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Builder contracts: Don't get stuck with a builder you don’t like

Today I'm going to tell you a story about Mike and Jan. Their names have been changed, but the story details are true.

They signed a contract with a builder and made a $7,500 deposit based on the builder's promise that he could build the house they dreamed of within their budget. But when it came time to create the house plan, the builder didn't design what they wanted. He designed what he thought they could afford.

When they rejected his proposed house plan, he told them it would cost an extra fee to redesign the house to their specifications, and the plan would end up costing more than their budget. He refused to refund their $7,500 deposit despite the fact that he'd lured them with a complete bait-and-switch.

Here's a good general rule for contracts with home builders: If it sounds too good to be true, it probably is. A builder who tells you that your dream house will fit into your budget before he's done all his homework is simply trying to hook you early in the process. He wants you to commit now so you're stuck later. A true cost estimate on your house plan and all the included features takes hours and hours of work, so make sure your builder does their homework first.

If you've talked to multiple builders who have told you that your wish list is outside your budget, and then you find a builder who says otherwise, be skeptical. We're all using the same suppliers and contractors, so there shouldn't be that much difference in overall cost. How can one builder magically do what others can't? Trust me, I know it's tempting to believe them, and that's what an unethical builder is counting on.

Take plenty of time to read the fine print on the contract you're signing. If you're committing to build before you have any idea what the house plan looks like, be sure there's an out clause in the contract. The same advice applies if you're signing a contract before you've had specific conversations with your builder about what can fit in your budget and what can't. You don't want to be stuck in a contract with a builder who can't meet your minimum requirements.

Making a deposit isn't a bad thing. It signals your commitment to a builder who is about to invest a lot of time to create your specific house plan and give you a price. But make sure the builder is giving you realistic expectations and that there's a way out of the contract if those expectations don't match reality.

2 minute read