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If They Build It, You Will Come

So, you want to buy a brand new home in Florida? Join the crowd. As a real estate attorney in Lakewood Ranch, Florida, I am often asked by folks to review their new construction purchase contract for buying a home from a builder. I’m always happy to do it, but I will always caution that new construction builder purchase agreements are notorious for being one-sided, favoring the builder over the buyer.

One-Sided, But Selling Like Hot Cakes

The reality is that a home is only new once, and so if you want a brand new one, buying from a builder is your only option. And if you aren’t willing to sign their contract, there are many people who are. I find this to be an unfortunate reality because I find new construction builder contracts to be some of the most one-sided contracts I’ve ever laid eyes on as a lawyer.

Builder contracts are not prepared on a “neutral” format, such as a FAR/BAR As-Is Contract or a FAR/BAR Standard Residential Contract. Rather, typical new construction contracts are commonly drafted by the builders, themselves. Typical new construction builder contracts are notorious for being drafted 100% in favor of the builder over the buyer. This means that, in the event of a dispute, it is a very safe bet that the contract will resolve that dispute in favor of the builder and against you.

Here are some of the ways in which new construction builder purchase agreements could be one-sided:

  • Indefinite completion dates: Builder contracts typically state that there is no specific completion date. This can make it incredibly difficult for buyers to plan their lives. Most buyers need to sell another home to purchase the new one; without a definite completion date, it becomes difficult to find a buyer who is willing to just be “along for the ride.”
  • No contingencies: Builder contracts often state that there are no conditions upon which closing is contingent (financing, inspection, etc.) In other words, once you sign the contract, you are obligated to complete the purchase.
  • Lack of specificity: Builder contracts often lack specificity in terms of what is being constructed and when it will be completed. This can leave buyers at the mercy of the builder’s discretion. Some common provisions state that the builders can substitute materials, colors, and deviate from plans, none of which shall constitute a default.
  • Limited inspection rights: Builder contracts often limit the buyer’s right to inspect the home during construction and before closing. This can make it difficult for buyers to identify and address any potential problems with the home.
  • Limited warranties: Builder warranties are often limited in scope and duration. This means that buyers may not be covered for all repairs and defects, and they may have to pay out of pocket for repairs that should be covered by the warranty.
  • Atypical closing cost responsibility: Builder contracts typically require the buyers to pay all costs of closing. The major cost that is usually (in a resale situation, anyway) a seller’s cost is the documentary stamp tax (“doc stamps”). As an example, on a $500,000.00 purchase the doc stamps would be $3,500.00. Builder contracts push this cost off on buyers.

Despite the one-sided nature of new construction builder purchase agreements, builders have no problem selling homes. This is because there is a high demand for new construction homes, and buyers are often willing to accept the builder’s “take-it-or-leave-it” terms in order to get the home they want.

If you are considering buying a new construction home, it is important to be aware of the potential pitfalls of builder purchase agreements. You should also always be ready and willing to walk away if the deal isn’t the one you want. Finally, it may be wise to have a real estate lawyer review the contract before you sign it so that you can have a better understanding of how the contract may affect your goals and objectives. If you need assistance with a builder’s contract, contact us today and we will be glad to help out.


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