Real Estate

10 New Build Contract Questions Every Agent Should Ask

There are many facets to consider when working with buyers who want to go the new construction route, especially with COVID, tariffs and uncertainty at play. These questions tackle some major issues clients could face.

Representing the best interest of clients is always a challenge, but when builders use their own contracts, it’s especially difficult. Many builders are adopting the TREC New Construction Contract or the standard contract from the Home Builders Association, but most large builders have created their own.

All the contracts contain similar provisions, but finding the information in a 26-page contract created in 8.5 font is hard. Agents need to set good expectations, and asking good questions of the builder is the first step.

Agents need to know the most critical information that a client might need. The following is a quick list of the most important questions to ask pertaining to the new home transaction.  

Often, the seller’s representative is more willing to speak without the client present, so agents should address the questions to the seller’s representative and later disclose the answers to our clients. If there are any further questions or concerns, the client can always consult with an attorney.

Questions about the contract include:

  • How does the builder document procuring cause?
  • Are there any other fees or charges after the contract is signed?
  • What are the buyer incentives, and what are the restrictions on those incentives? Can we use our own mortgage company and title company?
  • What does the contract say about earnest money and canceling the contract? If there is a dispute, what is the procedure, and what are the rights of the customer? What buyer’s specific performance is required by the contract in regards to closing?  
  • In the contract, what builder specific performance is outlined including quality and closing date?
  • What is the warranty on the home? What is the procedure for warranty claims?  How quick are repairs made?

Here are questions about the process as stated in the contract:

  • Are there any restrictions on a customer using a home inspector? How will the builder respond to the inspector’s report?
  • How are change orders handled, and what are the additional charges?
  • Is there anything on the lot survey other than standard utility easements?
  • It is not in the best interest of any party to have verbal agreements. Will the builder put everything in writing throughout the process, including the “punch list” with items to be completed before closing?
  • What is the builder’s definition of a complete home? What is the builder’s standard of finish out quality? Can the buyer preview a property that is set to close at the end of the month to see an example of finish out quality?

Many agents are intimidated by representing their client in a new home construction transaction. There are too many variables, and no builder does things the same way as another. There is a lot of room for error.

This list, though not exhaustive, should address the major issues a client might face. Agents who do their due diligence will be able to represent their client as competently as possible.

Andy Bearden is the managing broker with Insight Realty Network in Texas. Connect with him on Facebook or LinkedIn.

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