G
Goldbeere8 Nov 2010 11:40Hello to all readers! 🙂
After mentioning the payment schedule topic in a post related to a specific company, I would like to open a new discussion on this subject today. I want to focus on the basics first (independent of any company), and I suspect many others feel the same way. 😉
After my partner and I were presented with an "impossible" payment schedule, where an overpayment would occur after structural work, roof & windows, we tried to research what would be appropriate at this point. Overpayments are supposed to be absolutely avoided! But it’s not that easy... opinions vary widely: Some say 52%, others about 60%, and others around 70%...
Looking now at the installment payment plan according to the broker and developer regulations (which you are supposed to review for comparison, even if you are not building with a developer), I also arrive at 70.60% (30 + 28 + 5.6 + 7). So is that too much? Or are 52% too little? Someone must have come up with the broker and developer regulation payment schedule... and had a reason for it?!?
Since we have been in contact with several companies and have various payment schedules from them, I can only say that all of them (large or small construction companies alike!) are at or above about 70% at the mentioned stage.
I guess the solution lies somewhere in between?!? 🙄
Thanks for all tips and advice!!!
Goldbeere 🙂
After mentioning the payment schedule topic in a post related to a specific company, I would like to open a new discussion on this subject today. I want to focus on the basics first (independent of any company), and I suspect many others feel the same way. 😉
After my partner and I were presented with an "impossible" payment schedule, where an overpayment would occur after structural work, roof & windows, we tried to research what would be appropriate at this point. Overpayments are supposed to be absolutely avoided! But it’s not that easy... opinions vary widely: Some say 52%, others about 60%, and others around 70%...
Looking now at the installment payment plan according to the broker and developer regulations (which you are supposed to review for comparison, even if you are not building with a developer), I also arrive at 70.60% (30 + 28 + 5.6 + 7). So is that too much? Or are 52% too little? Someone must have come up with the broker and developer regulation payment schedule... and had a reason for it?!?
Since we have been in contact with several companies and have various payment schedules from them, I can only say that all of them (large or small construction companies alike!) are at or above about 70% at the mentioned stage.
I guess the solution lies somewhere in between?!? 🙄
Thanks for all tips and advice!!!
Goldbeere 🙂
B
Bauexperte8 Nov 2010 12:25Hello again,
How do you come to that conclusion, or who told you that you should (or can) use the Real Estate Agent and Property Developer Regulation as a benchmark—regardless of the fact that it does not clearly define specific payment percentages? Developers are a completely different matter since they normally sell the house and the land together; it’s understandable in this case that higher payments are due. Even then, different payment schedules are used. One—such as your employer—bills higher amounts earlier, while another only demands payment after full handover. In every case, there are always two parties to the contract; ideally, they work as partners. I have given you another example in your other thread.
Basically, payment stages should follow the building code, and courts will decide—if necessary—according to civil law, with any gaps covered by the general terms and conditions of contract for construction works (VOB).
Again—if price is the only driving factor for you and your partner, you will repeatedly encounter such payment plans; these contractors are not inexperienced.
Kind regards
Goldbeere schrieb:
…But it’s not that simple... opinions vary widely: some say 52%, others around 60%, and others about 70%...
Goldbeere schrieb:
However, when I look at the installment payment plan according to the Real Estate Agent and Property Developer Regulation (which you’re supposed to review for comparison, even if you’re not building with a developer), I already arrive at 70.60% (30+28+5.6+7). So is that too much? Or is 52% too little? Someone must have created the installment payment plan according to that regulation… and had a reason for it?!?
How do you come to that conclusion, or who told you that you should (or can) use the Real Estate Agent and Property Developer Regulation as a benchmark—regardless of the fact that it does not clearly define specific payment percentages? Developers are a completely different matter since they normally sell the house and the land together; it’s understandable in this case that higher payments are due. Even then, different payment schedules are used. One—such as your employer—bills higher amounts earlier, while another only demands payment after full handover. In every case, there are always two parties to the contract; ideally, they work as partners. I have given you another example in your other thread.
Goldbeere schrieb:
…Since we’ve been in contact with several companies and have seen different installment payment plans, I can only say that all of them (whether a large or small construction company!) exceed or are close to 70% at the mentioned point. I suspect the solution lies somewhere in between?!?
Basically, payment stages should follow the building code, and courts will decide—if necessary—according to civil law, with any gaps covered by the general terms and conditions of contract for construction works (VOB).
Again—if price is the only driving factor for you and your partner, you will repeatedly encounter such payment plans; these contractors are not inexperienced.
Kind regards
G
Goldbeere8 Nov 2010 12:58Hello construction expert!
What makes you think that my partner and I are only driven by price? I hardly believe you have insight into the conversations we’ve had or the offers we have received...
If price were the only deciding factor, we would have definitely gone with one of the low-cost providers and already signed a contract. But we haven’t! We prefer to think things through more carefully beforehand. Also, the overall picture of a company matters. I wouldn’t choose the most expensive option either if their work methods or interpersonal approach didn’t feel right — a provider like that was just ruled out last week!
(In general, it’s hard to believe sometimes how much house prices can vary, even with almost identical specifications and size! We compared: the cheapest offer just for the house excluding extras was 145,000 euros (about 160,000 USD) — which was immediately dismissed — while smaller builders here say you can’t get under 280,000 euros (about 310,000 USD) without a basement, plus land and additional costs! And within that budget, you’re supposed to find the best option — but the budget isn’t unlimited and should be used WISELY?!?)
Using the real estate agent and developer regulations as a reference? When reading online forums, this is often suggested with good intentions. Many homebuilders probably have no experience with this and hope for guidance. That’s why I compared it as well...
I just wanted to understand why there are such different figures being quoted and where the truth lies. The 57% figure you mentioned is actually on the lower end when compared to all the other data. So it doesn’t seem to be standard... (But surely that doesn’t yet include windows, which I included in my calculation?) Most likely, there won’t be a definitive answer...
Kind regards
Goldbeere
What makes you think that my partner and I are only driven by price? I hardly believe you have insight into the conversations we’ve had or the offers we have received...
If price were the only deciding factor, we would have definitely gone with one of the low-cost providers and already signed a contract. But we haven’t! We prefer to think things through more carefully beforehand. Also, the overall picture of a company matters. I wouldn’t choose the most expensive option either if their work methods or interpersonal approach didn’t feel right — a provider like that was just ruled out last week!
(In general, it’s hard to believe sometimes how much house prices can vary, even with almost identical specifications and size! We compared: the cheapest offer just for the house excluding extras was 145,000 euros (about 160,000 USD) — which was immediately dismissed — while smaller builders here say you can’t get under 280,000 euros (about 310,000 USD) without a basement, plus land and additional costs! And within that budget, you’re supposed to find the best option — but the budget isn’t unlimited and should be used WISELY?!?)
Using the real estate agent and developer regulations as a reference? When reading online forums, this is often suggested with good intentions. Many homebuilders probably have no experience with this and hope for guidance. That’s why I compared it as well...
I just wanted to understand why there are such different figures being quoted and where the truth lies. The 57% figure you mentioned is actually on the lower end when compared to all the other data. So it doesn’t seem to be standard... (But surely that doesn’t yet include windows, which I included in my calculation?) Most likely, there won’t be a definitive answer...
Kind regards
Goldbeere
B
Bauexperte8 Nov 2010 13:39Hello Goldbeere,
That is as indisputably true as the fact that you and I have already had email exchanges with a comparable supplier. Coincidence?
The “smaller local building companies” provide you with a good reference. Since they don’t have the purchasing advantages of a regional or national supplier, you can reduce their offer price by a factor of 10/12 to get a first indication of what your house should cost compared to reputable suppliers with „standard“ equipment and construction based on the current state of the art/energy saving regulations. Note: If your preferred supplier maintains show homes, they will necessarily be more expensive than suppliers who forgo the luxury of a show home.
This is among the reasons why my colleagues and I write extensively here – voluntarily. You can easily make price comparisons if you follow their/my tips and contact the points we mention here.
The percentages I mentioned refer to a closed shell structure, which – in my understanding – includes the windows; by the way, the first payment is due only after submitting the building permit/planning permission application to the building authority.
There is no real standard payment plan, but a common indicator can be prevailing court rulings. In this sense, it is important – if the wheat is to be separated from the chaff in the long term – that future homeowners become more aware and, due to their resulting actions, the market of suppliers must narrow down to the reputable ones.
One more tip: a very good indicator is if the preferred supplier does not oppose external construction supervision.
Kind regards
Goldbeere schrieb:
How do you come to the conclusion that only price drives me and my partner? I hardly think you have insight into the conversations and offers we have had...
That is as indisputably true as the fact that you and I have already had email exchanges with a comparable supplier. Coincidence?
Goldbeere schrieb:
…[…](Basically, it should be said that it is sometimes hard to believe how much house prices vary – for roughly the same performance/size! We compared: the cheapest offer just for the house without extras was 145,000 euros (already discarded) , smaller local building companies say: under 280,000 euros without a basement is not possible... plus land and additional costs! And with that, you’re supposed to find the best – the budget is not unlimited and should be used RESPONSIBLY?!?)
The “smaller local building companies” provide you with a good reference. Since they don’t have the purchasing advantages of a regional or national supplier, you can reduce their offer price by a factor of 10/12 to get a first indication of what your house should cost compared to reputable suppliers with „standard“ equipment and construction based on the current state of the art/energy saving regulations. Note: If your preferred supplier maintains show homes, they will necessarily be more expensive than suppliers who forgo the luxury of a show home.
Goldbeere schrieb:
Broker and property developer regulations as a reference? When reading online forums, this is always a well-intentioned tip. Probably most future homeowners don’t have experience with this and hope for help this way. That’s why I also compared with it...
This is among the reasons why my colleagues and I write extensively here – voluntarily. You can easily make price comparisons if you follow their/my tips and contact the points we mention here.
Goldbeere schrieb:
I just wanted to generally understand why such different figures are given and where the truth lies. The 57% you mentioned is also rather on the lower side when comparing all figures. So it doesn’t seem to be standard either... (But surely the windows I included in my calculation are missing?) Probably there won’t be a clear answer...
The percentages I mentioned refer to a closed shell structure, which – in my understanding – includes the windows; by the way, the first payment is due only after submitting the building permit/planning permission application to the building authority.
There is no real standard payment plan, but a common indicator can be prevailing court rulings. In this sense, it is important – if the wheat is to be separated from the chaff in the long term – that future homeowners become more aware and, due to their resulting actions, the market of suppliers must narrow down to the reputable ones.
One more tip: a very good indicator is if the preferred supplier does not oppose external construction supervision.
Kind regards
H
Hans_Meier8 Nov 2010 21:54Excluding the cost of the land, the following (quite reasonable) payment schedule applies according to the real estate agent and developer regulations:
- 40% after completion of the shell construction including carpentry work (possibly divided by individual floors)
- 8% for the construction of the roof surface and gutters
- 10% for the installation of windows including glazing
(Shell construction with roof and windows thus totals 58%)
- 3% for the rough-in of heating systems
- 3% for the rough-in of sanitary installations
- 3% for the rough-in of electrical systems
- 6% for interior plastering, excluding additional plastering work
- 3% for screed
- 4% for tiling work in the sanitary areas
- 12% upon readiness for occupancy and simultaneously with handover of possession
- 3% for facade work
- 5% upon full completion
(The final installment should preferably be 5%. If it is only 2 or 3%, it becomes difficult to withhold sufficient funds in case of defects.)
Important: Advance payments are prohibited, because in the event of insolvency, all your payments could be lost.
Seriously, I was once presented with the following payment plan in a construction contract from a provider fairly active in the Munich market:
10% upon receipt of order confirmation
15% upon submission of the building permit application
25% at start of foundation slab
25% at start of roof frame
20% at start of interior plastering
5% at start of the last agreed trade
The payment term is 6 days from invoice date without deduction.
Just imagine that. Paying 50% of the total cost and having nothing more than a hole in the ground!!!
For that provider, it’s almost tempting to “go bankrupt” like that...
- 40% after completion of the shell construction including carpentry work (possibly divided by individual floors)
- 8% for the construction of the roof surface and gutters
- 10% for the installation of windows including glazing
(Shell construction with roof and windows thus totals 58%)
- 3% for the rough-in of heating systems
- 3% for the rough-in of sanitary installations
- 3% for the rough-in of electrical systems
- 6% for interior plastering, excluding additional plastering work
- 3% for screed
- 4% for tiling work in the sanitary areas
- 12% upon readiness for occupancy and simultaneously with handover of possession
- 3% for facade work
- 5% upon full completion
(The final installment should preferably be 5%. If it is only 2 or 3%, it becomes difficult to withhold sufficient funds in case of defects.)
Important: Advance payments are prohibited, because in the event of insolvency, all your payments could be lost.
Seriously, I was once presented with the following payment plan in a construction contract from a provider fairly active in the Munich market:
10% upon receipt of order confirmation
15% upon submission of the building permit application
25% at start of foundation slab
25% at start of roof frame
20% at start of interior plastering
5% at start of the last agreed trade
The payment term is 6 days from invoice date without deduction.
Just imagine that. Paying 50% of the total cost and having nothing more than a hole in the ground!!!
For that provider, it’s almost tempting to “go bankrupt” like that...
H
Hans_Meier8 Nov 2010 22:01By the way, I personally negotiated and signed this payment schedule:
Completion of foundation slab (including excavation) 8.0%
Completion of basement ceiling 9.0%
Completion of ground floor ceiling 9.0%
Completion of upper floor ceiling 6.5%
Completion of roof structure erected 6.0%
Completion of shell construction 9.0%
Completion of window and patio door installation 5.5%
Completion of rough installation heating/plumbing/electrical 9.0%
Completion of interior plasterwork 7.0%
Completion of exterior plasterwork 5.0%
Completion of screed work 3.0%
Completion of interior doors 3.5%
Completion of interior tiling 6.0%
Completion of interior floor coverings 5.0%
Completion of readiness for occupancy 3.5%
Completion of contractual services 5.0%
Completion of foundation slab (including excavation) 8.0%
Completion of basement ceiling 9.0%
Completion of ground floor ceiling 9.0%
Completion of upper floor ceiling 6.5%
Completion of roof structure erected 6.0%
Completion of shell construction 9.0%
Completion of window and patio door installation 5.5%
Completion of rough installation heating/plumbing/electrical 9.0%
Completion of interior plasterwork 7.0%
Completion of exterior plasterwork 5.0%
Completion of screed work 3.0%
Completion of interior doors 3.5%
Completion of interior tiling 6.0%
Completion of interior floor coverings 5.0%
Completion of readiness for occupancy 3.5%
Completion of contractual services 5.0%