QMy wife and I are considering buying a house in a new development. We would like to include several protective contingencies in the contract but are not sure of the wording. Can you assist?
AThe first thing you should do is read the proposed sales contract carefully. Most new-home contracts are heavily weighted in the builder's favor. Other than language required by local or state law, there are very few consumer protections in the contracts that builders want you to sign.
Let's look at the issues you raised:
.* Offer-shopping. You say that a couple of years ago, you were victims of a new-home builder who used your offer in an "offer-shopping" situation, searching for another buyer who would beat it. You withdrew your offer and stopped payment on your deposit check after 15 business days because the contract had not yet been ratified by the builder.
You ask whether you can add language to the contract: "If the offer is not ratified (signed) by the seller within 48 hours, the offer is withdrawn and the deposit refunded to the buyer."
You certainly can try to get such language into your sales contract. Some builders will agree; others will not.
There is another solution. Insert language in your contract saying that the deposit will not be given to the builder until three business days after the contract is ratified. Contract law is very clear: An offer can be withdrawn at any time before it is accepted. You make the seller an offer. If it is not accepted within a reasonable time, you have the right to withdraw that offer, by sending the builder a letter (and an e-mail) advising that the offer is no longer on the table.
With that approach, you control both the contract and your deposit.
* Mechanic's liens. You say you have a friend who purchased a new home and was faced with numerous mechanic's lien claims from subcontractors. A mechanic's lien is a statutory right that protects subcontractors (and building-supply companies) if a builder does not pay them. The subcontractor can place a lien on your property to collect what is owed.
The law on these liens differs from state to state. They can be a nightmare for new-home buyers. You should try to have the following language included in your sales contract: "The seller will provide at settlement a verified statement that all bills and claims for labor performed or materials supplied to or for the benefit of the property have been paid in full and there are no perfected or unperfected mechanic's, materialmen or artisan's liens on or affecting the property."
When you go to settlement, ask the settlement lawyer if mechanic's liens are covered under your title insurance policy.
* Home inspector. You ask whether you can engage your own home inspector, at your expense, to monitor construction. That is an excellent idea. It can be a win-win situation for both you and the builder. Your inspector may find problems that have been overlooked by the builder. If problems are corrected during construction, the builder doesn't have to come back later to fix them. However, many builders do not want someone looking over their shoulder.
You certainly should consider including this language in your sales contract: "The buyer will employ, at buyer's expense, an independent building inspector who will have access to the property during construction. The inspector will report back to the builder and the buyer on a periodic basis. Final acceptance of the property by the buyer will not take place until all unsatisfactory items have been corrected by the builder."
If the builder agrees, he may want to include a provision dealing with resolving disputes between the inspector and the builder, such as arbitration or getting an opinion from another independent inspector. But the concept makes a lot of sense, and reliable builders should not object to including such language in their sales contract.
The real estate market, especially new-home construction, is still quite active. Many builders will take the position that if you do not want to sign their form contract, someone else will come along and will not be as concerned about consumer protections.
You raised some legitimate issues. Before you sign your sales contract, talk with the builder about your concerns and see if he will cooperate. You should also carefully read the contract before it is signed, and have it reviewed by your legal and financial advisers.
Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036. Readers may also send questions to him at that address.