Let the Buyer Beware: New Build Purchase Contracts
Colorado’s population is growing quickly! It seems like every day a new construction project is started on the front range. If you are considering purchasing a newly constructed home, it is important to review the purchase contract carefully.
Builders of new construction are not required to use the Colorado Real Estate Commission form contract (“Colorado Form Contract”). The Colorado Form Contract is required to be used by real estate brokers in the transaction for previously owned homes to protect buyers and sellers from common disputes that arise in residential real estate transactions. Because these contracts are usually written by the builder’s attorney in the builder’s favor, the buyer is well advised to have their attorney review any contract for the purchase of new construction.
What will an attorney look for in a purchase contract for a new build?
The Colorado Form Contract limits the number of surprises in a home purchase agreement, but a newly constructed home will not necessarily be the same. Here is a list of a few things you and an attorney should review when looking over a purchase agreement for a new build in Colorado.
o Is there a deadline for completion of the new home?
o What signifies completion?
o How much earnest money is needed? Is it refundable?
o Can you access the property during construction?
o Are change orders allowed?
o Who provides title insurance?
o What are all the closing costs? Who pays for what?
o Can a third-party inspector visit the property?
o What is the process for dispute resolution?
What if I must sign the purchase contract right away?
The Colorado real estate market is hot! Homes are being purchased a few hours after being listed. Buyers of a new build may feel the pressure of immediately signing a purchase contract to ensure they are not left out of a lovely new home they want.
It is always best to avoid this situation if possible though. Get a copy of the purchase contract and have an attorney review it before you put pen to paper. However, if this is not possible, most builders will allow a clause that gives a buyer a certain number of days to have their attorney review the contract. Use this time to have an attorney review the contract to ensure there is nothing outrageous in the deal. If a builder does not allow such a clause, it should raise a red flag.
Conclusion:
The real estate market in Colorado is extremely competitive and rapidly expanding. Contracts for newly constructed homes often do not offer the same protections as the Colorado Form Contract used in previously owned homes. GLO has extensive experience in reviewing contracts for newly constructed homes and helping buyers ensure smooth closings in Colorado. Have GLO help you with you newly constructed home purchase. Fill out an interest form today to see if GLO can help you.
GLO has prepared this blog to provide general information on legal issues that may be of interest. This blog does not provide legal advice for any specific situation, and this does not create an attorney-client relationship between any reader and GLO or its attorneys. GLO engages clients only through specific fee arrangements and signed engagement letters. GLO does not guarantee any results.