B, Home Buyer in Chicago, IL

We are building a custom home in which the builder is carrying the construction loan. The builder requires

Asked by B, Chicago, IL Wed Apr 9, 2008

10% right away which will be spent (not held in an escrow account). Is this typical? I am just nervous that since he has other homes, our money would be comingled with their money...Thanks

Help the community by answering this question:

+ web reference
Web reference:

Answers

2
Sheldon Saln…, , Chicago, IL
Fri Apr 11, 2008
When doing a custom house there are many variations and permutations to the builder"s contract. I would strongly recommend that you obtain a real estate attorney who specializes in new construction, single family homes. Keep in mind that this type of attorney may charge by the hour but I have found there is a definite need for an attorney with major new construction custom housing experience and in the long run it may prove most economical.

Note, in the contract there should be checks and balances for cost over runs as well as procedures for drawing money from the escrow account. In addition, there should be written material in the contract pertaining to cost for changes and a detailed description of all product and appliance brand names, including model number.

I have outlined just a few of the things that should be in this type of contract. In summation, only after
a good attorney has reviewed the contact and made modifications to the contract should you hand over money to the builder.
0 votes
Ken Dooley, Agent, Chicago, IL
Fri Apr 11, 2008
A custom home is different to a spec home. With a true custom home you get to call the shots in terms of design, curb appeal, site location, interior finishes and layout. Contributing 10% ensures you don't walk away from the project because you don't like how it turns out. It may also be a requirement of the construction loan that the developer is carrying.
I would consult with a Real Estate Attorney prior to handing over the 10% to review the written agreement you have with the developer and the construction loan documents. There's plenty of small print and most contracts between a buyer and developer are weighted to benefit the developer in the event of a dispute. You also want to ensure a strict timeline for completion of the home so the developer doesn't disappear to spend time on another more pressing project. Look into the developer's reputation and talk to past clients of the developer.

Best of Luck, Ken.
Web Reference:  http://www.KDRchicago.com
0 votes
Search Advice
Search
Ask our community a question

Email me when…

Learn more