Not Working With an Agent? Let an Attorney Review Your Builder Contract

When some buyers decide to build a home in a master-planned community, they bypass the typical agent partnership and work directly with the builder's sales agent. There is nothing wrong with this path, but your efforts should not stop there. Builder contracts are often full of all sorts of hard-to-understand information that could come back to haunt you during the building process. Have a real estate attorney review the contract before you sign. Here are a few things they can help you address. 

Termination Without Cause

Some builders include language in their contracts that allows them to cancel a building contract without reason. Generally, the builder is only required to notify you in writing and refund any money you have paid within a certain number of days for it to be legal. 

For a buyer with plans of living in their dream home to be forced out, the scenario creates a great deal of stress. Getting the builder to remove the termination clause is not always likely. However, an attorney may be able to work in a contingency that provides recourse options should the builder consider terminating the contract.

Delayed Delivery Concessions

As you might imagine, these contracts are meant to favor and protect the builder. For this reason, if there is a material or labor delay that prevents the home from being completed on time, some builders will absolve themselves of any responsibility for these delays. 

However, for potential buyers in-between homes, these delays can be financially straining. Work with an attorney to see if you can add some form of compensation to the contract in the event of a builder-caused delay, such as free blinds or shutters. This step does not exactly resolve the problem, but it ensures your interests are protected.

Deposit Allocations

New builds generally have 3 upfront payments: earnest money, structural upgrade, and design upgrade deposits. Traditionally, any excess or unused amount of these deposits is applied as a closing cost credit at the end. However, some builders include language in their contracts that allows them to allocate the excess funds towards the difference of any material or labor cost increases. 

So essentially, the builder gets to pocket the extra cash. You want to ensure this language is not in your contract, and if so, you want the option to cancel an upgrade if it is determined that its cost to complete will increase or the option of locked pricing.

Once you sign the contract, the details are final. Speak with an attorney to ensure you are protected.


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