New Build Due Diligence

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David321

485 posts

Ultimate Geek

#309416 17-Oct-2023 14:08

Hi all,

My wife and I are looking to get a house built, we have found one company that has some plans we like, they actually have a lot more plans that other companies.

After hearing a few horror stories with people building and sometimes loosing a lot of money, weather its through unforseen costs, hidden costs, or even the builders going bankrupt etc, I want to make sure I am doing all I can to avoid that,

The company I am looking at is JNJ (https://build.jnj.kiwi/), a few things have caught my attention about them -

1 - JnJ build, is actually a "brand and trading name owned and operated by JnJ international investments limited" not sure if thats a red flag or not? its like a company within a company, I think this makes declaring bankruptcy easier? they can just shut down a small part of the large company rather than absorb losses as a whole company world wide? (I could be totally wrong here)

2 - Their prices do seem to be a fair bit lower than the big companies, this leads me to believe there could be hidden or unforseen costs after signing? They assure me there is not and they offer fixed price.

3 - They offered me a house plan up to 170m on a 450, section for my limit of 850k, I then asked about a bigger section just two lots down from the one the proposed (500m rather than 450m), they said they could build the same house on this section for the same price, that didn't make sense to me as the bigger section would cost more, so maybe they were over charging for the first proposal? (I have questioned this).

4 - Talking to a representative of theirs at the home show she said they have been operating since the earthquakes and did a lot of EQC repairs (I know a lot of EQC repairs were dodgy, not to say theirs were), and they have been building houses for the last 5 years apparently.

5 - A scroll of their Facebook page shows they do the standard handover photo with the clients, but there are only a few of these, suggesting they do not build many houses or they possibly don't post all the photos.

6 - Their main guy (I think he is the director) is very very keen for me to proceed, where as other companies take a more passive stance and wait for you to make the next move.

To sum it up, if I knew these guys were reliable and trustworthy and there would be minimal risk in engaging them I would choose them, I guess I am cautious because of the above factors, I would be more comfortable in having a large well known company that have been around for ages doing our house build, but the offers and options from JnJ are too good to ignore.

Does anyone have any thoughts on this company or how we can best proceed? should we avoid them? what should we look for etc?

_David_

TechSol

299 posts

Ultimate Geek

Technical Solutions Aust

#3148429 17-Oct-2023 14:24

Probably not the most helpful but here goes...

What you have outlined above, would make me avoid this company. I am not saying they are dodgy, I just think there are enough red flags to make me weary and it is such a large sum of money.

The construction sector is a lot quieter than it was last year, and there will no doubt be some companies that don't survive, owing to lack of work.

The only other advice I have is that some of the bigger names are franchised. As such you may or may not be in any better a situation if the franchise holder goes bust.

(For clarity I own a construction company, albeit in a different sector to residential home builds)

mattwnz

20145 posts

Uber Geek

#3148430 17-Oct-2023 14:30

I would go to one of their spec homes they are selling and look at their build quality, finishing and detailing. If you aren't sure take a builder with you. I would get at least 3 quotes for building. If you are going down the standard plan route, most building companies seem to buy in standard plans, while some of the larger franchise builders may have their own standard ones. Also I always look up the builder and their sub contractors on the LPB, plumbing and electricians website to see if their have been any issues in the past. Also contact their previous customers to see how they found the process and how they find their homes, and whether the builder was easy to deal with in getting any defects (if they have occurred) resolved quickly. The construction sector seems to have slowed down a lot, so many will be looking for new work and in Oz quite a number have gone out of business. Surprised it hasn't happened more here yet.

wellygary

8315 posts

Uber Geek

#3148443 17-Oct-2023 15:04

"if I knew these guys were reliable and trustworthy and there would be minimal risk in engaging them I would choose them"

To be honest, the fact you have to ask these questions, sounds like you already know how you feel about them ,

As others have said, the heat is certainly coming out of the building sector at the moment, so I would shop around some of the major players and se what deals they are prepared to do,

mattwnz

20145 posts

Uber Geek

#3148462 17-Oct-2023 15:41

IANAL, but make I would make sure to get the contract checked over by a lawyer.

cddt

1551 posts

Uber Geek

#3148480 17-Oct-2023 16:38

I have heard of so much heartbreak over new houses failing to meet expectations or even failing to be delivered. Personally I'll wait until the house is already built THEN buy it.

mattwnz

20145 posts

Uber Geek

#3148488 17-Oct-2023 16:59

cddt:

I have heard of so much heartbreak over new houses failing to meet expectations or even failing to be delivered. Personally I'll wait until the house is already built THEN buy it.

Do you mean buying a spec house that has been fully completed and being sold by the building company through an agent? IANAL but I have heard of issues over getting product warranties etc when buying a new prebuilt spec house, as the buyer wasn't the person that entered into the construction contract to build the house. As the building company built it themselves, there was potentially no construction contract entered into when it was built, as the company is building it for their own company. So if the building company business ceases to exists, you can be stuck if something like a heat pump fails, you may have no warranties or proof of purchase to get it repaired under its warranty or CGA. If you go to the manufacturer they may need proof of purchase. Whereas if you get the house built for you, and you enter into a construction contract with them, I understand the building company is required to provide you with all the warranties etc on completion. I don't know if the same thing applies with a spec building, or if you end up being the 2nd or 3rd owner of the new home .

Kim587

128 posts

Master Geek

#3148881 18-Oct-2023 15:42

I've recently build in Christchurch and would 100% recommend the builder I used, happy for you to send me a private message if you want any tips etc.

Just a few quick comments:

Research the subdivision and check what the rough price difference is between 450m2 and 500m2 sections. Sometimes there actually isn't much difference at all. If there is a reasonable difference, that does seem odd. I personally prefer buying a section outright because it means you get more transparency over how much the build itself is costing. Also you have your name on the title and assuming you make progress payments on the completion of set milestones, if your builder does go bust you should be less likely to be stuck in a position where you have paid them lots of money and have nothing to show for it.
I wouldn't be even remotely swayed by how many plans they have or willingness to customise them. Any building company worth their salt will have a filing cabinet full of plans they've used and be willing to customise them for you, or come up with something completely new.
The Facebook page isn't necessarily a red flag, some smaller companies do get by on word of mouth and minimal advertising and provide a great product. Its hard to know really without talking to previous clients.
Ask to review a draft contract and if they don't want to show you one, massive red flag straight away. Watch our for PC Sums in the contract/quote. PC Sums are an estimate of what a component will cost, but are not fixed prices. So if they say their contract is fixed price but there are lots of PC Sums, it really isn't fixed. Now, this can be entirely legitimate, for example its common to have a PC Sum for your kitchen so you can have freedom to design it with a kitchen maker. Sometimes you see them for foundations too because you can never be 100% sure what the land quality is like until it gets dug up. But less reputable companies will vastly underprice the PC Sum to make their quote look more attractive. Also check the contract for conditions allowing the builder to vary the price. Some contracts say they are fixed price, but then buried in the detail are clauses allowing the builder to increase the price everytime someone sneezes.

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mattwnz

20145 posts

Uber Geek

#3148889 18-Oct-2023 15:52

Yes good point over PC Sums. You really need to know exactly what you are getting including all door hardware, electrical plates, brands and models of all products etc. Kitchen quality and all fittings and products used. where a kitchen could cost 15k through to north of 100k depending on products used.

I would want to make sure everything is set in stone, so you aren't making decisions and changing things through the built, which is when prices increase.

The luxury of making decisions during the build can be very costly.

Froglotion

208 posts

Master Geek

#3150676 20-Oct-2023 22:54

Are they the only company you have considered? I built my current place ~seven years ago with a local CHCH building company. I had worked for them as a trade for as long as I can remember 10+ years, so know there product and how they work. I'd check out some show homes (do they still have them? I just assume they do lol) and see what you like in a house, then come up with ideas yourself. I'm not going to post who I built with here as it may come across as promotion. But if I was going to build again tomorrow i'd be talking to them again. Feel free to PM and I can tell you who it was. But otherwise, if you're shopping based on just price, then that's not the way to do it IMO. Sometimes it's worth paying a bit more and going with a company that has been around for 20 years and has an experienced team. Five years of building doesn't seem like much, not to take anything away from them. But it's the biggest investment you'll make, so don't rush it and do lots of research. Talk to previous customers or at least check their current stock of houses for quality levels and the likes.

Handle9

11386 posts

Uber Geek

Trusted

Lifetime subscriber

#3150679 20-Oct-2023 23:28

Kim587:

I've recently build in Christchurch and would 100% recommend the builder I used, happy for you to send me a private message if you want any tips etc.

Just a few quick comments:

Research the subdivision and check what the rough price difference is between 450m2 and 500m2 sections. Sometimes there actually isn't much difference at all. If there is a reasonable difference, that does seem odd. I personally prefer buying a section outright because it means you get more transparency over how much the build itself is costing. Also you have your name on the title and assuming you make progress payments on the completion of set milestones, if your builder does go bust you should be less likely to be stuck in a position where you have paid them lots of money and have nothing to show for it.
I wouldn't be even remotely swayed by how many plans they have or willingness to customise them. Any building company worth their salt will have a filing cabinet full of plans they've used and be willing to customise them for you, or come up with something completely new.
The Facebook page isn't necessarily a red flag, some smaller companies do get by on word of mouth and minimal advertising and provide a great product. Its hard to know really without talking to previous clients.
Ask to review a draft contract and if they don't want to show you one, massive red flag straight away. Watch our for PC Sums in the contract/quote. PC Sums are an estimate of what a component will cost, but are not fixed prices. So if they say their contract is fixed price but there are lots of PC Sums, it really isn't fixed. Now, this can be entirely legitimate, for example its common to have a PC Sum for your kitchen so you can have freedom to design it with a kitchen maker. Sometimes you see them for foundations too because you can never be 100% sure what the land quality is like until it gets dug up. But less reputable companies will vastly underprice the PC Sum to make their quote look more attractive. Also check the contract for conditions allowing the builder to vary the price. Some contracts say they are fixed price, but then buried in the detail are clauses allowing the builder to increase the price everytime someone sneezes.

Even a fixed lump sum contract can have variations to the price depending on the assumptions in the contract. This usually isn't unreasonable as otherwise most clients would have a massively overpriced contract. If there is an issue a competent contractor could not have been reasonably expected to know then it's usually claimable. This is particularly the case when you as the client change something.

Read the contract, have it reviewed and if you don't understand anything ask questions and get clarifications in writing. Get a notebook, write notes from phone calls and discussions in pen and date them. If you agree to something verbally follow up with an email confirming what you discussed.

Understand the claim and payment process in the construction contracts act, and your contract. You can't just deny/withold claims, you have to issue a client payment schedule at the right times otherwise the contractor is entitled to payment, even if it's bogus.

If you get into a dispute the emails and a pattern of taking notes will set you in good stead as well as helping to clarify what has been agreed for you.