If I cancel my build, will I get my deposit back?

4th November 2024

Finance & Budgeting Pre-Construction Design & Trends

This article explores whether home buyers can get their deposit back if they cancel their build, breaking down Preliminary Works Agreements (PWA) and the reasons why the preliminary fee is typically non-refundable. It provides key insights into builder costs, common misconceptions, and practical tips to avoid deposit-related issues.

If I Cancel My Build, Will I Get My Deposit Back?

When committing to building a new home, one of the first financial steps is paying a deposit, or as it is now commonly called, a preliminary fee. But what happens if you decide to cancel your build? Will you get your money back? In this article, based on episode 75 of the Home Building Hub Podcast, hosts Colin Bischof and Darren Brennan break down what home buyers need to know before signing a Preliminary Works Agreement.

Understanding the Preliminary Works Agreement (PWA)

Before a formal building contract is signed, builders require a Preliminary Works Agreement (PWA) and a preliminary fee (commonly referred to as a deposit). This fee is paid upfront to cover initial costs such as:

• Drafting and design work
• Site investigations, including soil tests and feature surveys
• Administrative tasks to prepare for contract creation
• Estimating and quoting costs based on customisations or upgrades

It’s essential to note that a PWA is a non-binding agreement, meaning it does not lock you into a build contract, but it does commit you financially to cover the builder’s upfront costs.

Is the Preliminary Fee Refundable?

In most cases, the preliminary fee is non-refundable. Builders use this money to cover real expenses incurred in preparing the contract, including professional services such as drafting, engineering assessments, and administration.

If a buyer decides not to proceed, the builder has already spent time and money, making refunds highly unlikely.

Key Reasons Why the Deposit Is Not Refundable:

• Builders incur real costs for site inspections, surveys, and draft plans.
• Administrative work, including setting up files and managing client information, takes time and resources.
• Preliminary agreements often have terms and conditions stating the money is non-refundable.
• Some builders might offer a cooling-off period, but this is not always the case—always check the terms before signing.

Common Misconceptions About Preliminary Fees

Many home buyers assume they can simply "test the waters" by paying deposits to multiple builders and then choose the best quote. However, this can lead to unnecessary costs, wasted time, and even legal complications.

Misconception #1: "If I Change My Mind, I’ll Get My Money Back"

Not true—once the money is spent on necessary processes, it is unlikely to be refunded.

Misconception #2: "I Can Pay Multiple Builders to Get Quotes and Then Choose One"

This old-school method is discouraged. Instead, do your research and choose the builder best suited to your needs before paying any fees.

Misconception #3: "The Preliminary Fee Covers Everything"

No—it only covers the early-stage work. The final price of the home is determined in the contract stage, including any allowances and upgrades.

How to Avoid Deposit-Related Issues

To prevent misunderstandings and financial losses, follow these tips:

• Do your research: Choose a builder you trust before committing financially.
• Ask about refund policies: Some builders may offer conditional refunds, but always confirm.
• Read the agreement: Ensure you understand what your money is paying for and whether there is a cooling-off period.
• Have clear expectations: Know that once the builder starts work, the money is generally non-refundable.
• Communicate openly with your builder: If cost is a concern, discuss estimates and budget expectations before signing anything.

Key Takeaways

• A Preliminary Works Agreement (PWA) is a non-binding agreement covering early-stage work.
• The preliminary fee is usually non-refundable as it covers real costs incurred by the builder.
• Refunds are rare unless explicitly stated in the agreement.
• Paying multiple builders to "shop around" is not recommended and can lead to wasted time for all parties.
• Always read and understand the terms before paying a deposit.

For a deeper dive into this topic, listen to the full podcast episode here.

Glossary of Terms

• Preliminary Fee – An upfront payment made to a builder to cover early-stage work before signing a contract.
• Preliminary Works Agreement (PWA) – A non-binding agreement that outlines what the builder will do in preparation for a formal contract.
• Cooling-off Period – A set time frame where a buyer can cancel an agreement without major financial consequences (if applicable).
• Provisional Sums – Estimated costs for certain aspects of a build that may vary based on final decisions.

FAQs

Can I cancel my build and get my deposit back?

In most cases, no. The preliminary fee covers real expenses and is non-refundable.

How much is a typical preliminary fee?

It can range from a few thousand dollars to around $10,000, depending on the builder and the services required.

Is a Preliminary Works Agreement legally binding?

No, it is a non-binding agreement, meaning you are not locked into building the home. However, you do commit financially to covering the builder’s costs.

What if I find a better deal after paying a preliminary fee?

Unfortunately, if you cancel, the builder is not obligated to refund your money, as it has likely already been spent on site inspections, drafting, and administration.

About the Home Building Hub Podcast

The Home Building Hub podcast, hosted by industry experts Colin Bischof and Darren Brennan, is Australia’s premier resource for new home buyers. With weekly episodes featuring special guests, the podcast provides objective, high-quality insights into the home-building process—completely free and without sales pitches. From understanding financing options to navigating the complexities of building a new home, each episode is packed with actionable advice and tips.

Explore more episodes at www.homebuildinghub.com.au and join our growing community of informed home buyers.

Disclaimer

Whilst we’re all about providing value to you, this article should not be considered as legal or financial advice. It contains general information only and is based on the content discussed during the podcast episode. This information is relevant to the episode’s release date and may not be applicable at the time of reading. Always seek independent professional advice tailored to your personal situation before making any legal or financial decisions.