YOU HAVE LOCATED YOUR BUILDER. “LET’S BUILD IT”! (New Residence to be Built)

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Provided by Rate a Home, LLC

www.rateahome.com

Copyright 2005

  

 

a) You have done the research, ratings, bid your home plan and toured the builder’s homes. Now comes the crucial part “let’s put it in writing”.

 

 

        Discuss the purchase price between yourselves and determine if it meets the target price range, including the lot cost.

        The Builder may have a purchase agreement that they utilize. If you’re involving a Real-Estate Agent, the Agent may write the purchase agreement through their office. Make sure that your requests are in writing on the purchase agreement, or on an addendum, signed by all parties. This will help avoid costly misunderstandings during the building process.

 

b) Writing the purchase agreement is one of the most important documents in your home search. If the purchase agreement isn’t written correctly you may encounter problems along the way. The purchase agreement is often the substantial evidence in many court cases between Builders and Buyers. Home Builders Associations and Real-Estate Associations across the nation have spent numerous dollars in legal fees to create the purchase agreement for their Builders and/or Agents and buyers. Although there are no perfect documents in the world, these agreements have legal terminology that will help in case a dispute does arise.

 

c) Items you should include in the purchase agreement:

 

        Reference to builder’s written warranty.

        Builders License Number.

        Agency Disclosure, if you’re dealing with a Real-Estate Agent. This determines if your chosen Agent is an Agent of the Seller, Buyers Agent, Dual Agent, or other. Include what party will be responsible for the Agents commissions.

        Seller’s Disclosure Statement (if required by law).

        Property Description (Legal Description) as well as, who is responsible to purchase the lot.

        Offer Price.

        Terms of Purchase: If you are paying cash, obtaining a mortgage, sellers financing, etc. And, if the offer to purchase is contingent upon financing approval.

        Contingencies: If you need to sell your existing home to purchase the home you are buying.

        Include a “Spec List” of what’s to be included in your future home. Items such as appliances, landscaping, etc.

        Municipal Compliances: Agree who will be responsible to meet municipal requirements for any required inspections, as well as who covers the cost of repair, if required.

        Title Insurance: Normally a seller provides the buyer with an owner’s policy.

        Property Survey: Agree on who will pay for a property survey if you require one, as well as the type of survey required. Most financing companies will need a mortgage survey to close, and you should discuss this with your lender on the type of survey required.

        Property Taxes: Will the builder or buyer be responsible for taxes until close of purchase? Will the taxes be pro-rated on the day of closing? Closing, meaning the day the home is transferred into your name/s.

        Assessments: Who will be responsible to pay for any outstanding or deferred assessments?

        Home Protection Plan: Do you want a Home Protection Plan or an extended warranty? If so, who will be responsible for the expense?

        Change Orders: Is there a set percentage fee over cost, for a change order, or is each change you request priced on a per request basis? When do you pay the Builder for an agreed upon change order?

        Different parts of the country require other items to be included in the purchase agreement; this is where a Professional Builder and/or Professional Real-Estate Agent can help.

        Closing: Determine what the, latest date, of closing the home will be. Many Builders can give you an estimated day of completion, but this date is only an estimate (weather or product supply can delay a homes completion). Builders often use the term “closing to be held at completion and final building inspection, or issuance of occupancy permit”.

        Possession: Determine when you will be allowed to move into your new home. Typically, the builder requires the total agreed upon purchase price, as well as any change orders, to be paid in full before move in is allowed.

        Good-Faith Deposit: Agree on a “Good Faith Deposit” to be paid to the builder. This constitutes a binding agreement between the Builder and Buyer. The Good Faith Deposit agreement needs to read, that the deposit will be applied to the purchase price. Spell out what terms if any, the Builder is able to retain the deposit or if contingencies are not met, that the builder must return the deposit.

        Buyers and Builder Acknowledgment: All parties involved need to sign the purchase agreement at the bottom, as well as date (witnesses may possibly be required).

        Builders Acceptance: Insert a date and time that the purchase agreement remains valid for. If the builder doesn’t respond, or accept your purchase agreement by the set date and time, make sure the agreement reads that the purchase agreement becomes null and void after this time.

 

 

d) Once you have reached a price agreement with the Builder.

 

        Contact your Lender of choice and supply them with the purchase agreement. The Lender will provide you with a formal application to move the mortgage forward. Once these papers are supplied to the Lender and the required lending fees are paid, the Lender starts the process of final approval (which may take some time). The more information you provide the Lender at the pre-approval stage, the smoother the transition towards an, end loan, will go. Once approved, the Lender (in most cases) will order the appraisal, title work and necessary papers to prepare for the closing. This is the time to request a construction loan (if required). If you are requested to provide any documents to the Lender, time is of the essence.

 

e) Be prepared for unforeseen delays such as weather, etc. in the building process. They can and do happen. Have a contact person within the building company that you communicate on all aspects of the process. Be accessible to the builder as well. They may occasionally require a quick answer to avoid a delay in the home.

 

f) Monitor your new home through-out the construction. If you see an area that doesn’t look correct to you, make the builder aware of it immediately.

 

g) Your home will be built by human hands, and earthly products, so expect a few flaws.

 

h) Once you feel comfortable that the deal has gone through start researching moving companies. A “Moving Check List” is provided for your convenience.

 

i) Your Builder, and/or Real-Estate Agent, and/or your Lender, will help guide you through the steps towards the closing.

 

j) The closing may be held at a Title Company, Lenders office, Real-Estate office, or at an Attorneys office. In most cases you will be required to bring certified funds to the closing. You will also need your driver’s license, or proof of identification, and most likely a one year insurance policy, naming the Lender and yourself as the insured. The insurance policy is usually required to be paid in full by you. Other documents may be requested, and you should inquire about those a few days before the closing so you’re prepared. A couple of days before the closing you should request the closing statement and documents for review of any discrepancies.

 

k) Professional Advice: Because a real-estate purchase can be a complex and confusing transaction, it is a good idea to seek legal, environmental, tax and other professional advice while researching the buying, purchase, mortgage and closing process.