Reserve the right to alter one-sided builder's contract


Are you planning to have a new home constructed? Then don't be surprised if your builder asks you to sign a 12-page contract laden with arcane legal phraseology.

Such an elaborate document -- known in the trade as a "builder's contract" because it favors his interests -- was once used solely by big-tract builders. Now, with lawsuits against builders on the rise, such one-sided contracts are also becoming prevalent among small- and midsized builders.

"People throughout society are becoming more concerned about legal issues, and homebuilders are no exception," explains William Young, director of consumer affairs for the National Association of Home Builders.

Should you sign your builder's contract without so much as letting a lawyer have a peek? Real estate experts caution against doing so. Although a homebuyer may not need a major rewrite of the contract, he needs some legal protection, the experts insist.

"Getting a house built for you can be a nightmare if you don't have the right safeguards in your contract," says Carolyn Janik, author of several books on real estate.

How likely are you to convince the builder to alter his one-sided contract?

Your chances hinge on market forces, says Jay Lenrow, a real estate lawyer in Baltimore. "If the builder has two buyers for every lot, he's less likely to grant concessions than if he has a lot of unsold lots," Mr. Lenrow contends.

But even if the homes in your development are selling better than cold beer on a torrid August day, it's worth trying to get a two-sided agreement for your new home purchase.

Here are pointers from the experts:

* Get a preview copy of your builder's contract before you enter negotiations.

Why wait until you're down to the final 24 hours before you must sign your contract to review this important document?

"A good builder, with a good reputation, is not going to be upset by a smart homebuyer who wants to be sure the terms of the contract aren't going to give him problems down the road," says Mary Doyle Kimball, an author specializing in advice for new home purchasers.

All too often, buyers fear they will alienate a builder by asking an attorney to check and change a new-home contract, Ms. Doyle says. They fear the builder will see their attempts to protect themselves legally as a sign of mistrust.

But a sophisticated builder will respect a buyer who wants written guarantees to protect his interests, in Ms. Doyle's view. And sharp buyers know that oral promises -- whether made by the sales person or the company president -- are tough to substantiate in court, she notes.

* Make sure the contract gives you access to the property.

Surprising as it may seem, many standard builders' contracts literally ban the homebuyer from walking on the construction site during the building process. And although builders rarely enforce such clauses to the letter, the potential is there to do just that.

Of course, the builder has legitimate reasons for restricting access. Construction crews typically aren't trained to handle visitors. What if a piece of debris should fall, striking the buyer on the head? Builders like lawsuits no better than those in any other field.

Still, the buyer should have reasonable access to the house in progress -- if only on an appointment basis. Many realty agents suggest you spell out your access rights in the contract.

* Ask for a contract clause that gives your home inspector access, too.

"You want to be sure your home is not only built according to code but also with the best methods and the construction materials that were promised," Ms. Kimball says.

Your professional home inspector should be able to see your home at least twice during construction. His first and most important visit should come just before the dry wall is put in -- when the electric, plumbing, heating, insulation and framing work are all still exposed. His second visit is just before closing, to be certain your home was properly finished.

* Use your contract to specify the materials and options you expect in your new home.

Builder's contracts give builders wide discretion in what they put in your home. To be sure you're getting what you anticipate, nail down the specifics, Ms. Janik said.

Go through the builder's model and itemize everything you think you're due -- from the type of shingles to the grade of kitchen appliances. Don't forget the small details, either, like moldings and doorknobs. Once your list is assembled, be sure it's attached to the contract you sign, Ms. Janik says.

* Gain as much ground as you can on the issue of when your new home will be delivered. Understandably, builders like to give themselves lots of leeway to guard against unforeseen interruptions that can slow completion of a home. Anything from bad weather to building supply or transportation problems can cause a home to be delayed.

But the buyer has a lot at stake in the completion of a home, too. A family that has already completed sale of their old home must often make costly and inconvenient arrangements when completion of their new property is strung out.

"I haven't known a builder yet who was on time," Ms. Janik complains.

Do you want your builder to be attentive to his schedule? Then try to place in your contract financial penalties for late delivery, Ms. Janik recommends.

* Limit yourself to reasonable demands of your builder. You're better off with a contract that is equitable rather than one that is onerously one-sided," says Mr. Lenrow, the Baltimore attorney.

Most people will be more trusting of a builder if they believe their interests are protected -- just as the builder's are. By the same token, the builder will work more cooperatively with buyers who accede to his legitimate interests and don't nitpick the contract.

Remember, well after you close on your new home, you'll still need the good will of your builder for follow-up work and to back up your new-home warranty, reminds Chris Coile, founder and head of Severna Park-based Champion Realty.

"Don't beat up your builder too bad," Mr. Coile cautions.

(Ellen James Martin is a columnist for The Baltimore Sun.)

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