It’s no secret that many builders have faced financial hardship recently, with some even going bankrupt.
While the building industry wasn’t entirely shut down due to COVID-19, the pandemic has undeniably left its mark, with supply chain disruptions, increased material costs, and fluctuating demand causing significant financial strain.
The pandemic has also brought the following question starkly to the surface of many soon-to-be homeowner’s minds:
How do you ensure your builder won’t fall into financial distress halfway through construction?
It’s a fair question, too — because if your builder goes bankrupt mid-project, it could mean delays, lost deposits, and worst of all:
Brick piles and scaffolding instead of a finished house.
Therefore, choosing a stable builder isn’t just a preference; it’s a necessity.
So here are…
7 Practical Steps to To Help You Select a Reliable and Financially Stable Builder
Given the stakes, it’s absolutely critical to assess the financial health of your builder before signing a contract with them.
The following steps are designed to guide you through this vetting process and help you make an informed decision:
Step 1: Check Their Reviews and References
Start by checking out your builder’s Google reviews and asking for references. Builders with high ratings and positive feedback are generally more stable as they maintain strong relationships with their clients.
Step 2: Talk to Their Subcontractors
To get a deeper understanding of a potential builder, it’s worth speaking directly with the tradespeople they frequently subcontract. A builder with an established reputation for fair treatment and prompt payments is probably less at risk of going under.
Step 3: Assess Their Staff Turnover
High staff retention is a positive indicator of a business’s health. A builder who keeps team members for years (rather than months) typically runs an operationally sound business that people love to be part of — and this usually translates to financial stability. For instance, our team at Pepper Constructions is incredibly tight-knit. All of our staff members have been with us for over four years, which speaks volumes about our operational and financial stability.
Step 4: Verify Their Licences with the VBA
Another critical step is to check a prospective builder’s licence status on the Victorian Building Authority (VBA) website. This will tell you if they’ve had any compliance issues or if any disciplinary actions have been taken against them. A clean record with the VBA not only confirms a builder sticks to industry standards; it also reassures you of their professionalism and ability to sustain a business long-term.
Step 5: Be Wary if You’re Being Rushed to Sign
Any reputable builder understands building a home is a big commitment. For that reason, they’ll take the time to ensure every detail of the contract is fair, correct, and clear. If a builder tries to rush you through the contract process, it’s a red flag: they might be trying to lock you into a deal because they’re under financial pressure and need the money right away. They could even be trying to trap you in a deal that’s great for them but not so great for you, using you as a rope to climb out of a financial pit.
Step 6: Avoid the Cheapest Quote
Snatching up the lowest bid is tempting, but extremely cheap quotes may mean a builder is cutting corners or not accounting for realistic project costs. This can lead to nasty financial surprises down the line. Remember, you’re looking for stable businesses, and stable businesses need to make a profit. It’s better to pay a fair price for a job well done than it is to face delays and extra costs later.
Step 7: Drive Around and Look at Their Job Sites
One of the best ways to gauge a builder’s operational and financial health is to scope out their current job sites. Look for signs of active construction — if not tradies, then recent material deliveries. A site that looks abandoned or rarely active might indicate scheduling or financial troubles.
A Little Diligence Now Could Save You A Lot of Pain Later
When it’s your home on the line, the risks of choosing a builder susceptible to bankruptcy are too big to overlook.
If your builder abandons the project midway through, it means you have to go through the process of finding a builder all over again. And that means delays, possible legal issues, and spending far more money than you signed up for.
Using the 7 steps above to thoroughly vet potential builders significantly increases your chances of choosing a financially stable builder.
Of course, this is just the tip of the iceberg when it comes to choosing the right builder. That’s why I’ve created this comprehensive guide for you to download.
Build With Confidence – Discover our 10 Tips for Choosing the Right Builder
It’s completely free and will help you avoid steering into the many other pitfalls that can emerge when building a custom home.
