New Construction Contracts
There is a lot of differences between landing on a new construction property and landing on a resale home. There are numerous differences between both. In this article, we will try to identify some of the critical issues that you will be confronted with when buying a new home.
Contained within our GAR Forms, we have a new construction Purchase & Sale Agreement. However, most builders have their own Purchase & Sale Agreements. The GAR forms usually contain about ten pages. Most builders have their own forms and most of the Purchase & Sale Agreements; which are somewhere between 40 and 60 pages of fine print.
In most cases agents do not read them, to identify items that can adversely affect their clients. In many cases, the Builders forms may give you something in the beginning, and then remove them in the numerous addendums that follow.
The last new construction home we did was a few months ago. The home was in the $330,000 range, and the earnest money was $16,000. On a resale, the rule of thumb is 1% of the sales price. Generally, the earnest money is paid when the contract is signed. You have seven days to get pre-approved with Builders, and after that the earnest money becomes non-refundable. On a resale, you have a Due Diligence Period; which means that you have the ability to terminate the contract for any reason and receive your earnt money back. The same thing happens with the appraisal and the financing contingency.
The Builders Lender
In most cases, the Builder has developed a relationship with a Lender that is a part of their company or an independent firm. In most cases, the Builder will only pay the closing cost if you use their Lender. Builders usually make moony off the loan which then allows them to pay some form of closing cost. Usually, a cash transaction will warranty the Builder paying some form of closing cost.
In a resale property, there is only one inspection, and it generally takes place within 10 days of forming a contract. On new construction, it is best to have two inspections. The first is done after the framing is completed and after all the systems are in. This means that the HVAC is in, plumbing is in, all windows are in, and the house is roofed and sided. By doing an inspection at this time you will be able to identify any framing that needs to be corrected, and all systems should have pressure on them. Normally it is best to have this first inspection done after the county inspectors have come out. That way you tell if they have passed their inspections or not.
Normally when the tax bill comes out the property will not be completed. This means that the taxes may be the same as vacant land, or the taxes will be based upon how complete the house is. This means that when taxes are prorated you will not receive very much from the Builder. It also means that your lender will estimate the taxes on the property so that you will be able to properly fund your escrow account.
Builders build into the contracts the ability to extend the closing. They do this by relying on acts of God, and supplies. Normally if the builder has to extend closing there is no penalty assessed. On the other hand, if the buyer needs to extend closing there is a daily charge. Normally a $200 fee is charged to the buyer which has to be paid at closing.
Van Purser and his wife Jeanne are a licensed Real Estate Brokers in Georgia. Since1984 they successfully purchased and renovated over 400 homes. Their expertise is in representing Buyers or Sellers as an advocate; which means always ensuring their best interest. Additionally, they represented hundreds of clients over the years as an Associate Broker with Metro Brokers, RE/Max and now with his own firm. He and his wife, Jeanne, have been married since 1977. Van or Jeanne can be reached at 770-623-3313, or by email at email@example.com or firstname.lastname@example.org.
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