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Negotiating a new home Contract

rwheel | Posted in Business on October 21, 2006 05:58am

I am building a new home in a development where the architect and builder are part of the realestate package. It appears that both are compitent.  Soon it will be time to negotiate a building contract but I do not have any experience in negotiating this type contract.  I am looking for good general and practical reference for this task. 

I am looking for ideas on pricing, warranty, resolving differences, communication, protecting the property and last but not least who cleans up the mess left by workers.

 

RWheel

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  1. User avater
    BillHartmann | Oct 21, 2006 08:54pm | #1

    "protecting the property and last but not least who cleans up the mess left by workers."

    What on the property needs protecting? Or are you talking about security of the building and materials during construction?

    And if you are buying a turnkey house (the builder does every {or subs it out}) then when you accept it it should be turnkey read. It is up to the builder to worrry about who cleans up and when.

    1. rwheel | Oct 21, 2006 10:49pm | #3

      I am concerned about protecting items like bath tub, shower stall, floor coverings etc.  I have observed that workers will walk through the house with mud on their shoes, use the tub as a trach container etc.  This is really good,  painting around dry wall debris when painting a closet shelf.

      I am from the old school of messy work place results in messy work. 

       

      rw

      1. User avater
        BillHartmann | Oct 21, 2006 10:58pm | #4

        I am not a builder. But I suspect that any wording in the contract about cleanless would be worthless.You can put all of the words in the contract that you want. But if the GC tends to run a sloppy job that it the way that yours will be. And vice-versa without anything in the contract one that runs a clean job will keep yours clean.But if this is a concern of yours then asking the GC about how he handels this and also seeing current job if possible is one way of qualifying the GC.

  2. IdahoDon | Oct 21, 2006 10:23pm | #2

    I am looking for ideas on pricing, warranty, resolving differences, communication, protecting the property and last but not least who cleans up the mess left by workers.

    Here are a few thoughts based on the problems we've personally encountered or heard about in the building trades:

    Don't prepay too much on draws as it encourages a jumping point for the contractor prior to completion if he wants to quit the business.

    Watch your last significant draw and ensure that all subs and suppliers have been paid regularly to that point.  This is another likely jumping off point for the contractor, possibly leaving you with large unpaid balances with multiple subs and suppliers.

    Don't accept someone's word that they are insured, insist on proof and read the fine print.  More than one GC is operating under insurance that doesn't cover everything he's doing.  Same with subs.  Insist that the GC provide copies of all their policies upon request and check them.

    A two-year warrantee isn't very long since many significan't structural problems take longer to cause problems.  A lifetime warrantee doesn't mean much if the contractor is likely to go belly up in the near future.

    Keep in mind that a contractor may not have any assets.  No, that's not a typo--no assets.  A general contractor working as a limited liability corporation (LLC) may lease all his equipment from a separately owned corporation, and his building from yet another.  If carpenters provide their own tools and major equipment is rented or leased there aren't any assets if you win a court case against him.  I believe it's even possible to lease working capital.

    Consider a constrution bond:  "This bond will protect the owner of a building or other structure should the contractor be unable to fulfill his contractual duty to the insured."

    There needs to be a financial penalty for you to make a change order or it will drive your GC nuts.  It encourages you to make up your mind up front and avoids yoyoing back and forth on important issues.

    The GC should be in charge of security and cleanup.  Clients who want to help cleanup should be allowed to during the day, but it's still assumed that if it's dirty at the end of the day the GC will clean it up.  Once the fun of this activity wears off clients almost universally do a half-arsh job of it, making the GC look like a slob at best and slowing down the job at worst.

    You should start writing a list of all assumptions and roles you believe belong to the GC, architect and yourself.  Talk to everyone involved about each item on the list, revise it and come to a consensus.  Tattoo this on the forearm of everyone involved, build a full-size billboard next to the job site, place copies in the portajohn and have it stenciled on any lumber prior to delivery. Write a song with it as the lyrics and sing it every night while dancing around a lumber scrap campfire with the crew.

    If a visiting friend of an uninusured sub of a sub of a sub left a halogen light on all night in a pile of sawdust and the whole works burns down one night prior to you accepting the keys who gets to pay for it?  If some local kids were smoking crack on the jobsite at midnight and left a lighted propane torch which then burned the place down who would pay for it then?  If a fired employee of a sub came back one night and torched the place what would happen?  We've seen it happen, watched the flames and thanked God we weren't the GC on the job.

    It's not in the contract, but stop by every morning to drop off donuts and coffee.  Stop by again at night and simply say, "Thanks for a good day."  It doesn't matter how good or bad the day has gone when someone says those words it means something. 

    Best of luck

     

    Beer was created so carpenters wouldn't rule the world.

    1. rwheel | Oct 21, 2006 10:59pm | #5

      Thanks for your comments.  This helps.  Will check the book store for "building contracts for dummies"

       

      RWheel

  3. User avater
    ToolFreakBlue | Oct 22, 2006 05:12am | #6

    Since the archy and builder are part of a package, did the "team" also build other(or all)  homes in the development so far? 

    Ask some of your soon to be neighbors of how things went.  What changes to the contract did they negotiate?  What would they do differently?  stuff like that.

     

    TFB (Bill)
    1. davidmeiland | Oct 22, 2006 05:43am | #7

      Good advice. Might also be worth asking the 'team' for a study copy of their standard contract and giving it a read, or having the lawyer give it a read.

      1. rwheel | Oct 22, 2006 04:43pm | #9

        Great Idea.  Thanks

         

        RWheel

    2. rwheel | Oct 22, 2006 04:42pm | #8

      Thanks for your comments. Fortunantly, I will be the fifth or sixth to build in our development and have been talking with owners and observing the quality of work resulting is a lengthy list of both good and bad stuff.  Was hoping for a good reference to "avoid reinventing the wheel".

      RWheel

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