The Building Contract
Contracts vary in form, length, content and print size.
Expect standard elements such as the names of the
parties, dates, and signatures to show up in every
contract. Contracts often contain clauses that address
company experiences and regional items. The contract for
the purchase of a new home includes a collection of
documents. These may include the purchase agreement
itself, blueprints, specifications, option and color selection
sheets, lighting schedule, site drawing, and limited
warranty. Besides drawing this collection together, the
purchase agreement includes many common clauses such
as those briefly described here.
Price and Allowances
The total cost of your home is stated in the contract. This
cost is subject to change based on your change orders and
selections. You may be ready to get the building process
moving but still need more time to finalize choices for items
like carpet, cabinets, tile, appliances and light fixtures. To address these items,
you and your builder can agree to an allowance in the contract. An allowance is
the estimated cost of each listed item. This amount is included in the
contracttotal and therefore your mortgage. If the actual cost of the item exceeds
the allowance, you can pay the difference in cash or ask your lender to approve a
Unless you are paying cash for your home, you apply for a mortgage shortly after
signing the contract. A standard finance contingency clause protects you in the
event you do not qualify for the financing described—a disappointment that
prequalifying makes unlikely. However, if this did occur, this clause says that the
contract is void and the builder returns your deposit.
The contract lists the plans, specifications, and buyer selections sheet—by
name, number of pages, and date—that describe the work to be done. The
builder commits to doing this work in a “workmanlike manner” as defined by
general practice in the region.
Commence and Complete