Buyer Beware when Working with a Builder
Disturbing stories of canceled home-building contracts are surfacing in Texas, Florida, Utah, and other states. As demand increases and the cost of lumber and other building materials rise, some developers invoke a clause in sales contracts with a devastating impact.
It’s not unusual for purchase contracts to include some protections against cost overruns for the builder. However, the recent spike in construction costs and home values requires even more diligence for buyers who want to avoid a builder willing to take advantage of the situation and leave them without a home.
As these stories document, many buyers sign a contract to build their next home without fully understanding the details. Unfortunately, some of these agreements include a builder option to cancel the deal without any cause required, only a minimum amount of notice.
Before you rush to sign any contract, particularly one involving the purchase of a home, you must take the time to read it carefully. Review each section and be sure you clearly understand all of your rights and responsibilities and any actions that the builder can take during the process.
Do not hesitate to ask any questions that you may have after reading through the entire document. Explain to the builder that you would like to sit down with someone who can clarify the unclear items. Don’t let them rush you into signing before you are comfortable. Consider asking for references from previous buyers to get more insight into what to expect along the way.
If anything you are told in response to your inquiry contradicts what is written in the contract, you should ask that it be updated accordingly. Once both parties have signed, it will be legally binding, so your only chance to make any changes must occur before that step. Specifically, you should find out how the company plans to adjust for changes in building costs and the legitimate grounds for cancellation.
Seek Legal Advice
Even if you are already working with a Realtor, it may be beneficial to engage an experienced real estate attorney to review the document. They may spot vague or problematic language and be able to offer suggestions on how to improve it.
In most cases, a disagreement later will cost significantly more to resolve. The expense of adding a lawyer to your team to protect against that possibility will be a more affordable approach. Buyers often spot red flags when working with a disreputable company, so don’t forget to trust your gut and move on to another builder if you are concerned by their reaction to your interest in the details.
A trustworthy lending partner is key to a successful home purchase. Start your search with the experienced originators at Open Mortgage. Visit our website for resources to help navigate the process, or call today to speak with a representative.