Why You Have To Pay A Building Deposit – The Ferrari Truth

The smell of soft Italian leather, lip gloss glistening

paintwork, 0 to 100 in 4.1 seconds. A Ferrari

Well, two ways you can buy this dream machine – open your fat wallet and pay for it right there and then. Or pay a deposit.

What is a Deposit?

Effectively, your ‘intention to purchase’, so that the seller knows you are not a ‘tyre kicker’ and he isn’t wasting his time.

So, does that mean that if you walk into a new car showroom, you have to pay a deposit because of your ‘intention’ to buy.

No it doesn’t. That’s why it is called a ‘showroom’. The cars there haven’t specifically been designed for you. You can touch, sit, take it for a test drive. Whatever. You might like it and you might buy it, but if you don’t, the next person will.

Seems fair enough, doesn’t it?

So why is it that Builders ask for a deposit when there is nothing to see or touch?

Absolutely nothing. Isn’t that so very unfair? Well, not quite. Here’s why.

  • Houses are different. Very different. If you own a site and a specific design is done for that site, it is pretty much toilet paper for another client
  • The builder will never get his money back if you decide not to continue
  • But, what if I pay a deposit and the builder goes bankrupt? Well, sorry to say, but that’s just a harsh reality of life. It’s something that nobody can really predict. Just look at the collapse of the big financial institutions and the 100-year-old corporate giants!

But, fear not, there are some remedies available

  1. Get a builder who is a Registered Master Builder (or member of an equivalent body in your country)
  2. Check to see if a guarantee will be provided to cover for ‘Loss of Deposit’
  3. Check credentials and track record of your builder. And please, a referee list is absolutely useless unless you contact some of them. Seriously, many people ask for referees, but never make contact.

Just before you drive off

  1. If you’re starting a building project – be prepared to pay a deposit
  2. Check to see if your deposit is protected
  3. Insist on referees and make sure they check out. If in New Zealand, check out your builder here http://www.masterbuilder.org.nz/

If you don’t do the above, then be prepared to see your deposit disappear, like a red Ferrari into the horizon…in 4.1seconds.



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