What should buyer put in construction contract when building a home? (contingencies, disclosure)
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Hi - are there any good books/websites to help us make sure the contract with the builder protects us from newbie mistakes? For example, after seeing the threads in this forum, I would make sure the builder is responsible for mitigating any radon found. Not having built before, I don't know what items I need to have in the contract to protect us and I am looking for good resource.
You need to be very specific with everything that's being installed in the house. This is just some of the things and in no order of importance..... appliances - make/model, tile - color/size, all plumbing fixtures (faucets, etc), tubs, showers, tile in showers, types of windows, doors, carpet, paint color, molding, ceiling heights, front elevation, landscaping, where the electrical outlets, switches, cable jacks, phone jacks will be located, lighting fixtures, kitchen cabinets and countertops, etc.
You also want them to put in a date that the home will be completed by and you need to find out the warranty terms. Also, the payment/draw schedule should be defined if you're doing a construction loan.
There's plenty of more things, but this is just a start. Just remember, the more specific you are upfront, the less chance of error/mistakes. Good Luck.
Hi - are there any good books/websites to help us make sure the contract with the builder protects us from newbie mistakes? For example, after seeing the threads in this forum, I would make sure the builder is responsible for mitigating any radon found. Not having built before, I don't know what items I need to have in the contract to protect us and I am looking for good resource.
Thx bunches!
I'm Mike, a New Jersey DEP licsensed radon mitigator with 20+ years experience. Your post doesn't say where you are from but if your in a high incidence radon zone then the builder is required to install a complete passive system at the time of construction which eliminates the need of having an unsightly system installed on the exterior of the house if it tests high after construction......since you seem to have a concern with radon even if your in a "medium" incidence area you might consider asking him to install the passive system anyway..
Hi - are there any good books/websites to help us make sure the contract with the builder protects us from newbie mistakes? For example, after seeing the threads in this forum, I would make sure the builder is responsible for mitigating any radon found. Not having built before, I don't know what items I need to have in the contract to protect us and I am looking for good resource.
Thx bunches!
You sound like you are new to this. I would strongly recommend that you use and experienced real estate attorney and/or agent who has dealt with new house contracts. This person needs to represent your best interests and not be associated with the builder. Most builder contracts protect the builder more than the buyer. The need to negotiate appropriate protections for you is critical. You definitely need to have various contingencies(i.e., inspection, funding, etc.) in the contract that protect your interests and clearly spell out how these contingencies will be handled.
Thanks for all the info so far. We have a realtor who is nice but I am not sure if he is up to this challenge. I will look into a real estate attorney for more details. Other than recommendations from friends/colleages, is there anything I should be looking for in a real estate attorney? Do they specialize in new construction contract details for example?
The things stevep listed are what are called the specs of the of the house (specifications). If you are having a house built from scratch, the plans and specs should be addended to the contract.
Our specification sheets include: Roofing, Walls, Windows, Gutters, Front Door, Paint (In and Out), Siding, Drywall & texture, Central Vac, Garage, Plumbing, Electrical, HVAC, Insulation, Cabinets, Flooring, Appliances, Fireplace, Trim, Door Hardware, Masonry, Drainage & Grading, Landscaping, Concrete, others as appropriate.
Our area uses a separate contract for New Construction than for existing. Some of the different things in that contract are a reference to Plans and Specs, selection of colors and finish materials, Preliminary construction meeting, a "Construction site is dangerous" type disclosure, a clause about risk of loss that also refers to sweat equity (if you do work yourself to lower the cost), seller warranties, a breakdown of R-values for insulation in different areas, homeowner's orientation and final walkthrough.
One big thing for new construction that I really push at people is to make sure when you close that someone pays for extended/expanded title insurance. That covers you if the builder doesn't pay his bills for whatever reason, so the subcontractors can't file liens against your house. That is also the reason builders usually prefer to choose their regular title company to close, because that title company knows them and is willing to issue the title insurance. If they have to go to another company, they have to start that process from scratch. I can't stress enough how important this is. I know of wayyy too many people who have lost their brand new homes back to the bank because of a bad builder, but even a good, honest, reputable builder could be killed the day after closing and have 30-60 days worth of unbilled (and thus unpaid) bills that would then immediately be liened against your house.
Thanks for all the info so far. We have a realtor who is nice but I am not sure if he is up to this challenge. I will look into a real estate attorney for more details. Other than recommendations from friends/colleages, is there anything I should be looking for in a real estate attorney? Do they specialize in new construction contract details for example?
If your Realtor is not up to the challenge then you should get one that is. This is too important of a transaction to be working with an agent that can't successfully negotiate a contract that protects your best interests. If you determine that your Realtor does not have enough experience or know how you should discuss your concerns with them as well as that person's managing broker. Any managing broker worth their salt will help you find a Realtor that can protect your interests.
Thanks, and that is a great idea about the extended title insurance. I forgot about my old neighbors who had that problem after the builder left town and left unpaid bills for them to take care of.
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