Understanding Your Residential Home Builder's Contract

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The estimate includes all costs associated with the project, laid out in a document which breaks the costs down so that people understand how the builder arrived at the estimate. Once the estimate is approved, the residential builder starts work.

Residential builders can order and install appliances, flooring, cabinetry, and other accessories, delivering a complete finished home at the end of the job. Residential builders also handle tasks like ordering supplies, controlling supply costs, managing waste, confirming that all of the contractors and employees are qualified for the work, and working with property inspectors to ensure that the structure meets the building code.

Typically, a residential builder has a large staff so that it can have several projects underway at once, and the staff includes people experienced in many different aspects of construction, from lawyers who handle construction issues to foremen with extensive experience in the field.

There are many steps to building a new home, a home builders contract is one of the most important documents you will sign. Many homeowners don't understand what a home builder's contract is exactly and they wind up unprotected if something goes wrong with their home.

Several of the problems people have with their builders can be directly traced to an inadequate contract. Most builders will have you sign their contract, which is heavily weighted in their favor. You want a home builder's contract that will protect your rights.

After all, you are the one paying for the home. Read over your home builder's contract and make sure you understand everything on the contract. Begin with the deposit clause.

How much is the deposit and is it refundable? What will happen to your deposit if you and the builder run into problems?

If the deposit is your lot; who will be holding the title to the lot? What will happen if there is a fire during the construction phase?

Who will be responsible for maintaining the insurance for fire and other extended loss while the house is begin built? The home builder's contract should clearly define if they have adequate Worker's Compensation coverage and general liability coverage.

Insurance is a must-have for a home builder's contract. You should not be responsible for paying if there is an accident or fire at your home that is under construction.

In your home builder's contract, you should also have a clause that states you are allowed to visit the job site and check on the progress and the quality. Another common problem many people have with a builder's contract is a drop dead date.

Construction projects tend to fall behind schedule do to unexpected circumstances be sure your builders contract clearly states what will happen if your job runs over or doesn't start on time. Change orders are another area of high importance.

Your builder needs to be able to make substitutions on products and things, however there needs to be a limit as to how much they can spend. State this amount in the contract so you have cost control.

The home builder's contract should also contain information about building codes. The codes should include general code, electrical codes, and plumbing and heating/AC codes as well. Your builder will be responsible for meeting all these codes when building your home.

Don't overlook the small things in your home builder's contract like manufacturers specifications. This basically means the builder will be responsible for installing all the products in your home according to the manufacturer's specifications.

Look over the contract and just make sure everything is clearly defined so you don't have any loopholes. A few last things that you need to find on your home builder's contract are the owner's copy of manufacturers' specs, plans and specifications, escrow, and the walk through inspection.

The copy of manufacturers' specs is easy to obtain. The escrow information should state that you have the right to hold back money for unfinished items. Finally, your walk-through inspection should be scheduled a week or a few days before closing.

All the work on your home needs to be completed before the closing date or you will be left with unfinished work in your home. Most builders actually appreciate working with someone who knows what they want and has taken the time to properly research things.

Anything you add or take away from the house after the contract is signed will be your responsibility to track, not the builders'.
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Jack Landry has 1 articles online

Jack R. Landry has worked in real estate since 1988 as an expert on home buying and construction. He has written hundreds of articles on real estate and home construction including new construction Utah.

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Jack R. Landry

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Understanding Your Residential Home Builder's Contract

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This article was published on 2011/01/14