If you haven’t noticed, builders have aggressively moved back into the market.
There are new developments going up everywhere you turn. But that isn’t the only way builders have been getting aggressive.
Many home builders have reworked their sales contracts, and make no mistake, they are very one-sided agreements.
If you’re planning on purchasing a new home, read that contract inside and out. Don’t rely on the sales agent pointing out all of the critical terms – they work for the builder. Here are some of the more important potential pitfalls:
1. Appraisals – There are no contingencies in the standard builder contract for an appraisal. You have to add this contingency and in most cases it won’t apply to upgrades. If you overbuild and it doesn’t appraise – it’s on you.
2. Financing contingency – Not allowed unless you use the builder’s lender. This does affect your ability to shop rates and closing costs.
3. Build time – Ensure the builder owns the lot you’re writing a contract on. Banks will often release lots in blocks but that doesn’t prevent a builder from writing a contract for a lot he doesn’t own yet. Ask if the permit has already been applied for. The builder could have up to 120 days before they have to begin construction.
4. Cost increases – I know of one builder right now that will write amendments increasing the contract price due to material cost increases, even though the sales price has been agreed upon. You can choose not to go through with the purchase, but you will in all likelihood lose your earnest money and any upgrade fees you have paid.
5. Final walk through – Some builders are not allowing the buyer’s agent to attend the final walk-through with their clients. I can only assume why they don’t want the buyers to have their representation there.