Contingency Plans for Builder Delays
As a potential new homeowner, you owe it to yourself and your family to do your administrative homework. The cost for a new home is possibly the single largest outlay of funds that you will make in your lifetime. A new home can also introduce a huge amount of stress in your life, even should everything go according to plan.
Whether you are buying an existing newly built home, buying a still-to-be-built home, or having a home custom built, each of these scenarios carries different risks.
It's important to have a clear contract, which details all the terms and rights for the buyer and the seller, and provides for various contingencies during the construction and closing of your new home. The contract will include all the terms of your purchase, such as price, amount of deposit, financing terms, closing date, possession date, personal property to be included in the sale, tax adjustments, right to inspect, and possible contingencies, such as attorney's approval, financing, or the sale of your present home. Other matters that may need to be addressed include existing land title, well and septic issues, right-of-way, right of access, easements. The Home Building Suite comes with a sample building contract that covers these issues and more.
Although the Home Building Suite is a great place to start for developing a contract, the laws in each state are different, and you should definitely retain an attorney for legal advice. If you must sign a contract before meeting with your lawyer, always add the following words: "My agreement to the terms and conditions in this contract are subject to and contingent upon the review and acceptance by my attorney."
When entering into a contract, you must keep in mind that home construction is complex and involves many materials and sub-trades. You must be reasonable in your expectations and if there are critical dates and items in your construction, you must identify these up front in writing. Make sure they are included in the contract.
Your builder will include a "force majeure" clause which talks about war, acts of God and so on. These and other clauses are often referred to as "boiler plate" implying that they are routine, and there is nothing you can do about them. That isn’t necessarily true. You are entitled to know what happens in the case of a force majeure, or other delay; and, if your house is not available on the specified date, for whatever reason, make sure your contract specifies who will pay for the double move, storing of furniture, hotel costs, etc.
Remember, it is generally in everyone’s best interest that your home is ready for occupancy as scheduled, but there are many things that can and often do prevent that from happening. Here a just a few examples of some of the items that could happen to delay your move into your new home:
1. Your builder goes bankrupt and you are committed to vacate your old house.
2. Your general contractor disappears with the house unfinished, leaving things in a state of chaos.
3. The incomple home (not yours yet) burns to the ground.
4. There is a carpenters strike for 3 months.
5. Materials such as counters, fixtures, or stone are delayed.
6. Landscaping is not completed.
7. Paving is not done and there is a sea of mud around your new home, yet your builder wants you to move in.
8. There are municipal/state/federal building code violations.
9. The municipality will not grant an Occupancy Certificate.
10. The municipality will not grant clear title to the property because the builder has not met some conditions.
11. You discover that there are "mechanics liens" against your home, because some of the sub-trades were not paid, even though you y paid the builder and can prove it.
12. You lose your job and income
Tips:
Be sure you understand your Purchase Agreement and Contract. Ask your attorney to explain all the terms in plain language. Be sure that all your questions are answered to you and your lawyer's satisfaction BEFORE you sign the contract. Have clear and strong language about who will pay for the added costs associated with any delays..
Another article will cover steps you can take to deal with a home that has been delayed, aside from ensuring all of the legal issues have been dealt with.
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