How to Avoid New Home Construction Contract Disputes

Construction of new house - construction contract concept

Once you’ve decided to build your dream house, you will face complex and challenging decisions. Most people who choose to build their own home understand that overseeing a new home construction project is a massive undertaking that will require working with the builder or general contractor, obtaining the necessary permits to build on the land, and overseeing the project until its completion.

But before any of this process begins, it is most important that you conduct your due diligence about the builder or general contractor to confirm if they are licensed through the State of Michigan’s Licensing and Affairs Department and determine if any complaints have been filed. In addition, one should always try to contact persons who have contracted with the builder or contractor for a new home construction to learn about their experiences with the builder or contractor..

Why a Construction Contract Is Important

It is also important that you review and understand the construction contract because this document will form the basis of everyone’s understanding of what is to be done on the project and who is responsible. The contract reflects this understanding, identifies payment terms for the builder and subcontractors, and ensures that you receive the home you were promised.

Fundamentally, a residential new home construction contract ensures that you receive the home you were promised and that the builder gets paid for the house that was built. In some cases, the contractor will present you with a contract that is ready for you to sign. In others, you will need to hire an attorney to prepare a contract for you. Regardless, you should never build a new home without a new home construction contract, and you should always have an attorney review the contract before signing it. To fully protect your rights, be certain that you understand the contract. The final agreement should be specific, clear, and easy to understand.

Michigan Real Estate Law: New Home Construction Contract

Under Michigan law, for a real estate contract to be valid, the agreement must be in writing and must identify the parties to the agreement, the property to be sold, the purchase price, and how and when the purchase price will be paid. A well-drafted construction contract will identify each party’s rights and obligations, and provide remedies if someone breaches the terms of the agreement.

There are three main categories of residential new construction contracts: (1) construction of a custom home on land owned by the homeowner during the construction period; (2) the construction of a new custom home on land owned by a builder or its affiliate during the construction period; and (3) the sale of a finished new spec home built by a builder on land owned by a builder or an affiliate who speculates that the home will be purchased by an owner.

Successfully negotiating an acceptable building contract will depend on various factors, including the quality and character of the builder, existing new home market conditions, and the experience and capability of the homeowner’s attorney. A reputable builder should be willing to engage in reasonable negotiations over legitimate issues.

Regular Communication Can Avoid Construction Contract Disputes

Regular communication between the homeowner and the builder goes a long way toward avoiding new construction contract disputes. Even if you have a good relationship with the builder, it is wise to remain in regular communication to ensure that your expectations are being met and that the relationship does not sour. Regular communication can avoid disputes by giving the homeowner confidence that the project is progressing on schedule. It also gives the builder an opportunity to change anything that is not to the homeowner’s liking. However, these changes may require altering the original contract.

Visit the construction site as often as possible to observe the builder’s progress. This is especially important at the early stages of the project, where the work will be covered up once completed. For example, once the builder installs drywall, it is too late to observe the plumbing, electrical, HVAC, and other work contained within the walls. Do not hesitate to ask questions about any aspect of the project, including any changes that have been made to the specifications of your home.

Similarly, you should pay special attention when constructing a new home during the winter months. Even though concrete used in basements and walls cures best at very specific temperatures, many builders regularly pour concrete in temperatures below freezing. Likewise, certain building materials such as siding, flooring, and framing materials can be damaged when they are exposed to moisture for a prolonged period of time. Exposure can also void the manufacturer’s warranty.

The Importance of Home Inspections

You should engage the services of a reputable private home inspector to inspect the project at every stage of the construction process. A certified home inspector will have completed a course of study and have a certificate proving that the course has been completed. A high-quality home inspector will also have a Michigan builder’s license.

The home inspector’s fee will vary based on the square footage of the home. A good inspector will more than earn their fee by identifying issues with the construction process before they become a liability for the owner.

Ager Law Office: Protects Your Legal Interests

Real estate transactions are among the most significant and complex financial matters that a person will address. The applicable laws require meticulous attention to ensure full compliance with all legal requirements. Michigan real estate attorney Bill Ager’s goal is to protect your legal rights and interests in all matters involving Michigan real estate.

Bill Ager has more than three decades of experience assisting people in Michigan real estate matters. He will protect your legal interests, make certain that you completely understand your rights and obligations, and ensure expeditious completion of the transaction.

Ager Law Office offers comprehensive real estate services for a reasonable flat fee. Bill Ager is pleased to represent people throughout Washtenaw County, including Ann Arbor, Ypsilanti, Saline, Chelsea, Dexter, and other communities. To talk with Bill about your real estate law matter, call (734) 649-0784, email, or use the online contact form.

Categories: Real Estate