Mariel Megan Ross
"Why is THAT term in my new home contract?"
We’ve reviewed dozens of builder contracts in the Denver metro the past 6 months. Here’s what we’re seeing.
One of the more unique services we offer at Focus Real Estate?
When you build a new home in the Denver metro, whether it’s with Brookfield, Parkwood, Lennar, or another builder, our real estate attorneys will review the builder’s contract at no additional charge.
These contracts tend to be LONG. Some are 200+ pages with exhibits and disclosure. So we’ve found our clients appreciate having a second set of professional eyes review their contract.
So … what are we seeing in builder contracts these days?
We collected information from the different new home communities our 8 brokers focus on. These neighborhoods include our lovely Sterling Ranch, as well as Central Park in Denver, Painted Prairie in Aurora, and The Canyons in Castle Pines, among about 10 others around the Denver metro we work in.
Before we begin, I wanted to mention that each builder typically uses its own contract. Larger builders in the Denver metro normally don’t use the standard Colorado-approved contracts, which are often used for resale deals instead.
If you’d like to learn more, I chat about the Colorado standard resale contract in this article. Also, if you’d like to know more about the basics of builder contracts, be sure to check out 7 things to know about new home builder contracts.
“My builder is asking me to sell my current home almost immediately!”
If your new home contract is contingent on you selling your current home, some builders will contractually require you to sell your home – and rather quickly.
As just one example, we have wonderful clients building a gorgeous new home. The estimated completion date is January 2022. Great! But the builder is contractually requiring the clients to list their current home late this summer. So our clients might be in a position where they sell and move out … before their new home is completed.
Why is this in the contract?
“Contingent” contracts are arguably less desirable for builders than ever. Many builders have waitlists full of buyers eager to purchase. A contract that’s contingent on the sale of a buyer’s current home just means one more thing has to fall into place for a builder to know they have a solid deal. This is one reason you might see an early sale deadline for your home – your builder wants to know if you’ll be ready to close when the time comes, or not.
The good news? As you probably heard, the Denver market is extremely seller-favorable these days, so listing your home for sale sooner rather than later might end up being a blessing in disguise.
Also, for example here at Focus when we sell our lovely clients’ homes (we’re a full service brokerage that lists homes for 1.5% listing commision, by the way), we have other options to help bridge timing gaps. From 60-day leasebacks to extended closing dates to other options, we can help minimize any timing issues you face.
“My builder wants several years to build my home!”
I had an interesting conversation about a builder contract recently. Our attorney told us this: “Believe it or not, but the builder is only giving itself 1 year to build the client’s home!” This may not sound interesting to you, but it is to us.
Some homes in Sterling Ranch and other communities are facing delays. Some delays are permitting related. Others are related to sourcing materials and labor. Still others are related to Colorado’s wonderful, yet erratic, weather. While almost all builders strive to build your home as quickly as possible, since they normally don’t get paid until the home is done, the reality is there can be delays.
It’s become common for builders to give themselves up to 2 years to build a home, and even that date could be subject to force majeure (what this means is a separate conversation). Regardless, don’t be shocked if your builder contract says your builder actually has multiple years to get your home done.
“Wait, my builder can change my floorplan and selections after I sign?”
In our experience, very few builders will guarantee in your contract that your new home will be built EXACTLY in accordance with plans and specifications. Nor will most builders promise you EXACTLY all the same upgrades and selections you pick. Why?
First, understand that construction is an imperfect, human process. While all builders desire to build your home perfectly and to not substitute anything or make changes to the floorplan or other improvements, the reality is topography, soil conditions, and other factors may necessitate that this happen. I’d say in my experience that changes are rare, but they can and do happen.
Examples? When digging foundations, a builder needed to re-route the sewer line onto another lot because of soil issues. This wasn't the original plan, but the builder had no choice but to make the change.
Here’s a more recent COVID-19 example. Certain appliances, supplies, and other materials that were once readily available are either out of stock or extremely delayed. So while you might have picked a certain refrigerator initially, it’s possible your builder might have to swap in a different refrigerator that’s actually available.
Here’s a human-related example. The plans might say a wall in your home is 20 feet long. When constructed, the wall might actually be 20 feet 1 inch long.
The good news? In addition to the fact that builders don’t want to make changes if they can avoid it, many builder contracts say changes and substitutions generally have to be “of equal or better quality.” So while you might not get the refrigerator you picked out originally, the builder has to give you a fridge that’s similar or even nicer.
So there you have it, friends! If you’d like to learn more about building in a new home, feel free to shoot any of Focus' 8 real estate brokers an email.
And you can always reach me at Mariel@Focus-Realtors.com!
Last but not least, remember that all real estate transactions are different, and all real estate contracts are different. Some of the issues I discuss in this post may – or may not – apply to your transaction, may apply in a different way, or may even be interpreted differently. This post is not comprehensive and is not legal advice and should not be relied upon. You’re responsible for your own agreement and deal – so read it and get the necessary legal help you need!
Alex R. Ross, Esq. of McLeod Brunger, PLLC assisted with this Scoop post.