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New residential construction contracts are documents that typically have been prepared by the builder for the builder’s benefit. The provisions identified in the purchase contract web page must be included in this contract with additional information about the building.
New residential construction contracts should include:
- A re-proration of taxes through the date of closing based on the actual tax bill when issued
- A statement that the builder will build the home in accord with specific plans, blueprints and specifications which are attached to the contract
- A warranty regarding the correction of defects in materials and workmanship
- A warranty that the completed structure will be in accord with build and zoning laws and ordinances
- A closing date that is clearly identified and not subject to a contingency within the control of the builder
- A penalty clause for failing to meet the closing date or an alternate date to allow the builder a window for completion
- An escrow for incomplete items
- A personal guarantee from the principal of the corporation assuming that the earnest money will be returned if the contract is terminated (if the builder is holding the earnest money)
- A requirement that the builder provide the title company with lien waivers and pay for the lien waiver examination
- A warranty that the builder is the owner of the property
- A preliminary title commitment provided at the contract signing to determine ownership of the property
- A remedy available to the buyer in the event the builder defaults or otherwise fails to perform (not just a return of earnest money)
These contracts can be confusing and require professional assistance to draft and implement. The Naperville real estate attorneys at Roscich & Martel Law Firm have extensive experience handling these kinds of contracts and are equipped to help you.
Reach out to our firm by calling (630) 793-6337.
Money given to a builder as earnest money is at risk. In the event the builder files bankruptcy, disappears, or just closes shop, the money given to the builder is probably gone. Therefore, it is recommended that the money given to the builder is kept to a minimum. It is best to deposit the money with a third party escrowee.
When contracting for new construction, you should not:
- Agree to price escalators due to failure of the builder to start or complete the structure within a time frame
- Agree to pay a penalty for failing to close if the builder states you must
- Agree to release the builder from liability for his negligence
- Sign a contract that does not have mutual remedies in the event of a party’s default
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