Builders going under. It’s a story we’ve all heard — one that ends with an unfinished home and your hard-earned money buried in the rubble.

But it isn’t just a story.

Building or renovating your dream home can quickly become a nightmare if you aren’t careful about who you hire. And with building companies collapsing left, right, and centre, the risk is greater than ever.

But what’s behind this wave of builder busts? Is it all about underbidding? Or is there more to it? Let’s break it down, starting with a real-life example.

 

Why the Lowest Bid Can Lead to the Biggest Headache

When shopping for a builder for a new custom home, Jamie and Lisa* settled on the lowest bid, thinking they’d scored a bargain. But in reality, their builder had underquoted to win the job, leaving no buffer for unexpected costs.

As material prices rose by 10 to 20% during construction, the builder — running on thin profit margins and insolvent trading — quickly ran out of cash.

The work stopped, the subcontractors pulled out, and Jamie and Lisa were left with a construction site instead of a finished home.

The takeaway?

If you want to avoid becoming the next cautionary tale, it’s important to: 

 

Choose a Builder Who Can Weather the Ups and Downs of the Construction Industry

While it isn’t a hard-and-fast rule, smaller, local builders are often your best bet — as it’s more likely they embody the 7 qualities you should look for when shopping for a builder.

Let’s break them down:

 

Quality #1: Strong cash flow. Builders with solid cash flow can handle unexpected costs without falling apart halfway through the project. They don’t rely on deposits from new jobs to fund existing ones, ensuring stability from start to finish.

 

Quality #2: Transparency in quoting. Stable builders typically disclose all potential costs upfront — including buffers for contingencies — as they know that no one wants to get blindsided by hidden fees after signing a contract.

 

Quality #3: Hands-on oversight. Reliable builders usually spend more time on-site, leading to fewer delays and quicker responses to issues as they come up. This hands-on approach also means better accountability throughout the entire project.

 

Quality #4: Consistent team of subcontractors: If a builder works with a consistent team of trusted subcontractors, it’s a good sign the builder has the cash flow to pay on time — and well. A solid team also means fewer delays and a higher builder quality.

 

Quality #5: Lower overheads: Stable builders don’t waste money on flashy offices or showrooms, which means more of your budget goes into the actual build instead. What’s more, by focusing on the essentials, they can deliver a higher quality home.

 

Quality #6: Local expertise: Builders with local knowledge can streamline the permit process and efficiently source materials and trades. This expertise not only keeps your project on track but also helps the builder stay afloat by reducing costly delays.

 

Quality #7: Community investment: Builders who are invested in the local community are more likely to see your project through. With their reputation on the line, they’ll work hard to keep you happy and deliver a solid build.

 

Now, you might be wondering…

 

How Do You Find All This Information?

The only way to know if a builder ticks all these boxes is to do your homework.

Start by checking online reviews. They’ll often give you a good idea of how a builder handles surprises, communicates, and keeps things on track.

But don’t stop there.

Have a conversation with each builder directly. Ask them about their quoting process, how they manage unexpected costs, and whether they have a consistent team of trades. If you can, visit their work sites and see for yourself. You’ll get a sense of how involved they really are and the kind of quality you can expect.

And if you get the chance, have a chat with local suppliers or subcontractors. They often know which builders are rock-solid and which ones are barely holding on.

 

The Bottom Line: Choose Stability Over the Lowest Bid

As Jamie and Lisa discovered, there’s a lot more to finding a good builder than snagging the lowest price.

It’s about securing a partnership with someone who can turn your vision into a reality — without unexpected financial drama.

Of course, building or renovating goes deeper than assessing a builder’s financial health before you sign a contract.

That’s why we’ve put together this free guide for you to download:

7 Things You Must Know Before Designing a New Home

It’s packed with insights to help you sidestep the common construction pitfalls that catch far too many homeowners off guard.

*Disclaimer: Names and identifying details have been changed to protect the privacy of individuals. These stories are based on real events, and any resemblance to actual persons is coincidental.