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Home Building Contracts

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Some home building contracts are very straight forward documents, created to aid quality home builders in clarifying what exactly will be constructed and the details of materials involved. Other home building contracts however are sticky legal documents full of language that could be harmful to the home buyer. Because some contracts should never be signed, it is vital to have your attorney look over your contract for arbitration clauses and other language that may limit your rights as the home owner.

Home Building Contracts: What Contracts Should Contain?

Home building contracts should contain or be accompanied by a detailed materials list signed by the builder. If you don’t get one, then ask for one and make sure the builder signs it. The materials list should be gone over carefully. If you need a second opinion ask a home building expert to have a look at it with you. Contracts should have a completion date no more than one year from the date the document was signed. Language should also specify the square footage of the home, other details of construction and the price. If your builder employs upgrades they should be specified in the contract.

Home Building Contracts: What Should Not Be in the Contract?

There should be no language in the contract limiting your right to visit the construction site. In fact, you should ask for written permission to visit the site frequently. There should be no language in the contract specifying or inferring arbitration. An attorney should look over your contract, before you sign it, to insure that should the worst happen, you have the right to sue for damages. Any language specifying or inferring that you forfeit your right to choose an independent appraiser not affiliated with the builder should not be considered. Clauses restricting your right to choose your own financing should not be present either, unless you have decided to use their lender. Do not use their lender unless they offer the lowest possible interest rates or you have credit problems and cannot get a loan otherwise. Always consult an attorney before signing any sort of contract that involves large sums of money or labor.

Home Building Contracts: Don’t be Pressured into Signing

Many first time home buyers complain that they feel pressured or intimidated by home builder sales staff, or that they felt they’d been the victim of bait and switch. Yet they wanted their home in a specific community controlled by one home builder, or they felt they were otherwise obligated to sign the contract even though it was not to their liking. Never allow yourself to be put in that position. You are the customer and they are people you are hiring to do a job. In the current economy, you have the upper hand as a paying client in a failing economy. You should always seem prepared to walk out if your terms are not met. They need you more than you need them. If they seem unaware of that fact, then there are many builders in your area that are painfully aware of that fact. They will be glad to build your home on your terms.

The contents of your contract should help you decide whether you want this builder to build your house, or whether you will continue to search for another home builder. Builders who expect you to sign an arbitration clause are not the kind of builders you want to do business with. Instead, look for builders who offer you warranties from selective warranty companies, and who routinely go the extra mile to satisfy clients. An arbitration clause in your contract, should be a not so subtle message that you are in the wrong office. If you spot an arbitration clause in any of the home building contracts you read, put down that contract and choose another builder.


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