Warning on new home contracts

Homebuyers and investors who are building a new home need to ensure that what they see in a display home is in line with what's written in the building contract, Western Australia's commissioner for consumer protection has warned.

The commissioner, Anne Driscoll, says some first homebuyers have complained that having agreed on a price to build a new house, they've been asked to pay more along the way for extras that they thought were included.

"Remember that the salesperson is not who the building contract is with, so any discussions they have about what is or is not included in the home needs to be documented in the contract with the builder before it's signed," Driscoll says.

"It's also important to realise some aspects of the display home won't be included in the property being purchased. Flash decor, manicured gardens and subtle finishing changes can easily influence a consumer's perception of what their finished house will look like."

The most common contract used in the home building industry is what's commonly called a lump sum contract, Driscoll says. Paperwork will include specifications and detailed plans explaining exactly what the buyer is entitled to - which tiles, bricks, windows, taps, wall finishes, etc.

"These documents should be taken away and read thoroughly before the contract is signed," Driscoll says.

"Simple things like consideration of where power points need to be for items like a TV and also sun orientation so that the alfresco area is facing in the right direction can have enormous long-term implications if we don't get them right."

She says if homebuyers or investors are still uncertain, they should seek advice from an independent advisory service.

"The key thing is that everything expected must be documented in the contract and specifications. If in doubt ask for this to be explained and pointed out."

Posted on Tuesday, November 24 2009 at 10:00 AM
Australian Property Investor Magazine