Do Bigger Builders Offer Better Value?

by Ryan Stannard | March 2, 2024

Given what has been happening in the construction industry over the past few years, choosing the right builder has never been more important.

But how as a consumer, are you able to differentiate between the good, the bad and the insolvent when a silver-tongued salesperson is telling you all the right things?

Despite the challenges, and the lack of financial information in the public domain it is possible to identify companies like Porter Davis well in advance of their eventual demise.

However, it does require a bit of independent research and an adherence to a core value we have at Stannard Family Homes which is to ‘trust but verify.’

The professional salesperson you are engaging with has a dilemma. 

Their income depends on them not accepting the gravity of the situation their building company finds itself in.

It’s not that they are deliberately trying to deceive you, it's simply a case of if you knew what they knew, you would never hand over a deposit which means their income would quickly dry up.

Which is why they convince themselves that everything will be OK and their clients will be fine.

I can’t tell you how many times I have been told by consumers that the salesperson has promised the earth and assured them that ‘everything will be fine.’

It’s like putting the fox in charge of the chickens, Trust but Verify! It’s so important you do this in order to protect yourselves.

However, before I get into some practical tips that will enable you to do just that, I need to address a common myth that has existed in our industry for quite some time now.

Large vs. Small Builders

Do Bigger Builders Offer Better Value 1That is that large building companies, the volume builders with display homes and large sales teams, are more financially stable than smaller builders.

So let me explain why it's the exact opposite…

During the construction boom triggered by COVID, the volume builders with their large sales teams all signed up 3, 4 and in some cases 5 times the number of contracts they would normally sign in a 12 month period.

The problem with taking on all that work was that they did not have the resources to deliver 3, 4 or 5 times the number of homes they would normally build in a 12 month period.

This meant the contracts had to be queued sequentially over a three year period.

Normally, that would be a good thing for the builder, and a frustrating experience for the consumer.

However, because those were all fixed price contracts with no cost escalation clauses, it meant that as soon as construction costs increased by 10%, they started losing money.

Which is why so many of these large building companies collapsed with massive debts taking consumers deposits with them.

Conversely, according to data collected by the Association of Professional Builders small building companies only took on an extra 10% in signed contracts during this period.

Don’t get me wrong, as builders every one of us lost money on at least one of those contracts during this period. 

However, our losses were limited and were more than covered by the cash a professionally run building company holds in reserve for situations like this.  

This is why you’ve seen plenty of large building companies fail over the past few years while the small professional operators have been able to pay their bills on time and continue trading.

Which is why small builders are now considered to be far more financially stable than their larger competitors.

Ensuring Financial Protection

Do Bigger Builders Offer Better Value 2

The other thing I should mention is that when a professional building company accepts a deposit for a building contract, they are legally required to have insurance in place which will cover you should the company go into liquidation. 

So always make sure you sight that insurance certificate within an agreed timeframe, otherwise you are effectively uninsured!

Rather than blindly listen to a salesperson or trust a building company based on its size and the number of years it has been operating for, here are some practical tips that will help you assess what may be going on behind closed doors right now.

How To Spot A Quality Builder

Do Bigger Builders Offer Better Value 3

The most important thing you can do is check out online reviews. 

If the company has a large number of client builds that have been unreasonably delayed, then those issues will normally come to light in customer reviews.

Obviously, no business is immune from a bad review and reading about an unhappy client's experience is not an immediate disqualifier.

However, delays can be caused by cash flow shortages so it should raise questions that need to be answered by the builder.

Visiting sites can also be a source of good information, if subcontractors are not being paid on time they are normally happy to share that information with anyone that cares to ask!

Another check you should always make before engaging with a builder is a review of their building license.

It goes without saying that you should only contract with a licensed builder, however, there is so much more you can do rather than assume a licensed builder will deliver a quality home.

A quick check on the Consumer and Business Services website will reveal if the company you are speaking with has an active license…

How long they have been licensed…

The type of work they are licensed to carry out as well as any suspensions or disciplinary action that may have occurred in the past.

It doesn’t matter if you are building your first home or if you have built many times before…

Designing a new home can be very overwhelming and when you hear new things for the first time, it's not easy to remember everything.

All the tips I’ve covered here are just a small sample of the information I need to share with you to ensure you are well informed when you get started on the design process... 

Which is why I put together a quick guide for you to download. 

The 7 Things You Must Know Before Designing A New Home.

It’s completely free, and it will help you to avoid any nasty surprises that can sneak up on you when building a custom home.

Just click on the link below and let me know the email address you'd like me to send it to.


Download Our Free Guide For Building In Adelaide