Building a new home can be exciting. However, the process differs from buying an existing home because you must make a deal with a builder. That means you need to learn about builder contracts.
Builder contracts outline the builder’s responsibilities and the buyer’s payment terms. A good contract will ensure the interests of both parties. This post will outline what you need to know about builder contracts.
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The Basics of Home Builder Contracts
Scope of Work
The scope of work section outlines the work the builder will do. It will cover materials, labor, and other services they provide to complete the home. The contract may also have sections for inclusions (all things included in the contract’s scope of work) and exclusions (work not covered in the contract).
Pricing and Payment Schedule
This section outlines the cost of the work and the payment schedule. Most builder contracts involve a lump sum up front. The buyer then needs to provide payments as the project reaches various milestones. The contract should also outline a final payment and how long after completion it is due.
Buyers and builders need to set a timeline to hold the builder accountable if the project runs long. This section will include the schedule of work and an outline of the payment milestones. However, it will also have terms concerning delays. For example, the contract should allow for delays in the event of a natural disaster.
The scope of work might change during the project. Maybe you changed your mind about a detail or decided to add something. It could be an issue with the local building codes. The contract should have terms that cover changes to the scope of work and you should ammend the contract to reflect the changes.
The contract should define clear quality standards that the builder must meet throughout the project. These standards cover aspects like materials, workmanship, and construction techniques. It should also outline the role of inspections to ensure compliance with these quality benchmarks.
Warranties and Guarantees
Builder contacts should include warranties and guarantees. Common warranties cover workmanship, materials, and structural integrity.
A solid contract is crucial when building a home. That’s why buyers should work with a lawyer or real estate professional. They can help you understand the contract and ensure it protects your interests.
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