When you sign a contract, you might as well consider that pen in your hand to be a stick of dynamite.  Over the next several months, you will have to live by what is and - equally important - what is not in the contract.

If you ever talk to a home buyer who’s been ripped off by a builder (that is, had a “negative home buying experience”), you’ll notice one common thread: a bad contract.  After you strip away all the incompetent subcontractors, the builder-grade materials, and the outright deception by the builder or salespeople, you’ll usually discover that it all starts with a lousy contract that didn’t protect the home buyer.

How do bad contracts zap good home buyers?

Generic real estate forms:

Surprisingly, many new homes are bought with just the generic real estate “Contract to Buy and Sell”.  While this may be fine for existing homes, new home construction is another ball game.  Although this generic contract does not identify the buyer and seller and the amount to be paid, no mention is made of exactly what you’re buying or when it will be completed.  Some builders get around this problem with a “new construction addendum,’ which is nice but it runs into the next problem.

Omission of details:

Even some of the contracts written for new construction are devoid of critical details.  For example, it’s rare to find a completion date and any penalty clause.  No specs or materials are promised - just a vague wording that says the home will be built in accordance with the "drawings and design plans."  If the builder drew those plans, the plans may still omit many details.  For example, a door opening is drawn on the plans but no mention is made whether it’s an expensive, six panel, solid oak door or a cheap, pine hollow-core door.  And it’s like that all the way down the line: heating/cooling systems, windows, faucets-the plans give you no clue as to whether you’re getting quality or trash.

Verbal Promises:

The final straw of these bad contracts is verbal agreements.  The builder may promise a brick fireplace at the beginning, but having no written agreement makes it easier for the builder to say later he never promised you that.  If you order a change but fail to put it in writing, the builder may fail to make the change.  Or the change will be made and you’ll be charged twice the “verbal” price.  Near closing, you may be shocked by huge bills for items you thought were more affordable in earlier conversions.

This Homebuyers Tip was excerpted from:

Your New House, by Alan & Denise Fields, Windsor Press, 1996

ISBN# 0962655686