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 Choosing a builder without knowing how much your new home
will cost to build may seem counterintuitive. However, it can be helpful
to have a builder's assistance during the site selection and design
phases of building your new home. The solution to this dilemma is to
choose a builder on a preliminary basis early in the process with the
understanding on both sides that you may later select a different builder for the construction of your home. The preliminary agreement between you and the builder should afford you the opportunity to cancel the contract for any reason at any time prior to the start of construction. That way, you'll be in a better position to avoid repeating the preliminary steps with another builder immediately or, if the construction of your home has been postponed, in the future.
Preliminary Agreements
A preliminary agreement provides an understanding of the services the builder will render and the fee for those services. Preliminary agreements typically retain the builder to assist the buyer in evaluating and selecting a lot, monitoring the design and specifications process, estimating the cost of building the home, preparing a loan application package and starting the building approval process. Expect the builder's fee for these services to amount to approximately 1 percent of the total construction cost
| If you later hire the same builder to construct your home, his or her fees for these preliminary services generally will be included in his or her cost estimate. If the builder's performance under the preliminary agreement is satisfactory and he or she bids a fair price for constructing your home, it's probably in your best interest to move ahead with the same builder. |
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CONTACT US for a List of Builders who can build your Dream Home in the location of your choice. | | The type of contract the builder will ask you to sign for the construction of your home will depend on the type of working relationship you've established. The longest and most comprehensive option is a full general contract. The shortest and least complicated option is a construction management contract. The latter arrangement requires more time, commitment and effort on the part of the buyer. Getting some advice and help from your attorney before you sign a contract with a builder is a smart idea.
The contract typically can include the following provisions:
1. Price and allowances
These items outline what is--and is not--included in the builder's cost-breakdown.
2. Plans, specifications and cost-breakdown
These documents can be incorporated by reference into the contract.
3. Completion Date
4. Dispute resolution procedure
Negotiation, mediation and arbitration are alternatives to litigation.
5. Procedures for change orders
6. Insurance
Insurance, including builder's risk, worker's compensation and liability. The contract typically should state the types of insurance and the policy limits and designate whether you or the builder will be purchasing each type of policy.
7. Warranty
The timeframes and performance standards for warranty work typically should be clearly stated.
8. Special conditions
Any issues related to soils, weather or other miscellaneous factors typically should be explained in the contract.
9. Contingencies
Examples of contingencies include obtaining financing or selling your current home.
10. Payment procedures
The contract typically should detail when and how payments will be made to the builder.
Also see:
All Types of Builders
Which Builder is Right for You?
Choosing your Builder
How to Resolve Problems with your Builder |