Mitigating Risk With Upfront Payments To Timber Frame Companies?

[SteamyTea]

49 minutes ago, Iceverge said:

The disadvantage is you negate the advantages society leant two hundred years ago in the industrial revolution with the efficiencies and quality improvements of mass production.

 

50 minutes ago, Iceverge said:

Until we all agree to live in extremely standardised houses

Is that why my Ford C-Max is almost the same as my neighbours, Nissan, Peugeot, Audi, and flat bed truck.

Strip out a 1980s Ford Sierra and a BMW 3 series, they basically look the same. Engine and steering at the front, gearbox just after, differential and half shafts at the rear, all held in play with linkages and springs.

Standardised standards and design techniques does not mean standardised looks, anything but in reality, as more time can be spent of product style differentiation.

[dpmiller]

I was very happy with the terms we got from the small-ish TF co we dealt with.

 

30% deposit

10% on completion of design, to release structural drawings to BC

balance on completion of erected structure with an offer from the Co to withhold an amount to cover any missing or snagged portions

[SteamyTea]

4 minutes ago, dpmiller said:

10% on completion of design, to release structural drawings to BC

What would happen if they went pop before realising the drawings?

[Furnace]

22 minutes ago, dpmiller said:

30% deposit

That sounds high. Probably covers a large portion of the materials, yet no materials are needed at that stage.

Companies go bust 'unexpectedly' all the time. I don't have the information to know which one it will be, and I'm not (any  longer) in the business of betting on creditworthiness. The amount of money at risk is enough that I wouldn't pay upfront without mitigation in place, and that's not because I don't think MBC is a good company. It probably is, but I don't want to take the risk.

[Furnace]

2 hours ago, Iceverge said:

However if they prebuild a bespoke slab and kit for  @Furnace  and they don't get paid they are goosed. 

Hence I think escrow is a good idea, and fair

 

2 hours ago, Iceverge said:

exposing ourselves to the creditworthiness of manafactuers and they will need to do the same for us.  

Business to business trade is exposed to this all the time, and often deal with it via standardised trade finance/letters of credit. We are in the twilight world of business-to-customer, but with the amounts of money in line with business-to-business.

[saveasteading]

5 hours ago, Furnace said:

Letters of credit.

Aaarghhhhh.

1 they are horrible to admninister

2. The bank wants collateral. Cash or your house.

[Furnace]

14 hours ago, saveasteading said:

Aaarghhhhh.

1 they are horrible to admninister

2. The bank wants collateral. Cash or your house.

The requirement for collateral is because there is a real risk of loss, and that is the business banks are in.
I'm wanting to build a house, not lend money to a housebuilder.

[saveasteading]

4 minutes ago, Furnace said:

there is a real risk of loss

Exactly. Loss for anyone other than the bank.

 

I'm just saying don't assume L o C is an easy answer. I did them for 10 years. When the order turned up it then lay on someone else's  land and was still at risk.

Then you build it and the client doesn't pay. Can you take it down and away? No. English law is apparently the worst  in Europe for anyone other than landowners.

Can you stop work? No, you must give your client notice, but carry on.

 

Don't ever go into  contracting.   

 

There you are, some sympathy for the kit suppliers.  They have an unknown client every time.

[Furnace]

No one likes credit risk, unless they're being paid a fair price for it. The current situation benefits only the suppliers.
I lend money to plenty of companies, but at a rate I think is fair for the adopted risk. Many forum members do this too via savings and pensions etc.
It feels uncomfortable to lend money to a supplier via paying prior to receipt of goods - I'm providing their working capital for free and have no recourse (other than being an unsecured general creditor) if they run into difficulties. I'm happy to self-insure when buying a £10 book on Gumtree, not when stumping up £200k.

I'd be happy to pay a modest premium to mitigate the exposure, I'm just not sure 6% for 6 months' cover is 'fair'.

[SteamyTea]

6 hours ago, Furnace said:

I'd be happy to pay a modest premium to mitigate the exposure, I'm just not sure 6% for 6 months' cover is 'fair'.

What if fair?

Without know the number of trading TF companies that go bust every quarter, compared to the number in the business every quarter, and what the outstanding liabilities are, hard to say if 6% is fair or not.

 

[Iceverge]

The market seems to judge what they do as fair. As @Nickfromwales says they have plenty of work. 

 

9 hours ago, Furnace said:

I'm happy to self-insure when buying a £10 book on Gumtree, not when stumping up £200k.

 

Ultimately this is one of the things that made us choose the builder we did, trustworthiness. 

 

Taking a chance with such a large sum of money needs to be risk appraised and the benefits ultimately couldn't outweighs the risk of going with a builder with more passive experience but whom we were less sure about giving our money to. Who knows what would have happened in hindsight. 

 

Cellulose fill stick build and police the airtightness yourself with a DIY blowerdoor test. It'll be more than fine and cost less to boot I reckon. 

 

 

[Nickfromwales]

13 hours ago, Iceverge said:

The market seems to judge what they do as fair. As @Nickfromwales says they have plenty of work. 

 

 

Ultimately this is one of the things that made us choose the builder we did, trustworthiness. 

 

Taking a chance with such a large sum of money needs to be risk appraised and the benefits ultimately couldn't outweighs the risk of going with a builder with more passive experience but whom we were less sure about giving our money to. Who knows what would have happened in hindsight. 

 

Cellulose fill stick build and police the airtightness yourself with a DIY blowerdoor test. It'll be more than fine and cost less to boot I reckon. 

 

 

It's horses for courses, simple as that.

Private clientele who know zero about construction would be forced to use a PM. Not all PM's are any good. That cost is a set % of the gross build (project total) cost and can be utterly unfair and disproportionate, and can also be a 'risk'. That can be a 5 to 6-figure sum.

With a company which provides a turnkey service (foundation, structure, insulation, airtightness, B-Regs, S.E. etc) there is an inbuilt opportunity, should you have chosen as well as is practicable, to save a huge chunk of the PM fees that would otherwise reside in your lap, be your responsibility, and would be utterly uninsurable against (most architects and PM's have a long list of exclusions and caveats stitched into their contracts to limit their liabilities) so the risk doesn't go away even if you 

13 hours ago, Iceverge said:

build and police the airtightness yourself

It's down to trust, getting a "feel" for the customers or companies (the shoe goes onto either foot) and then you decide which is the better of the "2 evils".

 

MBC is like a family run business, and they don't stray from what they excel at doing. They have a 'get in, get done, finish, move onto the next one' ethos, and I for one hold them in very high regard.

 

Would I trust them with £100k of my own money? Yes. Would I trust them with the same sum of money if that relied on them having successfully imported a finished product from abroad to then pass on to me? No. The reason is, trust wouldn't be relevant, as there would be the additional weak link, a completely unknown 3rd party risk attached, a-la the Isotex debacle; a set of circumstances which would then be something that changes things way beyond my comfort zone.

 

These are my own thoughts, and opinions, and not advice. But they do come from over 8 years of familiarity.

[zzPaulzz]

Hi @thefoxesmaltings Did you find a safe solution the end? Your build looks amazing BTW 👏🏻

[Mark Greenfield]

On 10/09/2022 at 19:33, JohnMo said:

Think I would consider stick build.  There are a few people on here who are way more knowledgeable than me, who have suggested to a few it's the way to go.

Isn't always AS easy to get the 10 year structural warranty in place. Plus, many lenders won't lend against a build system unless it comes with what they call 'third party accreditation' - ISO:9001, or similar.

[JohnMo]

1 hour ago, Mark Greenfield said:

AS easy to get the 10 year structural warranty in place

Not sure why, nearly every house in Scotland is timber build!

[saveasteading]

54 minutes ago, JohnMo said:

nearly every house in Scotland is timber build!

Your home page shows that some trees rem(ain. Have you tried a clip from that lovely pic as your icon?

 

Your point is good, stick built is ubiquitus in Scotland but insurers remain ignorant that is is not high risk. They are about money and not technical. It could be huge business for an insurer that embraced the prinfiple.

[Kelvin]

1 hour ago, JohnMo said:

Not sure why, nearly every house in Scotland is timber build!

We didn’t have any trouble getting a quote. I never went with it. 

[JohnMo]

58 minutes ago, saveasteading said:

Have you tried a clip from that lovely pic as your icon?

I have tried but for some reason can't work out how to do it? Any pointers 

[saveasteading]

1 hour ago, JohnMo said:

Any pointers 

I can't remember. I think I used the windows 'snip' function to get the image and then there was an easy-enough way to plonk it in the profile.

I also vaguely remember trying 4 times, to get the picture centred optimally.

Sorry.

But if I can do it then  it can't be difficult, and so can you

 

I do like when people use it, as it helps point to the items likely to be of interest, or I can help........or not.

btw You are in the 'interesting' category.

[JohnMo]

3 hours ago, saveasteading said:

I can't remember. I think I used the windows 'snip' function to get the image and then there was an easy-enough way to plonk it in the profile.

I also vaguely remember trying 4 times, to get the picture centred optimally.

Sorry.

But if I can do it then  it can't be difficult, and so can you

 

I do like when people use it, as it helps point to the items likely to be of interest, or I can help........or not.

btw You are in the 'interesting' category.

Will go on the computer and try. Maybe it's not straightforward on the phone