Red Flags When Choosing a Builder

I am an architect, not a builder, and most of the builders I work with on the Central Coast are honest, capable people. But over the years I have also watched builds go badly wrong, and here is the uncomfortable truth: none of them went wrong without warning. The signs were there before the contract was signed. People just did not know what they were looking at, or wanted the project so much they explained the signs away.

These are the red flags I take seriously. One on its own might have an innocent explanation. Two or more, and I would keep looking.

1. A deposit above ten percent

In NSW the deposit on residential building work is capped at 10% of the contract price. A builder who asks for more is either ignorant of the law that governs their own trade or hoping you are. Neither is a person to hand your savings to. The rest of the legal protections you should check are in my guide to the questions to ask before signing a building contract in NSW.

2. A payment schedule that runs ahead of the work

The classic shape of a builder in financial trouble: a big claim at slab, another at frame, and suddenly you have paid seventy percent for forty percent of a house. If the builder folds at that point, you are the one left short. Payments should track completed stages, roughly level with the value of work on the ground. A front loaded schedule is the single most dangerous clause I see.

3. Pushing cost plus for a straightforward build

Cost plus contracts (you pay whatever it costs, plus a margin) have a legitimate place in genuinely unpredictable work, like heritage renovations full of unknowns. For a standard new home on a normal block there is no honest reason the builder cannot commit to a price. Pushing cost plus for simple work shifts every risk onto you. My guide to selecting a builder covers the difference in detail.

4. Allowances that sound generous but are set low

Provisional sums and prime cost items are the quiet blowout mechanism: the tender looks cheap because the allowances in it were never realistic, and every overrun comes back to you with the builder's margin on top. If a quote is meaningfully cheaper than the others, compare the allowances line by line before celebrating. I have written a full explainer on provisional sums and prime cost items, because this one deserves its own page.

5. Token liquidated damages

Liquidated damages are what the builder pays you for finishing late. Some contracts offer amounts like ten dollars a week, which is not compensation, it is a joke with your name on it. A builder confident in their timeline will agree to damages that reflect your real holding costs, like the rent you will be paying. A builder who refuses is telling you something about their schedule.

6. No licence, the wrong licence, or no insurance certificate

Check the contractor licence number with the NSW Fair Trading licence check before you get emotionally invested, and make sure the entity on the licence is the entity on the contract. Ask for the Home Building Compensation certificate for your job (required for residential work over $20,000) plus their public liability and workers compensation. A professional builder produces these without friction. Excuses here are disqualifying.

7. Pressure to sign now

"The price goes up Friday." "I can only hold this slot until the weekend." Real builders with real order books do not need pressure tactics. A price that expires in days is a negotiation device, and it works by stopping you doing exactly the checks on this page. Walk away from anyone who makes slowing down feel dangerous.

8. Exclusions that quietly hand you the risk

"Retaining walls by owner." "Site costs to be confirmed." "Driveway not included." Exclusions are not automatically sinister, but a tender built on them is not a price, it is bait. The gaps get filled after you have signed, at variation rates. This is exactly why I keep a list of things to change before signing with a project home builder, and why tight documentation matters more than almost anything else.

9. They cannot point you at past clients

A builder proud of their work will happily give you addresses to drive past and a past client or two to talk to. Treat reluctance as data. When you do get a reference, ask about the end of the job, not the start: how were defects handled, how were variations priced, did the final account match the contract?

10. The contract is not a recognised standard form

HIA, Master Builders, ABIC or the Fair Trading plain language contract: these are battle tested documents with reasonably balanced clauses. A home made contract, or a standard one with key clauses struck out, means you are paying a lawyer either now to review it or later to fight it. Now is cheaper. Know what a building contract should include before anything is put in front of you.

The pattern behind all of them

Every flag on this list does the same thing: it moves risk from the builder to you before the build even starts. Good builders carry their own risk and price it honestly. That price can look more expensive on paper than the bait quote, and it is almost always cheaper by the end.

If you have quotes in hand and something feels off, that instinct is worth an hour of professional time. I review tenders and contracts as part of a free site assessment, and the whole journey, from feasibility to handover, is mapped in before you build on the Central Coast.