You’ve been thinking about your dream home for years and know exactly what it would look like. You’ve accounted for all the nooks and crannies. You’ve finally had a professional draw out the plans in your head.
You even shopped around and found a contractor who has approved the plans and drawn up a contract. All you have left to do is pay the deposit and sign the contract, and you’re ready to go, right? Wrong.
Building a custom home is complex, and you may have overlooked several important issues with the contractor. These issues can result in significant financial costs down the road.
An experienced real estate attorney can help make your dream home a reality with less work and headaches. An attorney can guide you through the process by recognizing, addressing, and avoiding problems before they happen.
The Problems
Contractor Qualifications
It can be challenging to determine whether a contractor is qualified to perform a specific job. You may have looked online for reviews or got a recommendation from a friend.
But did you go further? Have you checked to see if they have any licenses or confirmed they received the necessary permits for the work? Did you check the subcontractors?
A contractor may take on a project they cannot handle or promise completion dates they cannot make. How can you ensure everyone working on your project is capable and suitable for the job, and avoid construction defects?
Differing Perspectives
For many of us, a home is the largest purchase we’ll ever make. When we make that purchase, we want everything to be perfect and expect the process to go smoothly. However, it rarely ever does. This is especially true in a custom home – you’re paying a premium and want to ensure your vision is realized. Otherwise, what is the point of building it custom?
While these concerns are a big deal for most homeowners, the job is just another Monday for the contractor. Your project does not carry any particular significance for them. They may ignore your request to install a custom door for your bathroom, and you won’t know until the home is finished, at which point it will be too late to change.
How can you be sure that everything you discussed and agreed to with your contractor is followed?
Change Orders and Financing
During a custom home build, things are constantly in flux and change. Thus, there is a standard process for it called a change order.
However, contractors are not always the best at implementing change orders. Some don’t have a process for it at all. They may be poor communicators or lack effective management skills. They’re specialized in construction, not always business.
When tracking the finances of these changes, they may be worse. Contractors may change materials or designs without assessing the resulting price difference or notifying you of such changes and their associated costs.
How can you be certain you’re aware of any changes and their consequences? And how can you be sure that the project’s finance account addresses those changes?
The Mortgage
A custom home is usually financed by a lender. The process usually goes like this:
- The buyer will get a “construction loan” from the lender.
- The construction loan will be converted into a mortgage once the project is finished. Those agreements will have different terms, including differing interest rates, which are only “locked in” if construction is completed by a deadline date.
- The project begins, and draws will be periodically taken from the construction loan.
- The project is completed on time and converts to the mortgage.
Contractors aren’t parties to these separate agreements with the bank and don’t necessarily know or bind themselves to their terms.
Sometimes, they go around the homeowner and get draws before it is proper. Sometimes, they say things to the lender that can negatively affect your relationship. Sometimes, they ignore or forget the deadline for your loan, a mistake that can cost you hundreds of thousands of dollars in interest over the course of a 30-year mortgage.
How can you be sure these things don’t happen?
Clarity
As mentioned above, contractors are not always the best communicators. They also aren’t lawyers. Despite these two things, they often draft the contracts for their projects.
Due to this, many items in their contracts are often unclear. The completion date and how that date can change need to be well-defined, and often, they are not. The process for accepting the home and transferring title needs to be exact, and often, it is not. The process for handling subcontractors and their payment needs to be clear, and often, it is not.
How can you be certain that all the steps in the process are clearly outlined?
The Solution
An experienced real estate attorney is all too familiar with these problems. They are often tasked with cleaning up messes after the fact, after the home has been completed and the problems become apparent. It can be costly, messy, and confusing to sift through, and issues cannot always be resolved because the home is already complete.
The good news is that the solution is straightforward: consult an experienced Georgia real estate attorney before signing a contract for your custom-built home.
Benefits of speaking with an experienced Atlanta real estate attorney:
- An experienced real estate attorney can ensure the contractors and subcontractors are qualified to do the work by verifying their licenses and permits.
- They can tailor a contract to your needs – a custom contract for a custom home – so everything is addressed.
- They can ensure the contractor follows through on their word and address any deviations as they arise, instead of six months after the contractor has abandoned the job site.
- They can serve as a liaison between the lender and the contractor, balancing their respective needs.
- They can create processes for change orders, financing, completion dates, acceptance and transfer, and everything in between.
- Not only can they save you money by catching and resolving potential mistakes in a custom home, but also having a lawyer from the beginning can save on potential litigation costs.
- It is often more expensive and time-consuming to clean up the mess after it happens than to keep something orderly and controlled while it is happening.
- You can factor legal costs into your budget from the outset instead of having to figure out where to scrounge up cash after you spend your savings on your dream home.
If you’re considering building a custom home but are concerned about the potential pitfalls, contact us by email at info@thriftlegal.com or by phone at 678-882-0830.
