Everything you need to know before signing a contract

May 3, 2016

Here are some things to keep in mind:

● The entity that will build and sell your dream house to you may not be the firm whose name is prominently displayed in the model home and the sales materials. It may be a limited liability company set up to build this particular community; when construction and sales are complete, it will become inactive. If something happens down the line, you may be chasing a shell company with no assets.

● The promises and assurances of the sales agent will not be honored if they are not included in the contract document. Some sales contracts explicitly state that oral statements, assurances and promises made by any employee or representative of the firm regarding anything about the house are unenforceable, Brincefield said.

● Beware of “substitution” and “substantially similar” clauses. After move-in, a common complaint concerns the differences between a buyer’s house and the sales model. The attorneys said buyers should not be surprised; these possibilities are addressed in the sales contract.

The “substitution clause” says the builder may substitute another material “of equal or greater value” if the one that is standardly used is unavailable. The substitution may be innocuous or more obvious.

The “substantially similar” clause states that the house will be similar to the model but may vary in dimensions by an amount that is not specified.

● Know what the builder’s warranties cover. In Maryland, state consumer protection laws and the additional ordinances in some counties are strong and cannot be waived. In Virginia, the state code provides a strong warranty for new homes, but the law allows builders to include a waiver in their sales contract. (D.C. doesn’t have much new construction.)

● Scrutinize the builder’s lending package. Almost all builders offer inducements to use their preferred lender. But the lender is not obliged to give you a competitive rate.

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