Texas Builder Contracts: A Buyer Should Know

First lesson in Texas Real Estate Law…

Almost invariably… “if it ain’t  in writin’… ya ain’t got nothin’ !”

Please… no verbal agreements!

Buyers need to understand that most large production Builders have their own contracts. These contracts greatly favor the Builder… not the Buyer. They will almost never allow any changes or strike-outs to the contract. If you, the Buyer, want the product then you have to accept the Builder’s terms.

You should ask the salesperson for a blank copy of the Builder contract so you can be familiar with it. I make sure my Buyers are especially aware of the “arbitration clause” that almost all builders have in their contracts. You, the Buyer, basically sign away your right to sue the Builder in a court of law with a jury. Disputes go to binding arbitration not a jury trial.

Also I like to call to attention to the section that talks about the closing. Keep in mind that you have to close when the Builder is ready. If they finish earlier than expected they will expect you to close. They will usually give the Buyer a 5 to 10 day notice to close. If there are unforeseen delays on the part of the Builder but are out of the Builder’s control, then you have to wait on the Builder…. potentially up to 18 months to 2 years. Two years would be an extreme of course but it is in there. Most delays might be 3 to 8 weeks. Keep in mind… the Builder wants to get the house finished asap. They want to get their money, and move on to the next house.

Most Builder contracts give a very short or no financing contingency. So you must understand that after the contingency period passes (if there is one) the buyer is exposed to lose all of the deposit(s) that has been paid to the Builder if the Buyer cannot close on time. This aspect of the contract especially applies to the smaller builders that work inside Houston’s inner  loop and other very desirable areas closer to a downtown area where large production Builders may not be present . Many of these builders give no contingency whatsoever. So you must be very sure of your ability to close the deal BEFORE you sign a purchase contract. They are notorious for NOT returning a buyer’s deposits when they are not able to close. As a matter of fact, since 2014 many of the larger production builders have been taking a less tolerant stance on refunding deposits. Buyers must be clear on matters and circumstances where they can lose their deposits! 

DISCLAIMER: I am not an attorney.  If there is anything in a contract that you do not understand then you should consult an attorney before signing anything. Your real estate agent cannot practice law nor give you legal advice.


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