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Top 3 Questions To Ask New Construction Builders Before You Sign The Contract

Are you considering buying a new construction home? In this post we’re going to go over the top 3 questions you should ask any home builder before you sign the contract and put down a lot of your hard earned money that might not be refundable.

I’m Scott with Homeport Residential and overall, I love new construction homes and communities, however, in this crazy sellers’ market many new home builders are writing terms into their purchase contracts that are extremely unfavorable for potential home buyers. To start virtually no new home builders use the standard purchase contract adopted by the association of realtors for their state. Let me explain what this means and why it matters. Here in California our standard purchase contract is about 10 pages long, and it provides ample protection for both home buyers, and sellers, and as far as contracts go, its relatively easy to understand. New home builders however, write their own contracts that are anywhere between 50 to 120 Plus pages long, they have little to no protection for buyers, and they are getting more outlandish by the day with some of the unfavorable terms their writing into their contracts. New home builders can get away with this because of the overwhelming amount of buyers competing for their new homes. That is why it’s vitally important to ask these questions to the new home builder you’re working with before you decide to sign on the dotted line.

Can you increase the price of the home after I have signed the contract?  

Well, Prior to the market explosion of 2020 when you signed the purchase contract for your new home you could expect to pay the purchase price listed when you signed the contract and opened escrow. Now many new home builders are adding provisions to their contracts that allow them to increase your purchase price after you have signed the contract based on rising inflation, labor shortages, or increases to the price of building materials. These price increases can be as much as 5 to 10 thousand dollars over the contract amount, and sometimes even much more. So you will want to make certain that the price your quoted is the price you will actually pay when you purchase your home, or you know the maximum amount it could go up.

Can the builder unilaterally cancel the contract?

This means is the builder allowed the cancel the contract without your permission. The housing market got so insanely competitive in late 2020 and 2021 with prices skyrocketing in only a few short months, that there were several horror stories of home buyers waiting well over 6 months for their new home construction to be complete only to have their home builder cancel the contract and relist the home for sale for an additional $100 to $200 thousand dollars above the original price tag. Make certain to ask this question so your home builder doesn’t try to do this to you.

What is the construction timeframe and are they expecting any delays?

New home construction wait times often average 6 to 12 months after you sign the initial purchase contract. Additionally, extended wait times often happen due to inclement weather, labor shortages, and things like backlogs at the local inspector’s office for your county. Lengthy build times and delays could cost big money if your interest rate goes up while your waiting for your new home to be finished. Also, you will want to make certain you have a long term plan for where your going to live throughout the entire construction process and allow yourself plenty of extra time in case the builder does run into delays. Guys, it’s always better to have extra time and not need it. You will save yourself a lot of stress and aggravation by planning ahead.

Finally, when you ask the builder any of these questions or questions about anything else, make sure they show you in the contract exactly where each of these relevant points are. Don’t just take their word for it.

With everything I just said I do want to reiterate that I love new construction homes. They’re generally built with the latest and most up to date building codes and standards, they usually come with a pretty good warranty, and you get to customize the home with all the features and finishes to make it exactly how you want. If you start your new home purchase, knowing that it could be a lengthy process and what questions to ask the builder you will be way better off than most other home buyers out there.

If you have any questions about the new home construction process feel free to leave them in the comments below or reach out to me directly.  

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