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Vacant Land and Construction

For many clients the option to choose your own land location and build your new dream family home or investment property is a scenario which is appealing and exciting. The process of selecting your block of land, planning, designing and costing your property project is extremely rewarding. In this article, we will walk you through the various stages of the process in an attempt to answer the key questions, provide important finance information, whilst giving you, our customers a valuable reference document as you consider this property journey.

 

Key areas for review include:

  1. Meet with Team Fidelis

  2. Key Information and Finance Notes

  3. Process Flow and Timelines

 

1. MEET WITH TEAM FIDELIS

It is our recommendation that before committing to this property option that you engage the advice and support of a Fidelis Broker. The timescales for land and construction could be an 18-24 month project, during this time there are various stages and milestones to navigate, having a qualified expert by your side as a point of reference is extremely valuable.

Why a Fidelis Broker:

  • Project Budget. Our brokers will give you clarity and a clear budget for your project. Meeting with ourselves early in the process will give you confirmation of will your budget deliver a property that suits your expectations and needs.

  • Incentives. We are across all of the latest government and lender incentives. This could save you thousands of dollars during your property purchase, subject to qualifying conditions.

  • Expert Advice. Our broker team specialise in this area, this is an area of expertise that our brokers regularly advise on. From timings, to lenders, costings and loan products our broker will ensure you have all the information required to support your property goals.

  • Experience. Fidelis brokers love to build! They have real live experience in land and construction projects both for personal and investment purposes. They get it because they have done it, many times and are well placed to share their learnings.

  • Communication. We pride ourselves on being fast and efficient, the wider Fidelis team is also available to support in ensuring a smooth application and approval. When you look at the entire land and construction process, the complexities and timescales involved, we partner you through the process from start to finish and beyond. Always available as your trusted advisor.

 

2. KEY FACTS AND INFORMATION

Land Purchase Research:

  • Research. Review land locations and pricing, online and sales offices, meet with land agents.

  • Encumbrances. Does your land have any legal requirements attached to it, is there a specific time in which you must build on your land, this could result in penalties charged.

  • Development Expectations. Are you required to install a water tank, specific fencing or landscaping, understand early, ensure these are built into your property budget.

  • Sloping Land and Retaining Works. COST BEWARE! This can add a substantial cost to your construction costs required, essential to discuss this expectation with the land agent in advance.

  • Soil type. COST BEWARE! Have this conversation with your land agent, different soil types can affect your footing costs. Example rock, clay soil can result in increased footings costs.

  • 1 Builder Only or a Builder of Your Choice. Certain developments may allow only one builder, so understand this early in the process. This can impact cost and property designs available.

 

Finance Notes:

  • Valuation Requirements. IMPORTANT! Land must be pegged and accessible for a valuation to be arranged by the bank. Pegs or wooden stakes show the boundaries, shape and size of the land to the bank valuer. Without a valuation your finance application cannot be lodged with a lender.

  • Title Registration. IMPORTANT! Land must be titled before you can settle or take ownership of your new block of land. This is the registration of the land’s unique identification number with the Land Title’s Office. This is a key date to understand early in the process.

  • Contract of Sale Signed. After appointing your broker, completing your research and understanding the following key finance notes above, you will be in a strong position to sign a Land Contract of Sale. This is one of the key documents required by your lender to approve your finance application.

  • Formal Approval. Finance Secured. A formal finance approval may be granted by the lender in advance of receiving the land title, this is an important technicality which may prove helpful in certain purchase scenarios and should be discussed in more detail with your Fidelis Broker.

  • Qualified Advice. IMPORTANT! Please ensure you discuss with your broker and conveyancer before signing your land COS.

  • Government Fees. Stamp duty will normally be payable against land value only. This is a significant benefit when building your property versus building an established property. Stamp duty payable could be reduced, resulting in a sizeable saving to the customer.

  • Government Incentives. Your Fidelis Broker is experienced and can provide expert advice as to which incentives may be available to support your land purchase, this could result in saving thousands of dollars related to your purchase.

Construction Research:

  • Research builders. Online, display villages and sales consultant appointments.

  • Research Spec. Decide on size, shape, layout, position on the block, features, specifications and pricing.

  • Builder Selection. Select your preferred x3 builders, visit and discuss your options, specifications, confirm pricing. Keep each builders pricing confidential from the other. You may surprised at the variation in price between builders, this can lead to large savings in your favour.

  • All Costs Upfront. It is best practice to cross check your house plan to ensure all costs are included in your build contract upfront. Looking to add costs later in the process can incur additional fees and complicate or delay the build process. Worst case scenario, there may be no budget to accommodate these late additions.

  • Compare Apples for Apples. Confirm a price for the total build, ensure a consistent spec across all builder quotes. Builders quotes come in different forms and layouts, know your requirements and cross check everything is included upfront in the “Fixed Price Contract.”

  • Turnkey Build. This is the option to have the builder fully complete your property and have no works required for yourself to arrange after property handover.

  • Build Then Finishing Works. Builder completes the main property. You can then request quotes from trades for essential works required to make your property liveable and where possible fully complete. This option is considered when there may be a sizeable saving to the customer in arranging these works v’s builder prices.

       Examples include: -Flooring, blinds, stormwater, rainwater tanks, air conditioning.

       In addition, the builder may not offer such works.

       Examples include: -Driveway, perimeter pathways, retaining works, fencing and general landscaping.

  • Initial Costing Complete. Compare against your budget.

  • Build Contract Signed. After discussion around budget v project costs with your broker, you are now in a position to sign your build contract. The builder will normally ask for a non refundable deposit of a few thousand dollars to confirm the contract.

  • Admin & Planning Commences. Builder will now proceed with finalising your house plans, ordering a soil test, engineering report (confirm footings cost) and will prepare your application for council development approval.

  • Footings Price Variation. COST BEWARE! Look out for the results of your soil test. In your build contract there will be a “budget” for footings, this is an estimate only. The soil test and engineering report received by the builder confirms if this budget is accurate. Often there can be increases to footings at this stage. Essential that you discuss before you sign your build contract the research behind the sales consultant’s initial budgeted footings figure. What are the average footings prices in the area (if purchasing in a larger development.)  

  • Final House Plans Agreed. Your final plans will be published and you will be asked to sign and confirm. Essential that you take the time to ensure everything is correct. After this point no changes can be made. If changes are essential, it comes at an expensive cost!

  • Final Spec Selections. COST BEWARE! Visit the builders selection centre, choose your bricks, paint colours, roof type, window colours, kitchen and bathroom accessories, tiles and accessories. Often your build contract cost may include “Builders Standard Range”, many of the products on show here come at an extra cost. Important to understand how this fits into your agreed project budget. This can result in large increases to your project cost depending on upgrades and selection preferences.

  • Final Property Construction Cost. This will be provided to yourself shortly after attending your builders final selections. This information will come in the form of an important pack known as the “Bank Pack”, will include:

    • Initial build contract cost

    • Variation to footings cost (soil test)

    • Variation to energy rating cost

    • Final selections cost

  • Lender Valuation. A bank valuation can now be arranged which is an essential part of your finance approval. All of the above will be supplied to the valuer, plus the following:

    • Signed land contract of sale

    • Finishing works quotes

  • Finance Application Lodged. Having all associated costings and a favourable bank valuation result. Your Fidelis Broker will now be well placed to lodge your finance application with a lender of your choice.

  • Finance Formal Approval. Following formal approval from your lender, confirmation will be sent to your land agent, builder and conveyancer.

  • Land Settlement. You now own your land, registered in your name and stamp duty, gov’t fees will be paid. All arranged by your conveyancer and broker working together on your behalf.

  • Construction Start. You are ready to build, your file will be sent to the builder’s construction team for processing and the builder will advise approx. timescales for expecting your slab to be poured.

  • Progress Draw Schedule. Refer to this important document located in your “Bank Pack”, your property build should follow this order of works. Slab first, then frame etc. The invoice cost of each stage will also be shown on the schedule, builders invoice requested should be cross checked against your schedule located in the Bank Pack.

  • Progress Draw Payment. Your builder will provide an invoice after completion of each stage of the build. You can work with your bank and arrange directly or your broker may be able to arrange this on your behalf. Essential to make prompt payment and keep the build project moving as quickly as possible.

  • Final Handover. Upon completion of the property, your builder will arrange a final handover and at this point you will make your final payment. Your bank will require a “certificate of occupancy” from the builder and you should provide your “buildings insurance certificate of currency” to your bank. Bank will also arrange a “final valuer inspection” to ensure the property is finished in line with the expected loan schedule and build contract. Only after the above has been actioned will your final payment be made.

  • Loan Balance Review. Following the main property handover and final payment to the builder. You should now have surplus funds in your loan account which will fund the required finishing works.

  • Finishing Works. If your build contract does not include flooring, driveway, fencing etc. It is now time to engage your contractors to commence these works based on the invoices previously provided to the bank upon lodging your finance application. Normal process is the builder will leave your site and then allow your trades to commence. Follow the same progress draw process above to make payments to your contractors.

  • Project Complete. Property build and all finishing works now complete.

  • Loan Finalisation. Any surplus funds will be transferred to your personal bank account or can remain inside the loan account to reduce the balance of the account and interest paid.

Finance Notes:

  • Ideal Application Scenario. If possible, we recommend the following as the ideal scenario when applying for construction finance:

    • Provide signed land “Contract of Sale” and “Final Bank Pack” TOGETHER to your Fidelis Broker

    • True property construction cost will be submitted to the valuer and lender, including final selection costs and footing variations and finishing works, all costs captured

    • By submitting your finance application as complete house and land, the valuer will be well placed to ensure an accurate value which supports a successful formal approval result.

    • The above process ensures only one loan application is required, all funds to complete the full project secured in advance.

  • Government Incentives.  Your Fidelis Boker is an expert in understanding any incentives to which you may be entitled to. This may include First Home Owner Grant, First Home Guarantee, Family Home Guarantee & Regional Home Guarantee Schemes and Stamp Duty Concessions. We could potentially save you thousands in fees.

  • New Costs after Formal Approval. It is not possible to add/remove/change costs or the scope of works once the finance application has been formally approved. Any additional costs after loan approval must be treated as an “out of pocket” expense and paid by the owner’s personal funds.

  • Fixed Price Contract. Lenders much prefer a fixed price contract when assessing construction finance. The price is agreed in advance and locked into the contract up front by your builder.

  • Owner Builder. Deemed as higher risk by lenders than a fixed price contract. It has different policy requirements. Feel free to discuss in more detail with your Fidelis Broker.

  • Council Development Approval. This process can take 3-6 months depending on the local council workload at the time. Good news, your finance application can still be submitted in advance of council approval having been granted.

  • Interest Only vs Principle & Interest Repayments. During the build process your loan repayments are usually lower as they are Interest Only, this normally supports cashflow as you may be renting during this time. Upon completion of the project and taking ownership of your property, your repayments will then become Principle & Interest as you look to reduce your balance and eventually close your loan in the future.

 

3. PROCESS FLOW & TIMESCALES

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  • Variation to Process Flow. The diagram assumes land and construction finance application presented together. The process flow and timelines involved may vary from the diagram due to land purchased in advance, then construction added a later date. These additional scenarios can be discussed with your Fidelis Broker who will guide and support accordingly.

  • Timelines. As a rule of thumb from signing your fixed price builder’s contract to final builders handover, this could be a wait period of 12-18 months. In current climate, this has become difficult to predict. These are estimates only and will be subject to each specific builder.

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