Page 21 - What You Need to Know to Find the Right Builder

Chapter 5

The Contract.

Finalizing funding.

Any needed financing should be worked out and finalized between the

client and their lending institution before a contract is drawn up to avoid any
issues that may arise from lack of funding or a delay in paperwork. Often, banks
may take 30 to 45 days for the paperwork to process so the timing of your
contract should account for this. It would be rare that your builder would be
willing to start a large project and then be willing to wait 45 days to get their first
payment. In fact, most contracts will ask for a deposit of 10% to 33% of the total

contract amount. You should expect to at least provide a deposit which would be
equal to the cost of the excavation, foundation, well, and perhaps a little extra for
carpentry, materials, or under slab plumbing rough in. This can get the job started
and the builder can feel comfortable knowing he has money in hand to pay for
the work they’re committing to start.

While most lenders are willing to provide a fair deposit for a down
payment, once the job starts rolling, they may require lien waivers from your
builder as proof that the work is progressing, and the money is going where it’s

supposed to, before subsequent payments will be released. Therefore, every time
a subcontractor receives a payment, the builder would give them a lien waiver to
sign. That lien waiver would then be forwarded to the bank as proof that the
subcontractor has been paid for work that has been completed. It’s also not
unusual for the bank to send an appraiser out to the jobsite periodically during
construction to evaluate the progress. The bank just wants to protect their

investment and make sure the builder isn’t taking the money and moving to some
tropical island.

So, now that the hard parts have been completed after many hours of
discussions and weeks or months of planning, it’s time to get the contract out of
the way. If the details have been worked out properly in the preliminary phases,
this should be a piece of cake. Hopefully your builder took plenty of notes during

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