone involved in the transaction would be stressed,” she said. “At the end of the day, we work for the client in their best interest, so being involved and keeping all lines of communication open are key.”

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