Osceola ReVIEW - May 2008 - (Page 14)

Legal Ease By Randy Hillman, Attorney at Law bEWARE Of THAT NEW HOME CONTRACT Most REALTORS® are familiar with the terms of the FAR/ BAR Contract, and are comfortable using such contracts. The contract was developed over a number of years with input from both attorneys and REALTORS®. It seeks to equitably balance the rights and responsibilities of the buyer and seller. The contracts used by many new home builders do not contain many of the provisions that REALTORS® are used to seeing in the FAR/BAR contract. No REALTOR® should ever let their customer go sign a contract for a new home without being with them to review the contract and/or suggesting they have an attorney review the contract before it is signed. The following is a list of items that might be contained or absent from a new home contract. 1. There is no financing contingency - even if the buyer does not get financing and cannot close, the deposit is forfeited. 2. Financing clauses that really do not make any sense - the clause provides the buyer must get loan commitment within a short period of time after contract signing, even if the house will not be finished for many months. If the loan approval is later denied for any reason, the buyer loses their deposit. Such reasons could be the loan program under which commitment was given is no longer available, the buyer his loses job, the buyer obtains a loan to buy a car, or the house does not appraise. 3. Clauses that give the builders several years to complete the house along with clauses that gives the builder additional time to complete the house if they run into problems. Many times the buyer is counting on moving in by a certain date, and when the builder does not finish when expected, it causes both emotional and economic havoc for the buyer. 14 4. Mediation and Arbitration Clauses - these clauses provide that if there is a dispute over a deposit, the buyer must first demand mediation and if that fails then go to arbitration. Usually, these procedures are more expensive then going to court, and if the deposit is less than $5,000.00 cost prohibitive. 5. No attorneys fees clause - the FAR/BAR contract provides that the prevailing party in any litigation is entitled to have their attorney compensated by the other party. If the builder’s contract fails to contain such a provision, even if the buyer wins, the cost of litigation may not make it worthwhile. Of course, if the buyer is the one who breaches the contract, not having such a clause would be to his advantage. 6. No contingency for the property to appraise for at least purchase price. Although the FAR/BAR contract does not contain this provision, many REALTORS® know to add it in an addendum. The new home contract usually does not contain such a provision, and it could result in the buyer not being able to obtain financing and losing their deposit. One other thing is to make sure copies of all documents are obtained at contract signing and dates and what was submitted to lenders is documented. If things go wrong, the buyer wants to make sure that he has the documentation to prove he met the requirements of the contract regarding obtaining loan approval. Every new home builder’s contract is different. Many are long and contain numerous addendums. They must be carefully reviewed with the buyer. The most important thing is to make sure the buyer understands the terms of the contract. If the buyer wants to enter into a contract that does not contain a financing contingency or any other provision that you question is in his best interest, make sure it is thoroughly explained and your file is documented that it was explained. Most buyers are excited with the prospect of purchasing a new home and overlook important details. You must make sure they thoroughly understand the terms of the contract. If things go wrong, and the contract has not been fully explained, you may be the one they blame. ■ Osceola ReVIEW May 2008

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Osceola ReVIEW - May 2008

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