Signing the $800,000 contract

08:54, Jan 18 2013

Friday, January 18

75kg, alcohol units 1 (but it was alcoholic ginger beer so does it count?), cigarettes 0, calories 4556, bike rides 1.

9pm, My house, Balmoral, Auckland. Excitement and drama this week as we finally engaged our builder and have a start date and a (reasonably) fixed price. Mix that excitement with the trepidation of making an agreement to pay someone a massive amount of money and add a slightly sore lower back and you'll have an idea of how I am feeling this summer's evening.

It's another year; welcome to this first blogging post of 2013. I hope you have all had proper New Zealand summer holiday time. Gemma and I relaxed hard-out for 10 days in Hahei at the campground in our tiny caravan, and I include the obligatory NZ summer photo below for your viewing pleasure.

It's one of those panorama photos that you do by moving the camera around in an arc. That's Hahei beach on the left, looking south, and in the middle of the shot, to the right of the red ute, is our little caravan. The main things to notice are sun and nobody working.


I would wish we were still there but for one thing: on January 30 excavation will begin at our section.

Thanks for all the great comments on the last blogging post. I asked what people's largest mortgages were and how they knew what level of mortgage was safe. The consensus seemed to be that the smartest way to ensure a mortgage is manageable is to make sure the repayments don't cost more than about 30 per cent of your income.

Choosing the winning tender was tough. Just before Christmas Gemma and I did our final comparisons of the builders' quotes and made sure we knew exactly what each of them included and didn't include so that we were comparing them on a level playing field. You will remember we asked three builders for prices: Stehr Brothers, Aztec Builders and Design Construction Home. As I've said before it was a really hard decision. All the quotes, after careful analysis and reconciliation, were very close in cost - the highest was about $30,000 more than the lowest, which equates to a difference of only about 3 per cent. That gave us confidence that they all knew what they were doing.

The only estimate we got that was very different was from the quantity surveyor. In past blogging instalments I talked about how the QS we hired before finalising the house plans surveyed the quantities and came up with a figure about $130,000 less than the lowest quote ended up being. Confused, we sent some "please explain" emails to the QS before we made our decision hoping he might cast some light on why this was, but he hasn't replied. I'm a bit at a loss (translation: pissed off) about that whole process, to tell the truth: it was supposed to be us being prudent and it ended up committing us to a more expensive build than we wanted. Certainly a case of dear prudence. (One for the Beatles fans there.)

In the middle of December we had a final meeting with each builder. We were reminded once more how much we liked each of them. At that meeting we told the builders about this sweet blogging situation I've got myself into. Whoever builds our house is going to have me writing about what they do every week for anyone to see, so it was important that they were happy about that. All of them were. We didn't want anyone who wanted to keep the whole thing secret anyway.

Predictably we chose the cheapest quote. It was the one from Design Construction Home. While only 3 per cent of the build cost, $30,000 is still a huge amount of money and worth saving. Heaps of people had said to us, "don't take the cheapest quote". In answer we said, "stuff that". Grant and James of Design Construction Home are also really nice characters who we get on well with. They also had the longest name with the most syllables so it seems like we're getting more for our money. We felt good about the decision and called Grant just before the yuletide season of joy and presents.

Christmas aside: For Christmas I got this book.

It is now my official favourite book of all time. I'm not going to go on about it too much right now - I have been boring all my friends absolutely rigid with facts about volcanoes for the past two weeks. What is the youngest volcano in Auckland? Too easy? Well what is the oldest? How many are there? How many of those haven't been quarried away, turned into gravel and spread all over New Zealand?  Having just published a book, I can tell you that I am in awe of the scholarship involved in the volcano book, and I wish I'd had more volcanoes in my own book.

Also the subject of volcanoes is extremely pertinent in this here blogging internet chronicle because we are building our house on a volcano. As we go through the build I'll provide your hungry mind with all the information about Three Kings volcano as you could ever need. Just as a teaser: Three Kings erupted 28,500 years ago. You want more now, don't you? You'll have to wait.

At our first meeting with Grant came the best moment of this whole process so far apart from the afternoon in the middle of 2011 when we first stood on the section and wondered if we could afford it. Grant and James gave us a start date for excavation - January 30, 2013. That filled us with joy because for the first time we are on a schedule. It's beginning.

Right. Let's talk numbers. Before we do I'm just going to say that this idea of publicising the costs of the biggest financial investment Gemma and I will ever make is entirely mine, and not everyone agrees that it's a good one. It does go against the New Zealand national sport of being coy about money. But on Grand Designs you find out how much things cost, and if it's good enough for Kevin McCloud it's good enough for me.

Speaking of Kevin, if you haven't got into his new series you should. 

It's about Kevin building his own cabin in the woods out of only what the woods provide (trees mainly) and recycled bits and pieces. It's not so much Grand Designs as Ugly Designs, but it's a gorgeous BBC production - Sunday 7.30pm TV1.

So here's where things get a bit scary. If you are pregnant, squeamish or arachnophobic it's probably best to look away. The contractor's fixed price for our build is $700,600 + GST. Now that does not include every single thing we'll need to finish the house. There are several items that we are supplying ourselves to add to that. Just tiny little massive things like excavation, insulation, timber floors, door handles, carpets, blinds, kitchen joinery and all the Fisher and Paykel things that you plug in. By the time everything is added up the maximum we are budgeting for is about $970,000 including GST.

Gemma and I have done some calculations taking that maximum amount, adding the current mortgage we've got on the section, subtracting our savings and the valuation of our current home and we've come out with an eventual maximum mortgage figure that we are happy with. Not ecstatic, but comfortable. Not comfortable like a big sofa, more like an old bean bag that's been sat on too often and needs more beans.

But, we are hoping to find some major savings and not spend that whole $970k. For example we are proceeding to contract with the expensive stairs allowed for in the price (see previous blogging post), but we are going to work with Grant and James to find a significantly cheaper way to make those stairs. Further it's Grant's policy to open his project books so we can see what he is pricing, where he is getting it from and how much it is all costing. We'll have a full schedule of the house and what is going in it. If we can source things any cheaper he is happy for us to do so (but his margin remains calculated from the original quoted item - so he doesn't lose out just because we find savings).

We're not fooling ourselves that we will find a whole lot of prices sharper than what Grant has, but we'll give it a go.

One of those major items that isn't included in the contract price but that we are paying for outside the fixed price is the excavation. Digging a hole is also the first thing on the agenda. How hard could it be? Maybe not too hard, but what is tough is estimating how much it will cost to dig. We've allowed $50,000 for digging in our budget above, but we're hoping it will come out much cheaper.

It all depends on this:

And that makes sense because our section is halfway up the scoria cone of Big King. The other four cones that made up Three Kings (or Te Tatua o Riukiuta) are gone now - quarried away to stumps or even holes in the ground. I suppose they were loose scoria all the way down and that's what we hope to find under our topsoil too, but the operative phrase above is "may also include basalt lavas and tuffs". If we find these it'll be very unfortunate. That's where the phrase "tuff luck" comes from.

Given it's the biggest unknown and thus the greatest risk of our build, we've had estimates given to us. So far since we bought the section we have had no fewer than six estimates for excavation:

1.  Eastern Earth Movers: $22,750 (given in 2011 to Graeme who sold us the section)

2.  Rick Cassie: $15,060 (given in 2011 to Graeme who sold us the section)

3.  Our Quantity Surveyor: $57,283

4.  Builder 1: $52,000

5.  Builder 2: $50,000

6.  Design Construction Home: $14,890

So you can see that Grant's estimate is the cheapest. However, the reason for that is that this isn't contained within his fixed price quote. If he had to include it in the quote he would have had to build in a big margin to allow for the risk as Builder 1 and 2 above did. So comparing the above estimates isn't really fair.

Gemma and I are assuming the risk for the excavation part of the build ourselves. We'll pay whatever it costs, plus the builder's 10 per cent margin. Here is how Grant's estimate breaks down:

And, optimist that I am, I'm hoping we can do it even more cheaply if we can avoid paying to dump what is dug out. It seems to me if the scoria from Auckland's volcanoes is so valuable they saw fit to flatten half our volcanic cones to get it, I should be able to find someone to at least take a few truckloads off us for free. We'll see.

So this is the big cliffhanger (not literally, I hope) of the first part of our build. Will the excavation go as smoothly as Grant estimates? Or will we find a seam of hard lava flow that makes the dig a debacle? OR, will we find a lava cave that unleashes a gang of evil Wilberforces, making us enlist a pair of ginger twins to save Auckland? (This is a brilliant movie btw - watch the DVD!)

I hope not - ginger twins are more expensive and less reliable than quantity surveyors.

That's why we anxiously await January 30. That's why we go to bed and dream of lovely loose gravel and soft scoria and no Oliver Driver coming out of a hole in the ground.

Yours, Purchase Man.

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