Posted on: 15 April 2018
Building a new home has many benefits over buying an existing one, such as higher energy efficiency and a layout that fits your family's exact needs. However, you'll also have to sign a contract with the builder to stipulate the terms of construction and payment, and that contract is written by the construction company's lawyer and varies from builder to builder. New home construction contracts are more complex than the contracts for purchasing already built homes, so make sure to check these three specific parts of the document to make sure the terms are fair to you as the buyer.
1. Earnest Money Amounts
First, check out the terms of how much earnest money you must pay upfront before any construction can start. Earnest money is required when buying a resale home as well, but a much larger amount is usually stipulated for new construction since the builder is facing more risk and must purchase materials. If you back out of the contract early, you'll lose all money paid in earnest up until that point. Since there are usually multiple checkpoints that require the payment of more earnest money, this can add up to a large percentage of the total cost of the home paid before it is finished and you can check that it fits your expectations.
2. Time to Build
The sales team that communicates with you and answers your questions about new construction may tell you that a home can be built in as little as six to eight months. However, the contract may not follow these promises and will likely include a time period for building that is as long as two years. Larger and more complex homes may come with contract periods of three years or longer. If you're already making plans to move in sooner than that, address it with the builder before signing a contract with a long time to build period.
3. Arbitration Clauses
Even the best builders can still run into issues that lead you to become unhappy with the way the construction process is proceeding or the condition of the finished home. You may think you can take the builder to court to regain your costs, but that may not be true if you signed a contract with an arbitration clause. Agreeing to arbitrate limits or prevents you from going to court, even if the arbitration process fails to satisfy the demands of either party.
For more information, contact your local home builders.Share